Supreme Court Rejects Biden's $400 Billion Student Loan Debt Plan

via AP

In a sharply divided 6-3 decision, the Supreme Court effectively rejected President Joe Biden's plan to cancel or reduce federal student loan debts worth $400 billion for millions of Americans. The majority, consisting of conservative justices, ruled that the Biden administration had exceeded its authority with the plan. This decision leaves borrowers responsible for repayments that are expected to resume in the fall.

The court's ruling emphasized that the administration needed the endorsement of Congress before implementing such a costly program. The majority rejected arguments claiming that the HEROES Act, a bipartisan law from 2003 concerning student loans, granted Biden the authority he claimed. Chief Justice John Roberts, writing for the court, stated, "Six States sued, arguing that the HEROES Act does not authorize the loan cancellation plan. We agree."

President Biden was scheduled to announce a new set of actions to protect student loan borrowers and address the court's decision. However, a White House official, speaking on condition of anonymity, mentioned that the President's statement would come later in the day.

The Supreme Court's decision means that loan repayments will resume in October, with interest beginning to accrue in September. The Education Department has made this announcement. Since the start of the coronavirus pandemic over three years ago, payments have been on hold.

Under the forgiveness program proposed by Biden, $10,000 in student loan debt would have been canceled for individuals earning less than $125,000 or households with an income below $250,000. Pell Grant recipients, who typically demonstrate greater financial need, would have received an additional $10,000 in debt forgiveness. The administration estimated that 26 million people had applied for relief, and 43 million individuals would have been eligible. The projected cost of the program over a 30-year period was $400 billion.

Advocacy groups supporting debt cancellation condemned the Supreme Court's decision and demanded that President Biden find another way to fulfill his promise of debt relief. Natalia Abrams, president and founder of the Student Debt Crisis Center, stated that the responsibility for new action falls squarely on Biden's shoulders. She said, "The president possesses the power, and must summon the will, to secure the essential relief that families across the nation desperately need."

This ruling on student loan debt forgiveness joins a series of pandemic-related initiatives that have faltered at the Supreme Court. Conservative majorities previously terminated an eviction moratorium imposed by the Centers for Disease Control and Prevention and blocked a plan that would have required workers at large companies to be vaccinated or undergo regular testing and wear masks. However, the court upheld the requirement for healthcare workers to be vaccinated.

Unlike the earlier initiatives, the loan forgiveness plan aimed to address the economic effects of the pandemic. During more than three hours of arguments in February, conservative justices expressed skepticism about the administration's authority to eliminate or reduce student loans held by millions. Republican-led states, arguing before the court, contended that the plan would result in a "windfall" for 20 million individuals whose entire student debt would disappear, leaving them better off than before the pandemic.

Chief Justice Roberts and other members of the court questioned whether non-college-educated workers would be unfairly penalized for the benefit of college-educated individuals. In contrast, the administration argued that the sweeping loan forgiveness was necessary due to the COVID-19 emergency and its continuing negative impacts, particularly on economically disadvantaged individuals. The official declaration of the emergency ended on May 11.

During the arguments, Justice Sonia Sotomayor warned that the justices would be making a mistake if they decided how much aid to provide struggling individuals instead of leaving it to education experts. The administration's top Supreme Court lawyer warned that without the promised loan relief, delinquencies and defaults would surge.

The court ruled that the Republican-led states had met the initial requirement to demonstrate financial harm if the program had been implemented. The states pointed to the Missouri Higher Education Loan Authority (MOHELA), a state-created company that services student loans, estimating that it would lose around 40% of its revenues if the Biden plan were put into effect. However, independent research has cast doubt on the projected financial harm to MOHELA, suggesting that the agency would still see an increase in revenue even if the debt cancellation program were implemented. It is important to note that this information was not part of the court record.

In a separate case, the justices unanimously ruled that two Texans who had filed a separate challenge did not have legal standing to sue. However, this ruling did not impact the court's decision to block the debt relief plan.

Source: Associated Press (AP)