Supreme Court says no to Biden student loan forgiveness plan. How the decision affects you

The Supreme Court quashed President Joe Biden’s plan for student loan forgiveness Friday, a measure that could have offered tens of thousands in relief to some borrowers.

In a 6-3 decision on ideological lines, the Court said that the program was not authorized under the 2003 Higher Education Relief Opportunities for Students Act, which allows the government to grant waivers for financial aid in a national emergency.

Invoking the act, the Biden administration had promised to forgive more than $400 billion in debt to alleviate financial distress caused by the coronavirus pandemic. But the Court said the White House initiative exceeded its power under the law.

“We hold today that the Act allows the Secretary [of Education] 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,” Chief Justice John G. Roberts wrote for the majority.

Biden had proposed relieving up to $20,000 for student loan borrowers who received a Pell Grant, a form of federal aid for low-income students. The plan, announced last August, would forgive up to $10,000 for those who earn under $125,000 a year individually or are in households that make under $250,000.

About 26 million borrowers applied or were deemed eligible for forgiveness. That included more than 2.3 million Californians, according to the White House.

After the Court handed down the ruling, Biden announced the administration was pursuing other ways to relieve student debt and make repayment more feasible. He condemned the Republicans who sued over his original plan. And he said the Court “misinterpreted the Constitution.”

“The money was literally about to go out the door,” Biden said of his original plan. “And then, Republican elected officials and special interests stepped in. They said ‘no’ — ‘no’ — literally snatching from the hands of millions of Americans thousands of dollars in student debt relief that was about to change their lives.”

Joe Biden announces new plan to forgive student loans following Supreme Court ruling

The median federal student loan debt for borrowers at all four-year California colleges with more than 500 undergraduates exceeds $10,000, according to 2022 analysis by The Sacramento Bee. About 30% of Sacramento State undergraduates took a federal loan; their median debt upon graduation was around $15,000. About 31% of University of California, Davis, undergraduates took a federal loan; their median debt upon graduation was around $13,200.

The Supreme Court heard arguments from two lawsuits in February. In one, states contended that the president overreached his authority and that the plan would injure student loan financiers. In another, plaintiffs said they would be harmed because they would be at least partially excluded from the program.

The Court unanimously ruled that plaintiffs in the second case lacked standing. If it had been the only case before the Court, Biden’s loan program could have survived. It was the case brought by the states that delivered the fatal blow.

“The dreams of too many students are limited by their parents’ paychecks, and the promise of higher education is too often closed to students of color,” Sen. Alex Padilla, a California Democrat, said in a statement after the ruling was released.

“President Biden’s federal student loan forgiveness plan amounted to one of the largest efforts to close the racial wealth gap in United States history And while the Supreme Court closed the door to this approach, I refuse to believe there’s no path forward,” he said.

Federal student loan repayments will resume in October after being repeatedly halted during the pandemic, the U.S. Education Department said before the decision. Interest will start to accrue again on Sept. 1. Congress prevented further pauses on repayment as part of the agreement to lift the debt ceiling, which was signed into law this month.

Federal loans account for more than two-thirds of student borrowing in the U.S, according to the Public Policy Institute of California (PPIC). About 3.8 million Californians are responsible for more than $142 billion of the nation’s student borrowing. The total national balance comes to about $1.6 trillion.

In California, which has long had a lower rate of student borrowing than the rest of the country, only a third of students took out loans in the 2019-20 school year, per PPIC. Those who attended for-profit colleges or who did not graduate from their institutions tended to have more difficulty reducing debt.

The Biden administration has forgiven at least $66 billion for nearly 2.2 million borrowers through other means, recent Education Department data shows.

Other forms of student loan forgiveness that have continued include relief for people in public service or who attended schools like Corinthian Colleges — for-profit institutions that the administration said took advantage of students.

Most people did not want the Court to strike the Biden plan. Polling from Data for Progress and the Student Borrower Protection Center released Friday showed that 61% of likely voters supported it. The poll was conducted at the end of May through the beginning of June. More than a third of voters opposed the plan, but only Republicans older than 45 had a majority of respondents disapprove.