Supporters of student debt forgiveness demonstrate outside the US Supreme Court on June 30, 2023, in Washington, DC.Â
Olivier Douliery | AFP | Getty Images
The Supreme Court on Friday struck down President Joe Biden’s federal student loan forgiveness plan, denying tens of millions of Americans the chance to get up to $20,000 of their debt erased.
The ruling, which matched expert predictions given the justices’ conservative majority, is a massive blow to borrowers who were promised loan forgiveness by the Biden administration last summer.
The 6-3 majority ruled that at least one of the six states that challenged the loan relief program had the proper legal footing, known as standing, to do so.
The high court said the president didn’t have the authority to instruct his Education secretary to cancel such a large amount of consumer debt without authorization from Congress.
“‘Can the Secretary use his powers to abolish $430 billion in student loans, completely canceling loan balances for 20 million borrowers, as a pandemic winds down to its end?'” wrote Chief Justice John Roberts in the majority opinion for Biden v. Nebraska. “We can’t believe the answer would be yes.”
Roberts also said the president’s plan would cause harm to at least one of the GOP-led states that had sued to block the relief, as it would have reduced profits at the Missouri Higher Education Loan Authority, or MOHELA.
“Under the Secretary’s plan, roughly half of all federal borrowers would have their loans completely discharged,” Roberts wrote. “MOHELA could no longer service those closed accounts, costing it, by Missouri’s estimate, $44 million a year in fees…The plan’s harm to MOHELA is also a harm to Missouri.”
‘An absolute betrayal’ for borrowers, say advocates
Financial experts expressed concern about what could come next for borrowers.
The U.S. Department of Education recently warned that pushing people into repayment after an over three-year-long pause and a pandemic that disrupted the financial security of many households without Biden‘s loan cancellation could trigger a historic rise in delinquencies and defaults.
Consumer advocates slammed the ruling, and accused the court of bias.
“Today’s decision is an absolute betrayal to 40 million student loan borrowers counting on an impartial court to decide their financial future based upon the established rule of law,” said Persis Yu, deputy executive director at the Student Borrower Protection Center, an advocacy group.
Last August, under pressure from other Democrats, consumer advocates and borrowers to fix a lending system they described as broken and predatory, Biden announced he’d cancel up to $10,000 in federal student debt for most borrowers, and as much as $20,000 for those who’d received a Pell Grant in college, a form of aid for low-income families.
When the Biden administration rolled out its loan forgiveness plan, it also released a 25-page memo by the U.S. Department of Justice asserting that its relief was permitted by the Heroes Act of 2003 – a product of the 9/11 terrorist attacks, and which grants the president broad power to revise student loan programs during national emergencies. The country was operating under an emergency declaration due to Covid-19 at the time.
But the administration’s forgiveness application process had been open for less than a month when a slew of legal challenges forced them to shut it. Biden’s plan has now faced at least six lawsuits from Republican-backed states and conservative groups, most of which accuse him of executive overreach.
Two of those legal challenges made it to the Supreme Court: one brought by six GOP-led states — Nebraska, Missouri, Arkansas, Iowa, Kansas and South Carolina — and another backed by the Job Creators Network Foundation, a conservative advocacy organization.
The justices heard oral arguments on those cases at the end of February.
— CNBC’s Kevin Breuninger contributed to this story.
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