The Supreme Court voted 6-3 in a decision that will prevent more than 43 million Americans from seeing any student loan relief. The scheme, which would have canceled up to $20,000 in student loans debt for Americans making less than $125,000, was enacted by President Joe Biden’s administration without congressional approval.
Biden vowed to create a new path for student loan borrowers, a policy he ran on in 2020, while the Department of Education has already enacted new reforms to make it easier for when payments are resume in October for the first time since March 2020.
“My administration’s student debt relief plan would have been the lifeline tens of millions of hardworking Americans needed as they try to recover from a once-in-a-century pandemic,” Biden said in a statement after the Supreme Court’s decision. “I believe that the court’s decision to strike down our student debt relief plan is wrong. But I will stop at nothing to find other ways to deliver relief to hard-working middle-class families.”
Under new guidelines initiated by the Department of Education after the Supreme Courts’ decision, borrowers will be able to choose a more favorable repayment plan based on their income, from 10% to 5% of disposable income. Some experts have warned that this may effectively turn the loans into grants and encourage new borrowers to take out bigger student loans. For borrowers that are not able to make a monthly payment for the first 12 months, they will not be reported to credit bureaus, placed in default or referred to debt collection agencies.
“In addition to today’s actions, our administration will continue the critical work we have pursued under President Biden’s leadership to make college more affordable to more Americans and make long-overdue improvements to the student loan system,” Secretary of Education Miguel Cardona said.
In his 26-page page majority opinion, Chief Justice John Roberts lamented that the HEROES Act, a law passed after the 9/11 attack, did not give the Secretary of Education the power to “transform” student loans but to only “modify” them. Justices Clarence Thomas, Samuel Alito, Brett Kavanaugh and Neil Gorsuch joined the opinion, while Justice Amy Coney Barrett joined the chief justices’ opinion and also wrote a concurring opinion.
“The question here is not whether something should be done; it is who has the authority to do it,” Chief Justice Roberts said in his opinion.
Justice Elena Kegan wrote the minority opinion, joined by Justices Sonia Sotomayor and Ketanji Brown Jackson. She argued that the HEROES Act gave the secretary of education “broad authority” to use emergency relief for borrowers and that Congress had already delegated these powers to the executive branch.
Since the beginning of the COVID-19 pandemic, student loan payments and interest have been paused, costing the federal government close to $200 billion. In a recently agreed upon debt limit deal, the White House and Republican representatives compromised that the pause cannot be extended. The proposed student debt relief plan by the Biden Administration would have cost the federal government $400 billion over the next decade.
