The Supreme Court on Friday rejected President Joe Biden’s student loan forgiveness plan, which would have provided as much as $20,000 in debt relief to millions of borrowers, at an estimated total cost of more than $400 billion.
The court ruled in Biden v. Nebraska that the White House had exceeded its authority when it enacted the plan via executive order, rejecting the argument that the 2003 HEROES Act – which was passed in the wake of 9/11 and empowers the Secretary of Education to grant relief for student loan debts during a national emergency – provides the authority to forgive student loans during the Covid-19 health emergency.
The decision upends a major part of Biden’s domestic agenda and lays the groundwork for millions of borrowers who thought their student loans had been forgiven to start making their payments again in October, when the pandemic-era suspension of payments comes to an end.
What the plan would have done: The Biden administration announced last fall that Americans who earn less than $125,000 per year or $250,000 per household could apply for $10,000 in student loans debt forgiveness. Those who also received Pell grants, which are awarded only to low-income applicants, were eligible for another $10,000 in debt forgiveness.
In total, nearly 46 million people in the U.S. owe about $1.6 trillion in student loan debt. More than 25 million people applied to the Biden program, with about 16 million receiving approval so far. But the program has been on hold in the wake of legal challenges, so no debt relief had been provided.
What the justices said: Writing for the majority in the 6-3 decision, which split on ideological lines, Chief Justice John Roberts said the law does not give the Secretary of Education the right to forgive billions of dollars in student loan debt.
"The Secretary’s plan canceled roughly $430 billion of federal student loan balances, completely erasing the debts of 20 million borrowers and lowering the median amount owed by the other 23 million from $29,400 to $13,600," Roberts wrote. "Six States sued, arguing that the HEROES Act does not authorize the loan cancellation plan. We agree."
Roberts said the administration’s argument that the Secretary of Education has the power to “waive or modify” loan terms cannot apply to a program of this size. “The Secretary’s plan has ‘modified’ the cited provisions only in the same sense that ‘the French Revolution ‘modified’ the status of the French nobility’ — it has abolished them and supplanted them with a new regime entirely,” Roberts wrote, quoting language from an earlier case. Instead of modifying the loans, the Biden administration had essentially created “a novel and fundamentally different loan forgiveness program,” Roberts said, which is beyond its power.
Bolstering his argument, Roberts quoted former Speaker of the House Nancy Pelosi on the matter. “People think that the President of the United States has the power for debt forgiveness,” Pelosi said in 2021, as cited in Roberts’ opinion. “He does not. He can postpone. He can delay. But he does not have that power. That has to be an act of Congress.”
In her dissent, Justice Elena Kagan accused the majority of taking on matters of policy that are beyond its scope. “In every respect, the Court today exceeds its proper, limited role in our Nation’s governance,” she wrote, joined by Justices Ketanji Brown Jackson and Sonia Sotomayor. “The result here is that the Court substitutes itself for Congress and the Executive Branch in making national policy about student-loan forgiveness,” she continued. “Congress authorized the forgiveness plan (among many other actions); the Secretary put it in place; and the President would have been accountable for its success or failure. But this Court today decides that some 40 million Americans will not receive the benefits the plan provides, because (so says the Court) that assistance is too ‘significan[t].’”
Reaction roundup: In a statement, Biden decried the ruling and accused his opponents of favoring the interests of business owners over ordinary citizens during the pandemic. “The hypocrisy of Republican elected officials is stunning,” he said. “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.”
Fiscal conservatives, who objected to the cost of the Biden plan, among other things, celebrated the decision. “The President’s unilateral student debt cancellation plan was expensive, inflationary, poorly targeted, and would have done nothing to improve the affordability of higher education,” the Committee for a Responsible Federal Government said in a statement. “With today’s Supreme Court decision, it’s time to put these costly cancellation schemes behind us.”
Other conservatives focused on what they see as the unfairness of debt relief for people who went to college, with nothing for those who chose other paths. “The 87% of Americans without student loans are no longer forced to pay for the 13% who do,” said House Speaker Kevin McCarthy.
Supporters of the Biden plan called on the White House to seek other options for student loan debt relief. "The Biden administration has remaining legal routes to provide broad-based student debt cancellation," Senate Majority Chuck Schumer said. "With the pause on student loan payments set to expire in weeks, I call upon the administration to do everything in its power to deliver for millions of working- and middle-class Americans struggling with student loan debt.”
What comes next: Speaking Friday afternoon at the White House, Biden outlined the steps his administration is taking and plans to take to address student loan debt. Biden said he would switch the legal basis for his debt relief plan, using the Higher Education Act of 1965 instead of the HEROES Act. The 1965 law gives the Secretary of Education the power to “compromise, waive or release any right, title, claim, lien or demand, however acquired, including any equity or any right of redemption.”
“In my view, it’s the best path that remains to providing as many borrowers as possible with debt relief,” Biden said while warning that it would take some time to work out the process.
Biden also said that the Department of Education would give student loan debtors a 12-month grace period, creating an “on-ramp repayment program” that removes the threat of delinquency or default for one year starting on October 1.
