After months of deliberation, the Supreme Court has ruled against the Biden Administration’s Student Debt Relief Program. Moments ago, the Supreme Court ruled 6-3 that President Biden (via the powers granted to the Secretary of Education in the 2003 HEROES Act) doesn’t have the authority to forgive student loan relief via his plan and a plan of this sort must be approved by Congress.
The Biden Administration announced in August 2022 that his administration would cancel $10,000 in federal student loan debt for borrowers that make less than $125,000 or households that make less than $250,000 per year. The loan forgiveness would’ve totaled over $400 billon. President Biden in his August 25th press conference also announced that Pell Grant recipients will receive $20,000 in forgiveness. As reported by hbcupulse.com, the $20,000 in forgiveness for Pell Grant recipients would’ve overwhelmingly affected HBCU students as UNCF reports that over 70% of HBCU students are Pell-Grant eligible, with black students making up 72% of Pell Grant recipients amongst all colleges. A press release published in January by the Biden Administration presented data showing that 26 Million People in All 50 States applied or were eligible for relief.
The move drew significant conservative opposition and several legal challenges. The Biden Administration Student Loan Forgiveness program is authorized by the 2003 HEROES Act, which allows the Secretary of Education to waive/modify loans in the case of a national emergency.
Specific verbiage from the HEROES Act is below.
MEMORANDUM OPINION FOR THE GENERAL COUNSEL DEPARTMENT OF EDUCATION
The Higher Education Relief Opportunities for Students Act of 2003, Pub. L. No. 108-76, 117 Stat. 904 (2003) (codified at 20 U.S.C. §§ 1098aa–1098ee) (“HEROES Act of 2003,” or “HEROES Act”), vests the Secretary of Education (“Secretary”) with expansive authority to alleviate the hardship that federal student loan recipients may suffer as a result of national emergencies. The Act provides that the Secretary may “waive or modify any statutory or regulatory provision applicable to” federal student loan programs if the Secretary “deems” such actions “necessary to ensure that” certain statutory objectives are achieved. 20 U.S.C. § 1098bb(a)(1)–(2).
Republican detractors argued that the federal government doesn’t have the power for unilateral federal student loan relief. Two specific cases (Biden v. Nebraska & U.S. Department of Education v. Brown) were heard by the Supreme Court in late February. Biden v. Nebraska was filed by six conservative-led states who argued that the Student Debt Relief Program would hurt tax revenue for their state as well as student-loan company MOHELA. MOHELA denied involvement in the case. U.S. Department of Education v. Brown was filed by two student-loan borrowers who didn’t qualify for relief. The issue of if plaintiffs had legal standing to file both lawsuits were brought up during oral arguments. The liberal justices and conservative justice Amy Coney Barrett heavily scrutinized standing by the plaintiffs, especially surrounding the involuntary involvement of MOHELA in the Biden v. Nebraska case. The plaintiffs in both cases needed to prove that the policy would injure them and the relief would address said injuries.
Ultimately, the Supreme court ruled in U.S. Department of Education v. Brown unanimously that the plaintiffs didn’t have standing due to them not proving significant injury from the policy. However, the Supreme court found in the Biden v. Nebraska case that Missouri had standing (and not the other five states in the ruling), striking down the Loan Forgiveness Program. The conservative justices ruled ultimately that MOHELA would suffer injuries due to the Loan Forgiveness Program, although they denied involvement in the case.
The verbiage from the majority ruling opinion is below:
At least Missouri has standing to challenge the Secretary’s program. Article III requires a plaintiff to have suffered an injury in fact—a concrete and imminent harm to a legally protected interest, like property or money—that is fairly traceable to the challenged conduct and likely to be redressed by the lawsuit. Lujan v. Defenders of Wildlife, 504 U. S. 555, 560–561. Here, as the Government concedes, the Secretary’s plan would cost MOHELA, a nonprofit government corporation created by Missouri to participate in the student loan market, an estimated $44 million a year in fees. MOHELA is, by law and function, an instrumentality of Missouri: Labeled an “instrumentality” by the State, it was created by the State, is supervised by the State, and serves a public function. The harm to MOHELA in the performance of its public function is necessarily a direct injury to Missouri itself. The Court reached a similar conclusion 70 years ago in Arkansas v. Texas, 346 U. S. 368.
President Biden responded to the Supreme Court ruling this afternoon. In his remarks at the White House,, he revealed a new Student Debt Forgiveness plan through the Higher Education Act of 1965. One of the provisions of the act allows the Secretary of Education to authorizes the education secretary to modify, waive or compromise federal student loan under certain circumstances. In his remarks, he emphasized that this route will take longer but the administration is not giving up the fight to forgive student loans.
“This new path is legally sound,” he said. “It’s going to take longer. And in my view, it’s the best path that remains to student debt relief to as many borrowers as possible as quickly as possible.”
President Biden also laid out actions that the administration is taking to relieve the financial stress around federal repayment resuming in October. The actions detailed in his remarks are:
- The Biden administration will create a temporary, 12-month “on-ramp repayment program” that will remove the threat of default for borrowers who are unable to pay their bills.
- The Department of Education will not refer borrowers who miss payments to credit agencies for a year
- Modifications will be made to the REPAYE (Revised Pay As You Earn) Plan, such as reducing the amount that borrowers have to make on their monthly payments by half — from 10% of their discretionary income to 5%
The plan has to undergo a regulatory process, which could take months and would likely be finalized by Spring 2024.
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