May 2, 2024
WASHINGTON (AP) — A sharply divided Supreme Court on Friday effectively killed President Joe Biden’s $400 billion plan to cancel or reduce federal student loan debts for millions of Americans.
The 6-3 decision, with conservative justices in the majority, said the Biden administration overstepped its authority with the plan, and means borrowers must repay loans, with payments expected to resume by late summer.
Biden was to announce a new set of actions to protect student loan borrowers and would address the court decision later Friday, said a White House official. 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 needed 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,” Chief Justice John Roberts wrote for the court.
Loan repayments are expected to resume by late August under a schedule initially set by the administration and included in the agreement to raise the debt ceiling. Payments have been on hold since the start of the coronavirus pandemic more than three years ago.
The forgiveness program would have canceled $10,000 in student loan debt for those making less than $125,000 or households with less than $250,000 in income. Pell Grant recipients, who typically demonstrate more financial need, would have had an additional $10,000 in debt forgiven.
Twenty-six million people had applied for relief and 43 million would have been eligible, the administration said. The cost was estimated at $400 billion over 30 years.
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 the 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.”
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. Legal challenges quickly followed.
The court majority said the Republican-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% of its revenues if the Biden plan went into effect.
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.
In a second case, the justices ruled unanimously that two Texans who filed a separate challenge 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.
