Supreme Court Strikes Down Biden's Student Loan Forgiveness Program

WASHINGTON, DC — The U.S. Supreme Court on Friday struck down President Joe Biden’s student debt forgiveness plan, erasing any hope borrowers have of seeing their federal loan balances reduced or wiped out.

The 6-3 decision, with conservative justices in the majority, effectively killed the $400 billion plan. Biden lacked the executive authority to enact the program, Chief Justice John Roberts wrote for the majority. That means millions of borrowers will now have to start paying back their federal student loans after the COVID-19 pandemic pause on student loans ends. Payments would have been due regardless of the Supreme Court decision but now borrowers will see no reduction in their balances.

Biden was to announce a new set of actions to protect student loan borrowers and would address the court decision later Friday, a White House official told The Associated Press. The official was not authorized to speak publicly ahead of Biden’s expected statement on the case and spoke on condition of anonymity.

The court held that the administration needs Congress' endorsement before undertaking so costly a program. The majority rejected arguments that a bipartisan 2003 law dealing with student loans, known as the HEROES Act, gave Biden the power he claimed.

“Six States sued, arguing that the HEROES Act does not authorize the loan cancellation plan. We agree,” Roberts wrote for the court.

Justice Elena Kagan wrote in a dissent, joined by the court’s two other liberals, that the majority of the court “overrides the combined judgment of the Legislative and Executive Branches, with the consequence of eliminating loan forgiveness for 43 million Americans.”

Twenty-six million people had applied for relief and 43 million would have been eligible. The cost was estimated at $400 billion over 30 years, and is one of the most expensive executive actions in history.

Advocacy groups supporting debt cancellation condemned the decision while demanding that Biden find another avenue to fulfill his promise of debt relief.

Natalia Abrams, president and founder of the Student Debt Crisis Center, said the responsibility for new action falls “squarely” on Biden’s shoulders. “The president possesses the power, and must summon the will, to secure the essential relief that families across the nation desperately need,” Abrams said in a statement.

The loan plan joins other pandemic-related initiatives that faltered at the Supreme Court.

Conservative majorities ended an eviction moratorium that had been imposed by the Centers for Disease Control and Prevention and blocked a plan to require workers at big companies to be vaccinated or undergo regular testing and wear a mask on the job. The court upheld a plan to require vaccinations of health-care workers.

The earlier programs were billed largely as public health measures intended to slow the spread of COVID-19. The loan forgiveness plan, by contrast, was aimed at countering the economic effects of the pandemic.

In more than three hours of arguments last February, conservative justices voiced their skepticism that the administration had the authority to wipe away or reduce student loans held by millions.

Republican-led states arguing before the court said the plan would have amounted to a “windfall” for 20 million people who would have seen their entire student debt disappear and been better off than they were before the pandemic.

Roberts was among those on the court who questioned whether non-college workers would essentially be penalized for a break for the college-educated.

In contrast, the administration grounded the need for sweeping loan forgiveness in the COVID-19 emergency and the continuing negative impacts on people near the bottom of the economic ladder. The declared emergency ended on May 11.

Without the promised loan relief, the administration’s top Supreme Court lawyer told the justices, “delinquencies and defaults will surge.”

At those arguments, Justice Sonia Sotomayor said her fellow justices would be making a mistake if they took for themselves, instead of leaving it to education experts, “the right to decide how much aid to give” people who would struggle if the program were struck down.

The HEROES Act has allowed the secretary of education to waive or modify the terms of federal student loans in connection with a national emergency. The law was primarily intended to keep service members from being hurt financially while they fought in wars in Afghanistan and Iraq.

Biden had once doubted his own authority to broadly cancel student debt, but announced the program last August. A flurry of lawsuits ensued from Republican-backed states and conservative groups, most of them accusing Biden of executive overreach.Legal challenges quickly followed.

The court heard two cases, dismissing one as lacking standing, but basing its ruling on a challenge brought by the attorneys general in Republican-led states Arkansas, Iowa, Kansas, Missouri, Nebraska and South Carolina.

In the second case, brought by the Job Creators Network Foundation, the justices ruled unanimously that two Texans behind the conservative advocacy group did not have legal standing to sue. But the outcome of that case has no bearing on the court's decision to block the debt relief plan.

The court majority said the GOP-led states had cleared an early hurdle that required them to show they would be financially harmed if the program had been allowed to take effect.

The states did not even rely on any direct injury to themselves, but instead pointed to the Missouri Higher Education Loan Authority, a state-created company that services student loans.

Nebraska Solicitor General James Campbell, arguing before the court in February, said the Authority would lose about 40 percent of its revenues if the Biden plan went into effect. Independent research has cast doubt on the financial harm MOHELA would face, suggesting that the agency would still see an increase in revenue even if Biden’s cancellation went through. That information was not part of the court record.

A federal judge initially found that the states would not be harmed and dismissed their lawsuit before an appellate panel said the case could proceed.

The Biden student loan plan, which would have forgiven up to $20,000 in debt for some borrowers, would have wiped out about a quarter of the country’s $1.7 trillion in outstanding student loan debt. As many as 14 million borrowers would have seen their debt entirely cleared.

The decision comes on the heels of a ruling Thursday striking down college affirmative action admissions policies. When Biden rolled out the plan last year, he said one of his goals was “to help narrow the racial wealth gap.”

About half of the average debt held by Black and Hispanic borrowers would have been wiped out by Biden’s plan.

Both cases focus on policies that address historic racial disparities in access to higher education, as Black borrowers tend to take on disproportionately more debt to afford college, Dominique Baker, an education policy professor at Southern Methodist University, told The Associated Press.

Backlash to racial progress tends to follow periods of social change and advancement, Baker said. In a study published in 2019, Baker found states were more likely to adopt bans on affirmative action when white enrollment at public flagship universities dropped.

“These are policy tools that have an explicit aim around reducing the power of white supremacy,” Baker said. The two court challenges, she said, can be seen “as linked backlash to two attempts towards racial justice.”

The rulings could also have political consequences among a generation of young voters of color who took Biden at his word when he promised to cancel debt, Wisdom Cole, director of NAACP’s youth and college program, told the AP.

“Year after year, we have elected officials, we have advocates, we have different politicos coming to our communities making promises. But now it’s time to deliver on those promises,” he said.

Borrowers who are unable to pay back their loans may qualify for an income-driven repayment plan, which determines your payments by looking at your expenses. If you’ve worked for a government agency or a non-profit organization, you could also be eligible for the Public Service Loan Forgiveness Program, which forgives student debt after 10 years.

Carolina Rodriguez, Director of the Education Debt Consumer Assistance Program at the Community Service Society of New York, told the AP that anyone temporarily unemployed should be able to qualify for a $0 payment plan. And many others qualify based on income and family size.

“The repercussions of falling into delinquency can be pretty severe,” Rodriguez said. “The federal government can administratively intercept tax refunds and garnish wages. And it can affect Social Security, retirement, and disability benefits. Does it make financial sense at that point? Probably not.”

Rodriguez says her organization always advises against deferment or forbearance except once a borrower has exhausted all other options. In the long term, those financial choices offer little benefit, as some loans will continue to accrue interest while deferred.

Bankruptcy is another option, though borrowers will have to prove “undue hardship” prevented them from paying back loans.

"That doesn’t mean people shouldn’t look into it," Rodriguez said. “But they may not be successful at discharging their loans.”

The Associated Press contributed reporting.