What the Supreme Court's student loan forgiveness ruling means for you, according to experts

The Supreme Court struck down President Biden’s $400 billion student debt relief plan in a 6-3 vote on Friday. Over 40 million federal student loan borrowers would have qualified for some debt cancellation under the plan, and an estimated 20 million borrowers would have had their remaining balance wiped clean.

Biden’s plan, which was announced last August, would have canceled up to $10,000 in federal student loan debt for all borrowers making less than $125,000 per year (or $250,000 per year for married couples) whose loans are owned by the Department of Education. Borrowers who had a Pell Grant would have qualified for an additional $10,000, for a total of $20,000 in canceled federal student loan debt.

The Supreme Court heard arguments for two cases challenging Biden’s student debt relief program. Biden v. Nebraska was filed by six Republican-led states — Arkansas, Iowa, Kansas, Missouri, Nebraska and South Carolina — who said that the plan threatened a loss in tax revenue for each state. Department of Education v. Brown was filed by the Job Creators Network, a conservative advocacy group, on behalf of two Texas student loan borrowers, Myra Brown and Alexander Taylor, who would not have completely qualified for debt forgiveness under the plan.

Both plaintiffs argued that the Department of Education did not have the authority to provide one-time debt relief under the 2003 HEROES Act, which the Biden administration claimed grants the Secretary of Education authority to alleviate hardships for federal student loan recipients caused by the COVID-19 pandemic.

In Biden v. Nebraska, in a 6-3 vote with conservative justices in the majority, the court ruled in the states’ favor — bringing an end to the president’s student debt relief plan. The court unanimously voted in Biden’s favor in Department of Education v. Brown, concluding that the plaintiffs didn’t have legal standing.

Student loan interest and payments were already slated to resume this fall, regardless of the Supreme Court’s decision, with interest resuming on Sept. 1 and payments due starting in October.

Yahoo News spoke with Cary Coglianese, a professor of law and professor of political science at the University of Pennsylvania, and Ashraf Ahmed, an associate professor at Columbia Law School, to help break down the Supreme Court’s decision and what it means for student loan borrowers. Answers have been lightly edited for length and clarity.

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How will Americans with student debt be affected by today’s Supreme Court decision?

Ahmed: We're basically as badly off as we were before this decision came out. When the Biden administration announced this plan under the statutory authority (or power under the law) of the HEROES Act, they opened up applications for everyone to apply for this debt relief. While they were applying for this debt relief, the states came and brought a suit saying this plan exceeds the statutory authority given to the secretary of education under the HEROES Act — i.e. that this is unlawful. At that point, there was a stay put on the plan, which meant the debt can't be discharged, but that people can continue applying and see whether they would qualify under any hypothetical plan if it was deemed lawful. What happened today is that that possibility was squelched, and there will be no debt relief.

What’s next? How will this decision impact future efforts to alleviate student debt in the U.S.?

Coglianese: If the Biden administration or any future administration wants to cancel or relieve former students of their debt, it will require new legislation. So this punts things back to Congress. The Biden administration can't really do it administratively, as they had hoped.

Ahmed: I don't want to say Biden has totally exhausted any powers that the executive branch might have, but you could say it's just very unlikely — it's extremely unlikely — that the Biden administration can make any headway on student debt relief absent Congress passing a statute.

What was the Supreme Court's reason for striking down Biden's student debt plan?

Coglianese: In a nutshell, the court said that Congress had not authorized such a major action and a major cancellation of student debt. This is just a question of whether Congress had given the secretary of education enough authority, and the six members of the court in the majority said that the secretary did not have that authority.

Ahmed: This case is a continuation of something called "the major questions doctrine,” which is basically this interpretive rule that the court has adopted over the last five to 10 years or so, especially over the last five years, which constrains the presidency, the executive branch and agencies from taking creative interpretations of past statutes on questions of major economic significance. The major questions doctrine leads the court to be very skeptical of extreme claims of statutory authority over matters of great economic and social importance in the country. And basically at $400 billion, the economic impact here is obviously pretty major. The court says that, in those instances, we need explicit congressional authorization.

Why did SCOTUS rule in Biden's favor in Department of Education v. Brown but against him in Biden v. Nebraska?

Coglianese: The difference between the cases hinged on what lawyers call "legal standing." In order to have a federal court hear a case, a plaintiff needs to have legal standing, and essentially the Supreme Court said that in the Brown case, the plaintiffs did not have standing, but in the Nebraska case they did.

The difference was that in the Brown case, the plaintiffs were loan recipients who were not going to benefit as much under the Biden administration program, and the court said that's not enough of an injury to satisfy the requirement for legal standing.

When it came to the Nebraska case, it wasn't actually Nebraska that had standing but Missouri and a special government-operated student loan institution that was going to be affected. The court said that Missouri's loan authority had the injury needed to meet the standing requirement.

Why did the dissenting justices believe Biden's student debt program should have been upheld?

Ahmed: The dissent is basically saying, "Look, if you read the statute the way we do, the statute does give authority to the presidency, because the Department of Education is a presidential agency. It falls under the executive power. The Department of Education and the secretary of education have the authority to do this thing, to do debt relief.”

But the majority has come in and basically decided, “No, we don't think that Congress did delegate this authority, because of how we read the statute. And moreover, we're just always skeptical when there are new interpretations of statutory authority that end up having huge economic impact.”