Supreme Court strikes down student loan forgiveness, ruling Biden plan unlawful

The Supreme Court on Friday invalidated President Biden’s student loan forgiveness plan, ruling that federal law does not allow the program to wipe out nearly half-a-trillion dollars in debt.

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

Before striking it down, the Supreme Court first said Missouri, one of the six states that challenged the lawfulness of the plan, had the right to sue, known as legal standing. That finding allowed the court to consider whether the secretary of education had the power to forgive student loan debt under a law known as the HEROES Act.

In a separate opinion, the Supreme Court unanimously said a pair of borrowers who also challenged the program lacked standing, and tossed out their challenge.

The decision from the high court is a major defeat for Mr. Biden as he pursues reelection. He pledged during his 2020 campaign that his administration would forgive at least $10,000 of federal student loan debt.

The student loan relief plan
Mr. Biden moved to fulfill that promise last August, when he announced his plan to forgive up to $10,000 in student debt for eligible borrowers earning less than $125,000 annually. Qualifying Pell Grant recipients, who are students with the greatest financial need, can have up to an additional $10,000 in relief.

Roughly 40 million Americans were eligible for the relief announced by the president last August, 20 million of whom would have had their loan balances erased altogether, according to White House estimates. More than 26.2 million people applied for the program, and over 16 million of those applications were approved before the Department of Education was forced to stop accepting applications due to the legal challenges.

The Trump and Biden administrations paused federal student-loan payments during the COVID-19 pandemic, though borrowers will resume making payments this summer.

The Department of Education relied on the 2003 HEROES Act as its legal justification for wiping out roughly $430 billion in debt. The law authorizes the education secretary to “waive or modify” student financial assistance programs for borrowers “in connection” with a national emergency, such as the pandemic.

Legal challenges
A group of six red states — Arkansas, Iowa, Kansas, Kentucky, Missouri and South Carolina — as well as two borrowers from Texas filed two separate lawsuits, arguing the debt relief exceeded the administration’s authority.

In the challenge from the states, a federal district court in St. Louis dismissed the case, finding they did not have the legal standing to bring the suit. But an appeals court blocked the loan forgiveness program, finding that Missouri was harmed from the financial losses the debt cancellation inflicts.

The appeals court focused its decision on the Higher Education Loan Authority of the State of Missouri, or MOHELA, a state-created entity that services federal student loans, finding that the financial impact on the loan servicer due to the debt discharge threatened financial harm to Missouri.

For the second case from Texas brought by borrowers Myra Brown and Alexander Taylor, dubbed Dept. of Education v. Brown, a federal district court found the borrowers satisfied the requirements for standing and ruled the plan is an unconstitutional exercise of Congress’s legislative power. A federal appeals court declined to reinstate the program.

Brown does not qualify for debt relief, as her loans are held by commercial entities, and Taylor is eligible for $10,000 in loan forgiveness.