SEMO's David Yaskewich on SCOTUS denial of student debt cancellation

David Yaskewich economist and chairman of Southeast Missouri State University's Accounting, Economics and Finance Department, has commented on the impact of the U.S. Supreme Court's decision Friday, June 30, to strike down President Joe Biden's student-loan cancellation plan.

New York Times reported Saturday, July 1, the high court's 6-3 ruling will impact 16 million borrowers who were approved for debt forgiveness.

David Yaskewich

David Yaskewich

"Based on a survey from the Federal Reserve, most individual borrowers have between $20,000 and $25,000 in student debt, which could amount to a $400 monthly loan repayment based on median income. I consider this a significant effect on a person's ability to spend in this economy," said Yaskewich, who indicated reports show mandatory repayments resuming as of Sunday, Oct. 1.

"I'm interested in how borrowers will react to this decision to see if any of them end up defaulting on debt repayments," said Yaskewich, who has been full-time faculty at SEMO for nearly 11 years. "Looking at default rates from the Great Recession of 2008-2009, we saw default rates as high as 15% (but) the U.S. economy is much stronger now."

The government paused student repayments because of COVID-19 in March 2020 and has extended that deferral a total of eight times since.

Missouri

The Show Me State brought suit, along with five other Republican-led states, to stop the debt cancellation effort, citing the so-called "major questions doctrine", which states Congress must speak particularly clearly when authorizing the executive branch to act on important political and economic questions.

Joining Missouri in the legal action were Nebraska, Arkansas, Iowa, Kansas and South Carolina.

White House reaction

Biden, in remarks following the ruling, said his education secretary is examining the law for a different method by which student debt could be forgiven.

"(Friday's) decision closed one path. Now we're going to pursue another," Biden said.

Justices John Roberts, Clarence Thomas, Samuel Alito, Neil Gorsuch, Brett Kavanaugh and Amy Coney Barrett voted to halt the Biden plan, while fellow Justices Elena Kagan, Sonia Sotomayor and Ketanji Brown Jackson cast their votes to sustain the administration's debt erasure initiative.

House Speaker Kevin McCarthy lauded Friday's court ruling to end what the California congressman called "President Biden's student loan giveaway."

"The 87% of Americans without student loans are no longer forced to pay for the 13% who do," added McCarthy, who assumed the speakership in January.

Biden's executive action, if it had been allowed to stand, would have canceled $400 billion in student debt,

The Government Accounting Office has reported the more than three-year debt repayment pause has cost the federal government more than $100 billion in anticipated revenue to date.

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