Supreme Court blocks student loan forgiveness in blow to Biden. Here’s what to know about the ruling

Student loan forgiveness, Supreme Court latest ruling.

The Supreme Court invalidated President Biden’s student loan forgiveness plan on Friday, ruling that a 2003 federal law does not allow the programme to erase nearly $500 billion in debt.

The 6-3 decision by the court’s conservative majority derailes the president’s major campaign pledge, denying relief to roughly 40 million Americans who stood to have up to $20,000 in student debt forgiven under the plan.

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The president said in a statement that he thought the decision was “wrong” and “disappointing.” He plans to address the nation on Friday afternoon, providing “more detail on all that my Administration has done to help students and the next steps my Administration will take.”

“I will go to any length to find other ways to help hardworking middle-class families,” Mr. Biden said. “My Administration will continue to work to make higher education a reality for every American.”

The Supreme court’s ruling  on student loan forgiveness.

 

Before striking down the plan, the Supreme Court first determined that Missouri, one of six states that challenged the plan’s legality, had the right to sue, a concept known as legal standing. The court was then able to consider whether the secretary of education had the authority to forgive student loan debt under the HEROES Act.

The majority opinion, written by Chief Justice John Roberts, stated that the law does not grant the secretary that authority.

“We hold today that the act allows the secretary to ‘waive or modify’ existing statutory or regulatory provisions applicable to financial assistance programmes under the Education Act, not to rewrite that statute from the ground up,” wrote Roberts.

 

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In part of its decision, the court invoked the so-called “major questions” doctrine, a legal theory that holds that an executive branch agency must have clear congressional authorization to decide an issue of “vast economic or political significance.”

According to Roberts, the “economic and political significance” of the loan forgiveness plan “is staggering by any measure.”

 

 

 

“Today, we have concluded that an instrumentality created by Missouri, governed by Missouri, and answerable to Missouri is indeed part of Missouri; that the words ‘waive or modify’ do not mean ‘completely rewrite’; and that our precedent—old and new—requires that Congress speak clearly before a Department Secretary can unilaterally alter large sections of the American economy,” he concluded.

Roberts concluded his opinion by emphasising that disagreement among the court’s members should not be misconstrued as disparagement. “It is also critical that the public not be misled,” he cautioned. “Any such misperception would be harmful to this institution and our country.”

 

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The dissenting opinion was written by Justice Elena Kagan, joined by Justices Sonia Sotomayor and Ketanji Brown Jackson, and summarised from the bench. “In every respect, the court today exceeds its proper, limited role in our nation’s governance,” she wrote.

The dissenting justices disagreed with the majority not only on the legality of the relief plan, but also on its conclusion that the states had the right to sue. Kagan claimed that the court overreached in deciding the case at all.

 

 

“The result here is that the Court substitutes itself for Congress and the Executive Branch in making national policy about student-loan forgiveness,” Kagan explained.

In a separate decision, the Supreme Court unanimously ruled that a pair of Texas borrowers who also challenged the programme lacked standing to sue, and dismissed their case.

According to a White House official, Mr. Biden is expected to announce new actions to protect borrowers.

 

The student loan relief plan

The decision rendered by the high court dealt a significant blow to President Biden’s reelection aspirations. During his 2020 campaign, he made a commitment to forgive a minimum of $10,000 in federal student loan debt through his administration.

 

Last August, President Biden took steps to fulfill this promise by unveiling a plan to provide debt forgiveness of up to $10,000 for eligible borrowers earning less than $125,000 annually. Additionally, qualifying Pell Grant recipients, who are students with the greatest financial need, would have been eligible for an additional $10,000 in relief.

 

Approximately 40 million Americans were deemed eligible for the relief announced by the president in August, with an estimated 20 million borrowers having their loan balances completely erased, according to White House estimates. The program received over 26.2 million applications, and over 16 million of them were approved before the Department of Education had to halt the acceptance of new applications due to legal challenges.

 

Both the Trump and Biden administrations had temporarily paused federal student loan payments amidst the COVID-19 pandemic, but borrowers will resume making payments in the upcoming fall.

 

To justify the elimination of around $430 billion in debt, the Department of Education relied on the 2003 HEROES Act as its legal basis. This law grants the education secretary the authority to “waive or modify” student financial assistance programs for borrowers in connection with a national emergency, such as the ongoing pandemic.

 

Legal challenges on Student loan forgiveness.

Two separate lawsuits were filed challenging the debt relief program implemented by the administration. The plaintiffs included six red states—Arkansas, Iowa, Kansas, Kentucky, Missouri, and South Carolina—as well as two borrowers from Texas. They argued that the debt forgiveness exceeded the authority of the administration.

 

In the case brought by the states, a federal district court in St. Louis dismissed the lawsuit, stating that the plaintiffs lacked legal standing to bring the suit. However, an appeals court intervened and blocked the loan forgiveness program. The appeals court’s decision was based on the argument that Missouri suffered financial losses due to the cancellation of debt, specifically focusing on the Higher Education Loan Authority of the State of Missouri (MOHELA), which services federal student loans. The court concluded that the financial impact on MOHELA posed a threat of financial harm to Missouri.

 

In the second case from Texas, filed by borrowers Myra Brown and Alexander Taylor, known as Dept. of Education v. Brown, a federal district court determined that the borrowers met the requirements for legal standing and ruled that the plan was an unconstitutional exercise of Congress’s legislative power. However, a federal appeals court declined to reinstate the loan forgiveness program.

 

It is important to note that Myra Brown does not qualify for debt relief since her loans are held by commercial entities. On the other hand, Alexander Taylor is eligible for $10,000 in the student loan forgiveness.