SLM - Federal judge strikes down Biden's student loan forgiveness plan

Texas District Court Judge Mark Pittman has blocked President Biden's student loan forgiveness plan, which would have provided borrowers the ability to wipe away $10,000 apiece from their outstanding balance. Pell Grant recipients, who display exceptional financial need, would get an additional $10,000 in debt forgiven. About 26M eligible undergraduate and graduate borrowers have already signed up to the program, which Biden unveiled back in August after months of deliberations inside the administration.

Bigger picture: The ruling is the latest hiccup in a plan that was intended to rollout and move at "full speed ahead." Last month, the states of Arkansas, Iowa, Kansas, Missouri, Nebraska and South Carolina sued to overturn the program, prompting the 8th U.S. Circuit Court of Appeals to issue a stay on the matter. Despite things being held up, the White House has encouraged borrowers to continue applying for relief as the order did not prevent the review of applications.

"In this country, we are not ruled by an all-powerful executive with a pen and a phone. Instead, we are ruled by a Constitution that provides for three distinct and independent branches of government," wrote Judge Pittman, adding that the program was an "unconstitutional exercise of Congress's legislative power."

Outlook: The concept of student debt cancellation, even if it would pass through Congress, has divided the country. Some say it would benefit borrowers at a time of high inflation, while other have flagged it as another contributor to higher prices, or an unfair measure for those that chose not to go to college because of the cost, don't have loans or already paid them off. The non-partisan Congressional Budget Office in September pegged the cost of the entire program at $430B, which would eliminate nearly a quarter of America's $1.6T in outstanding student debt. Related stocks include Sallie Mae ( NASDAQ: SLM ), Navient ( NASDAQ: NAVI ) and Nelnet ( NYSE: NNI ).

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