The supreme court has ruled against the Biden administration’s $430bn student debt forgiveness plan in a blow to up to 40 million borrowers in the US.
In a 6-3 decision, the conservative-leaning supermajority of justices ruled that the 2003 Heroes Act, passed in the aftermath of the September 11, 2001 terrorist attacks on the US, does not authorize Biden’s debt forgiveness plan.
The law gave the secretary of education authority to make changes to any provision of applicable student aid program laws in the aftermath of the September 11, 2001, terrorist attacks on the US.
The decision strikes down a major tenet of the Biden administration’s program, with the 2024 election quickly approaching.
Of the group of states suing the administration, led by Nebraska, the court determined that at least Missouri had standing – a sufficient legal case showing harm to the plaintiff – to sue given its implementation of Missouri Higher Education Loan Authority (Mohela), one of the largest holders and servicers of educational loans in the US.
In the opinion, delivered by Chief Justice John Roberts, the court found that the debt forgiveness plan would “cut into Mohela’s revenue, impairing its effort to aid Missouri college students”.
“This acknowledged harm to Mohela in the performance of its public function is necessarily a direct injury to Missouri itself,” said Roberts.
The court further ruled that the Biden administration could not justify using the Heroes Act for its spending on the student-loan forgiveness plan. Roberts wrote that the authority to modify statutes in the act allows for “modest adjustments and additions to existing regulation … not [to] transform them”.
Roberts added that the “modifications” by the Department of Education “created a novel and fundamentally different loan forgiveness program” that “expanded forgiveness to nearly every borrower in the country”.
The liberal-leaning justices Elena Kagan, Sonia Sotomayor and Ketanji Brown Jackson all dissented.
In a sharp dissent, Kagan accused the court of overreach, saying: “In every respect, the court today exceeds its proper, limited role in our Nation’s governance.”
Kagan argued that the states did not have a right to sue, noting that the court’s first overreach was “deciding it at all”.
She said: “The plaintiffs in this case are six states that have no personal stake in the secretary’s loan forgiveness plan. They are classic ideological plaintiffs: they think the plan a very bad idea, but they are no worse off because the secretary differs.”
Kagan then defended the merits of the debt forgiveness program, including that two secretaries serving under two separate presidents have used the 2003 Heroes Act to suspend loan repayments, including during the Covid-19 pandemic, with the Biden administration adding a debt forgiveness provision.
In light of the ruling, the Biden administration was expected to announce new actions on student loans, reported CNN and Reuters, citing White House sources.
The case, Biden v Nebraska, against the plan was originally brought by a coalition of six Republican-led states – Arkansas, Iowa, Kansas, Missouri, Nebraska and South Carolina – arguing that Congress should have approved any student loan debt cancellation plan and that the Biden administration and the US education department were abusing emergency authority.
Under Joe Biden’s loan forgiveness plan, announced last August, $20,000 per person of federal student debt would have been forgiven for borrowers who were Pell grant recipients and up to $10,000 of debt would have been forgiven for other borrowers.
In order to qualify for debt forgiveness under this initiative, individual borrowers could not earn more than $125,000 annually and married couples filing taxes jointly could not earn more than $250,000.
Millions signed up but the plan was immediately challenged in court and eventually reached the supreme court, which mulled the constitutionality of the initiative.
The court’s decision, after hearing oral arguments in February, underscores the limits of executive power and that the president cannot always unilaterally enforce legislation by executive order without congressional approval.
The Biden administration is considering alternative pathways to forgiving federal student loan debt, but has not explained how that will be achieved.
Student loan repayments, which were paused since the Covid-19 pandemic and again several times while the program was being litigated, are due to resume later in October.
