Law & Courts

Supreme Court Rejects Student Loan Relief Plan

The decision impacts loan forgiveness for K-12 teachers and staff.
By Mark Walsh — June 30, 2023 6 min read
President Joe Biden speaks in the Roosevelt Room of the White House on June 30, 2023, in Washington. Education Secretary Miguel Cardona listens at left. The Biden administration is moving forward on a new student debt relief plan after the Supreme Court struck down his original initiative to provide relief to 43 million borrowers.
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The U.S. Supreme Court on Friday struck down President Joe Biden’s $400 billion student debt relief plan, holding that it was a “vast new program” that exceeded congressional authorization.

In a case being watched by teachers because they tend to be big participants in federal student loan programs, Chief Justice John G. Roberts Jr. said a federal education statute gives U.S. Secretary of Education Miguel Cardona the authority to “waive or modify” existing statutory or regulatory provisions applicable to federal student loan programs,” but “not to rewrite that statute from the ground up.”

From the bench, Roberts called the relief plan a “vast new program.”

“The economic and political significance of the secretary’s action is staggering by any measure,” the chief justice said. “Practically every student borrower benefits, regardless of circumstances.”

And the program “amounts to nearly one-third of the government’s $1.7 trillion in annual discretionary spending,” he said. “The secretary has just drafted a new law of his own and he has done so without congressional authorization.”

Biden, speaking in the Roosevelt Room of the White House with U.S. Secretary of Education Miguel Cardona at his side, said, “I think the court misinterpreted the Constitution.”

But he aimed most of his reaction at “Republican state officials” behind the legal challenge to the program.

“I didn’t give borrowers false hope,” he said in response to a reporter’s question. “The Republicans snatched away the hope that was given.”

The president announced a “new path” to student loan relief that would be based on the Higher Education Act rather than the HEROES Act. It will include temporary, 12-month relief that would remove the threat of default even if a borrower missed payments. Details on the new program were not immediately available.

“It’s going to take longer, but we’re getting on it right away,” Biden said.

In a statement, Cardona said the Education Department “is providing a 12-month on-ramp transition period that will help ensure borrowers smoothly and successfully return to repayment without falling into delinquency or default.”

Cardona said that this transition period “will help borrowers avoid the harshest consequences of missed, partial, or late payments like negative credit reports and having loans referred to collection agencies.”

“We’re going to fight, and we’re going to keep fighting,” he added. “We’re going to put the best legal arguments forward to stand up for borrowers.”

The majority opinion in Biden v. Nebraska was joined by Justices Clarence Thomas, Samuel A. Alito Jr., Neil M. Gorsuch, Brett M. Kavanaugh, and Amy Coney Barrett.

From the bench, Justice Elena Kagan read from her dissent, which was joined by Justices Sonia Sotomayor and Ketanji Brown Jackson.

She criticized the majority for straining to find that the states challenging the program had legal standing, and she said the HEROES Act clearly gave the secretary the authority for the program.

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

“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,” she added. “But this court today decides that some 40 million Americans will not receive the benefits the plan provides.”

Teachers’ unions filed briefs supporting the Biden plan

The court dismissed the other case it heard regarding the plan, Department of Education v. Brown, ruling unanimously that individual challengers had not shown any harm that would give them legal standing. Alito wrote a short, unanimous opinion in that case.

Both cases involved the Biden administration’s $400 billion student loan debt relief plan, a major test of executive branch power watched by millions of teachers carrying high student debt, many of whom would’ve qualified for relief under the program.

The two national teachers’ unions each filed friend-of-the-court briefs supporting the Biden administration.

“Nearly half of educators have outstanding student loan debt, owing, on average, $58,700,” the National Education Association said in its brief. “The financial challenges faced by these educators compared to their peers accelerated during the pandemic, but debt relief now would place many educators on more solid financial footing.”

The American Federation of Teachers said in its brief that outstanding student loan balances, coupled with the lingering effects of the pandemic, have made it difficult for school districts to retain teachers.

“Student debt relief will help remediate the crushing impact of COVID-19 on teachers, who must amass substantial debt to enter their profession and who often work at low wages,” the AFT brief said.

When the COVID-19 pandemic hit in early 2020, President Donald Trump’s then-secretary of education, Betsy DeVos, invoked the HEROES Act to pause repayment obligations and interest accrual on all Education Department-held loans. The statute gives the secretary such power to act under a “national emergency,” such as a terrorist act, a war, or a pandemic.

Current Secretary of Education Cardona determined last year that the across-the-board pause should end, but that repayment obligations for lower-income borrowers would put them at risk of default. (The recent debt-ceiling bill agreed to by Congress and Biden blocks any further extension of the payment pause.)

The Biden plan issued up to $10,000 in student-loan relief to eligible borrowers with a federal adjusted gross income below $125,000, or $250,000 for borrowers filing jointly. Recipients of the federal Pell Grant could receive up to $20,000 in relief because they were considered to have fewer resources and be at substantially greater risk of default.

The debt relief plan was immediately challenged in multiple lawsuits, with two coming before the Supreme Court for arguments in February.

Six states—Arkansas, Iowa, Kansas, Missouri, Nebraska, and South Carolina—claimed the program violated the executive branch’s authority. They lost on standing grounds in a federal district court. But the U.S. Court of Appeals for the 8th Circuit, in St. Louis, reinstated the case on the theory that a Missouri state loan-servicing agency would lose revenue if many of its accounts were wiped out by the debt-relief plan, and thus Missouri would suffer the kind of concrete injury necessary to provide it with legal standing.

The 8th Circuit court also upheld a nationwide injunction blocking the program, although it did not specifically rule on the merits of the program. That case in the high court was Biden v. Nebraska.

The second case involved two Texas individuals, one who did not qualify for any relief and the other who qualified only for the first $10,000. A federal district court held that the program was substantively unlawful, and it also blocked the program nationwide. The U.S. Court of Appeals for the 5th Circuit, in New Orleans, declined to delay the district court ruling. The administration appealed those rulings in Department of Education v. Brown.

Five former Republican U.S. secretaries of education filed a friend-of-the-court brief in support of the challenges to the plan, which they called “unprecedented.”

“Never before has a president even suggested that the Executive Branch has the authority to cancel federal student loan debt on this scale,” said the brief signed by DeVos (who attended the arguments) and four of her GOP predecessors: Margaret Spellings and Roderick Paige (President George W. Bush), Lamar Alexander (President George H.W. Bush), and William J. Bennett (President Ronald Reagan).

“None of the secretaries believes that Congress provided clear authorization to the Executive Branch to ignore the [Education] Department’s obligations to collect student debt by canceling it,” the brief added.

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