Supreme Court strikes down Biden student loan forgiveness plan

The Supreme Court on Friday rejected the basis of President Joe Biden’s student loan forgiveness program, which would have canceled $430 billion of student loan debt, finding that officials had no authority to enact the plan.

>> Read more trending news

Update 5:10 p.m. EDT June 30: The White House released new actions the Biden administration is taking to help provide debt relief and support for student loan borrowers.

Those actions include, according to the White House:

• The Secretary of Education to initiate a process that will open an alternative path for debt relief for working and middle-class borrowers under the Higher Education Act.
• The Department of Education will work on finalizing an affordable repayment plan that borrowers can start to take advantage of this summer, which is before loan payments are due which is in October.

“In addition, to protect the most vulnerable borrowers from the worst consequences of missed payments following the payment restart, the Department is instituting a 12-month “on-ramp” to repayment, running from October 1, 2023, to September 30, 2024, so that financially vulnerable borrowers who miss monthly payments during this period are not considered delinquent, reported to credit bureaus, placed in default, or referred to debt collection agencies,” the White House said.

-- Jessica Goodman, Cox Media Group National Content Desk

Update 4:16 p.m. EDT June 30: The Biden administration said it is going forward with a new student debt relief plan after the Supreme Court ruling, according to The Associated Press.

“Let me begin by saying I know there’s millions of Americans — millions of Americans — in this country who feel disappointed and discouraged and even a little bit angry about the court’s decision today about student debt,” Biden said in a news conference Friday afternoon, according to The New York Times. “And I must admit I do, too.”

Biden said that the education department will not refer borrowers that don’t pay their student loans to credit agencies for 12 months, the Times reported. This will give borrowers additional time.

Biden also said that his administration would try to have a different student debt relief program that would fall under the Higher Education Act, according to the Times.

Biden released a statement earlier Friday following the Supreme Court’s decision, CNN reported.

“I believe that the Court’s decision to strike down our student debt relief plan is wrong,” Biden said, according to CNN. “But I will stop at nothing to find other ways to deliver relief to hard-working middle-class families. My Administration will continue to work to bring the promise of higher education to every American.”

“My Administration’s student debt relief plan would have been the lifeline tens of millions of hardworking Americans needed as they try to recover from a once-in-a-century pandemic. Nearly 90 percent of the relief from our plan would have gone to borrowers making less than $75,000 a year, and none of it would have gone to people making more than $125,000. It would have been life-changing for millions of Americans and their families. And it would have been good for economic growth, both in the short- and long-term,” Biden said in a news release from the White House.

-- Jessica Goodman, Cox Media Group National Content Desk

Original story: The program, unveiled in August, would have given Pell Grant recipients as much as $20,000 in student debt relief. Federal student loan borrowers who make less than $125,000 annually — or households that earn less than $250,000 — would have gotten as much as $10,000 in relief.

Shortly after the plan was announced, attorneys general in six states — Nebraska, Missouri, Arkansas, Iowa, Kansas and South Carolina — filed suit, claiming that the president lacked the authority to dismiss student loan debt and that Biden’s plan threatens funding for debt servicers.

In a 6-3 decision, the court found that the 2003 Higher Education Relief Opportunities for Students (HEROES) Act — which was used to justify Biden’s plan — did not grant officials the authority to carry out the debt relief program.

The HEROES Act, passed after the 9/11 terror attacks, grants the Department of Education the power to waive student loan repayments for those impacted by “a war or other military operation or national emergency.”

“We hold today that the Act allows the Secretary (of Education) to ‘waive or modify’ existing statutory or regulatory provisions applicable to financial assistance programs under the Education Act, not to rewrite that statute from the ground up,” Chief Justice John Roberts said in the court’s majority opinion. He wrote that Education Secretary Miguel Cardona “claims the authority, on his own, to release 43 million borrowers from their obligations to repay $430 billion in student loans.

“The Secretary has never previously claimed powers of this magnitude under the HEROES Act. ... Under the Government’s reading of the HEROES Act, the Secretary would enjoy virtually unlimited power to rewrite the Education Act.”

In a dissenting opinion joined by Justices Sonia Sotomayor and Ketanji Brown Jackson, Justice Elena Kagan wrote that the court’s majority overreached its authority with Friday’s decision.

“The question, the majority maintains, is ‘who has the authority’ to decide whether such a significant action should go forward,” Kagan wrote. “The right answer is the political branches: Congress in broadly authorizing loan relief, the Secretary and the President in using that authority to implement the forgiveness plan. The majority instead says that it is theirs to decide.”

The Job Creators Network also filed a lawsuit over Biden’s plan on behalf of two student loan borrowers, Myra Brown and Alexander Taylor, arguing that the Biden administration failed to follow proper procedure and allow for public comments before implementing the plan.

The Supreme Court unanimously ruled that the group had no standing to challenge the case.

The Supreme Court heard arguments in the cases, Biden v. Nebraska and Department of Education v. Brown, in February.

Biden issued a statement Friday afternoon saying, “This fight is not over. I will have more to announce when I address the nation this afternoon.

“... The hypocrisy of Republican elected officials is stunning. They had no problem with billions in pandemic-related loans to businesses – including hundreds of thousands and in some cases millions of dollars for their own businesses. And those loans were forgiven. But when it came to providing relief to millions of hard-working Americans, they did everything in their power to stop it.

“My Administration will continue to work to bring the promise of higher education to every American. And later today, I will provide more detail on all that my Administration has done to help students and the next steps my Administration will take.”

Senate Majority Leader Chuck Schumer, D-New York, criticized conservative justices who accept “lavish” gifts for themselves and ruled against Biden’s student debt forgiveness plan for middle-income borrowers.

Speaker of the House Kevin McCarthy, R-California, celebrated the ruling and reminded the president that the loan payments pause must end by the end of summer.

More than 26 million Americans have applied for the debt relief program, including 16 million people whose applications have been approved, officials said in November.

Student loan payments have been on hold since the coronavirus pandemic prompted a pause in March 2020. Officials agreed to resume payments in October as part of the debt ceiling deal passed earlier this year by Congress.