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President Biden does not have the authority to forgive student loans, the Supreme Court said in a 6-to-3 decision that dooms the administration’s debt-relief plans.
The court’s conservative justices sided with six Republican attorneys general who argued that the administration didn’t have the authority to forgive federal student loans under a 2003 law. The attorneys from six states—Arkansas, Iowa, Kansas, Missouri, Nebraska and South Carolina—alleged that the plan would harm state revenues and agencies that hold student loans.
Chief Justice John Roberts Jr., writing for the majority, said that the administration’s plan to forgive up to $20,000 in student loans for eligible Americans went beyond the waivers and modifications authorized under the Higher Education Relief Opportunities for Students (HEROES) Act of 2003. The law allows the Education Department to waive or modify parts of the student loan program so that borrowers affected by war, military operation or national emergency—such as the coronavirus pandemic—don’t end up in a worse position financially.
“The secretary asserts that the HEROES Act grants him the authority to cancel $430 billion of student loan principal,” Roberts wrote. “It does not. We hold today that the act allows the Secretary to ‘waive or modify’ existing statutory or regulatory provisions applicable to financial assistance programs under the Education Act, not to rewrite that statute from the ground up.”
Roberts said the debt-relief plan created a “novel and fundamentally different loan forgiveness program,” in violation of the statute.
The decision means that the millions of borrowers who were promised loan forgiveness will be denied that relief. About 26 million people applied and more than 16 million were approved for relief before a federal judge blocked the administration from moving forward with the plan. The administration had said the debt-cancellation plan would help prevent high rates of default and delinquency when payments resume later this summer.
Student debt relief advocacy groups condemned the court’s decision in statements and called on President Biden to take additional steps to protect student loan borrowers.
“In the face of the Supreme Court’s unjust decision, the responsibility to fight for student debt relief falls squarely on the president’s shoulders,” said Natalia Abrams, president and founder of the Student Debt Crisis Center. “This is a moment that demands swift action. The president possesses the power, and must summon the will, to secure the essential relief that families across the nation desperately need.”
Restarting payments without canceling student loans first will be “catastrophic,” advocates for cancellation have said. The Consumer Financial Protection Bureau recently said that millions of borrowers are at risk of defaulting.
Under Biden’s plan, announced last August, individuals who earn less than $125,000 a year would’ve seen their student loan balances drop by $10,000 while those who received Pell Grants in college would have seen an extra $10,000 in relief.
Justice Elena Kagan wrote in her dissent that the court overreached its role in the nation’s governance in striking down the debt-relief program by granting the states standing and then determining that the HEROES Act does not authorize the plan.
“The majority’s opposing construction makes the act inconsequential,” Kagan wrote. “The secretary emerges with no ability to respond to large-scale emergencies in commensurate ways.”
A majority of the justices found that the alleged harm to the Missouri Higher Education Loan Authority (MOHELA) was sufficient enough for the plaintiffs to show standing, or that they have right to sue. Whether the plaintiffs had standing was a key issue discussed during oral arguments earlier this year and in many court filings.
“The harm to MOHELA in the performance of its public function is necessarily a direct injury to Missouri itself,” Roberts wrote in the opinion.
The states’ standing argument focused on how MOHELA, a state-created entity and federal loan servicer, would be affected by the debt-relief program. MOHELA is not a part of the lawsuit. But Solicitor General Elizabeth Prelogar, who represented the Biden administration, said the agency would’ve had standing if it sued.
“From the first page to the last, today’s opinion departs from the demands of judicial restraint,” Kagan wrote. “At the behest of a party that has suffered no injury, the majority decides a contested public policy issue properly belonging to the politically accountable branches and the people they represent.”
Before and after the hearing, legal experts were generally skeptical that the plaintiffs could prove they had standing but expected the administration to lose its argument on the merits if they did clear that threshold.
The justices tossed a separate case from two Texas residents who challenged the debt-relief plan because they wouldn’t benefit from all the provisions and didn’t have the chance to comment on the proposal. The justices found that those individuals did not have standing to bring their challenge, concurring with the Biden administration and other legal experts.
Roberts wrote in the opinion that the statutory text of the HEROES Act alone precludes the debt-relief program.
In reaching their decision, the justices also applied the major-questions doctrine to the case, which says in part that agencies need clear congressional authorization when carrying out policies that have economic and political significance. Whether the doctrine applied was another key issue raised at oral arguments and in court filings.
“The ‘economic and political significance’ of the Secretary’s action is staggering by any measure,” Roberts wrote.
Conservative legal experts and the plaintiffs said that the lawsuits fit the major-questions doctrine because of the scale of the debt-relief program and what it would mean for executive power.
The administration and its supporters have argued in court filings that the major-questions doctrine should not apply, pointing to the use of the HEROES Act to suspend student loan payments during the pandemic, which has not yet been challenged in court.
Justin Draeger, president of the National Association of Student Financial Aid Administrators, said the decision will be “difficult—if not devastating—news” for student loan borrowers nationwide.
“And as we prepare for student loan payments to resume after more than three years, we must get on with the work of helping these same borrowers face the reality of student loan repayment,” he said in a statement. “Today’s Supreme Court decision only underscores the urgent need for student loan reform.”
That includes increasing the federal Pell Grant.
The University of California system said in a statement that it was disappointed in the court’s decision.
“This historic relief program would have made a significant impact on the lives of college graduates, particularly for those from low-income backgrounds who are more likely to take on debt to complete their education,” the statement said. “It also harms society as a whole: Those with student loans are less likely to earn advanced degrees, purchase a home, start their own business or make other investments that benefit their communities.”
The system encouraged student loan borrowers to consider all their loan-repayment options through the Education Department.
“At the University of California, we are committed to helping students make payments more economical and less burdensome,” the statement said.
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