The Supreme Court, in a sharply divided 6-3 decision, has effectively halted President Joe Biden’s ambitious $400 billion plan to cancel or reduce federal student loan debts for millions of Americans. The conservative majority on the court ruled that the Biden administration exceeded its authority with the plan, leaving borrowers on the hook for repayments that are expected to resume in the fall.
The court’s decision emphasized the need for Congress’ endorsement before implementing such a costly program, rejecting arguments that a bipartisan 2003 law, the HEROES Act, provided the necessary authority. Despite the setback, President Biden expressed determination to pursue a new debt relief plan, attributing the ruling to Republican “hypocrisy” and vowing to utilize the authority of the Higher Education Act to implement a program focused on mitigating the threat of default for borrowers over the next year.
Chief Justice John Roberts, writing for the court, highlighted the six states’ argument that the HEROES Act does not authorize the loan cancellation plan, a contention that the court agreed with. However, Justice Elena Kagan, in dissent, voiced her disagreement and warned that the court’s decision eliminated loan forgiveness for 43 million Americans, overriding the judgment of the Legislative and Executive Branches.
Student Loans to Resume in September
The resumption of loan repayments is set for October, with interest accruing starting in September. The Biden administration’s forgiveness program aimed to cancel $10,000 in student loan debt for individuals earning less than $125,000 or households with an income below $250,000. Pell Grant recipients, demonstrating greater financial need, would have been eligible for an additional $10,000 in debt forgiveness. Approximately 26 million people had applied for relief, and an estimated 43 million would have been eligible, making the cost of the program reach around $400 billion over 30 years.
Advocacy groups supporting debt cancellation expressed disappointment with the Supreme Court’s decision and urged President Biden to explore alternative avenues to fulfill his promise of debt relief. Natalia Abrams, president and founder of the Student Debt Crisis Center, emphasized that the responsibility for taking new action rests on the president’s shoulders, urging him to secure the essential relief that millions of families across the nation desperately need.
The court’s ruling on the loan forgiveness plan follows previous conservative-majority decisions that ended an eviction moratorium and blocked a plan mandating vaccinations or regular testing and masking for workers at large companies. However, the court upheld a plan requiring vaccinations for healthcare workers. While the earlier programs were primarily justified as public health measures to combat the COVID-19 pandemic, the loan forgiveness plan aimed to address the pandemic’s economic repercussions.
President Biden remains committed to exploring alternative
During the arguments presented to the court, conservative justices expressed skepticism about the administration’s authority to cancel or reduce student loans on such a massive scale. Republican-led states, arguing before the court, contended that the plan would result in a “windfall” for 20 million people, allowing them to entirely eliminate their student debt and surpass their pre-pandemic financial status.
President Biden’s announcement of the program in August prompted swift legal challenges, ultimately leading to the Supreme Court’s ruling. The court majority determined that the Republican-led states had demonstrated potential financial harm, primarily citing the Missouri Higher Education Loan Authority (MOHELA), a state-created entity responsible for servicing student loans. Nebraska Solicitor General James Campbell argued that MOHELA would suffer a significant revenue loss of about 40% if the Biden plan went into effect. However, independent research indicated that MOHELA could still experience increased revenue even if the cancellation program proceeded.
In a separate case, the court unanimously ruled that two Texans challenging the program lacked legal standing to sue, but this outcome does not impact the court’s decision to block the debt relief plan. Despite this setback, President Biden remains committed to exploring alternative options to alleviate the burden of student loan debt and support individuals affected by the economic consequences of the pandemic.
