A sharply divided Supreme Court ruled Friday morning that the Biden administration overstepped its authority in trying to cancel or reduce student loans for millions of Americans.
The 6-3 decision, with conservative justices in the majority, effectively killed the $400 billion plan announced by President Joe Biden last year, and now leaves borrowers on the hook for repayments that are expected to resume in the fall.
Biden was to announce a new set of actions to protect student loan borrowers later Friday, a White House official said. The official was not authorized to speak publicly ahead of Biden’s expected statement on the case and spoke on condition of anonymity.
The court held that the administration needed Congress’ endorsement before undertaking so costly a program. The majority rejected arguments that a bipartisan 2003 law dealing with national emergencies, known as the HEROES Act, gave Biden the power he claimed.
“Six states sued, arguing that the HEROES Act does not authorize the loan cancellation plan. We agree,” Chief Justice John Roberts wrote for the court.
Justice Elena Kagan, wrote in a dissent, joined by the court’s two other liberals, that the majority of the court “overrides the combined judgment of the Legislative and Executive Branches, with the consequence of eliminating loan forgiveness for 43 million Americans.” Kagan read a summary of her dissent in court to emphasize her disagreement.
Roberts, perhaps anticipating negative public reaction and aware of declining approval of the court, added an unusual coda to his opinion, cautioning that the liberals’ dissent should not be mistaken for disparagement of the court itself. ”It is important that the public not be misled either. Any such misperception would be harmful to this institution and our country,” the chief justice wrote.
Loan repayments will resume in October, although interest will begin accruing in September, the Education Department has announced. Payments have been on hold since the start of the coronavirus pandemic more than three years ago.
“I’ll have to give up on some dreams and some goals of mine simply because of the financial part,” said Alyssa Casias, who graduated from Colorado State University in 2018 and now has about $60,000 in student loan debt. “My parents are no longer in a position to help me financially and I think it will really, really change the trajectory of my life, which feels unfathomable at this point, but unfortunately something I have to consider.”
The forgiveness program would have canceled $10,000 in student loan debt for those making less than $125,000 or households with less than $250,000 in income. Pell Grant recipients, who typically demonstrate more financial need, would have had an additional $10,000 in debt forgiven.
The plan would have also limited the payments of borrowers who are on income-based repayment plans to spending 5% of their monthly discretionary income on loans, and would have covered unpaid monthly interest.
Twenty-six million people had applied for relief and 43 million would have been eligible, the administration said. The cost was estimated at $400 billion over 30 years, one of the most expensive executive actions in U.S. history. The program would have cleared more than a quarter of the country’s $1.7 trillion in outstanding federal student debt.
Reducing student debt was a key promise during Biden’s election campaign.
For months, the plan had been blocked by lower courts. The loan forgiveness program has faced at least six lawsuits from Republican-led states and conservative groups, that accused the president of executive overreach or argued the plan will cost them future tax revenue.
Two of those six legal challenges made it to the Supreme Court. The justices had been examining whether the president has the authority to forgive such a high amount of student debt without approval from Congress.
A chance to reduce student debt
The Biden administration announced the loan forgiveness plan on Aug. 24.
The policy was crucial for many borrowers, particularly people of color and those with lower incomes, who have needed to take on high levels of debt to build their careers and enter today’s economy, according to a report about the financial health of young Americans age 18-34 released by the Young Invincibles, a nonprofit focused on political and economic opportunity for young adults.
Since 1980, the cost of four-year public college and four-year private college has nearly tripled, even after accounting for inflation, according to the White House website. Pell Grants that once covered nearly 80% of the cost for a four-year public college degree for students from low-income families now only cover a third of the cost, according to the site.
The typical undergraduate student with loans now graduates with nearly $25,000 in debt, according to a Department of Education analysis. And nearly a third of borrowers have debt but no college degree, often because the cost of attendance was too high.
Casias, 26, applied for $20,000 in debt relief in September.
If the court had upheld Biden’s program, Casias said she hoped to begin improving her credit score. Casias also said shedding $20,000 in student-loan debt would have made it more likely for her to attend law school to become a criminal defense attorney. Currently, she’s a program coordinator at Key Communities, which serves mostly first generation students and young people of color enrolled at Colorado State University.
School loans put Casias in debt. But she has also had to open new credit card accounts to pay for daily expenses. She was able to purchase a home in 2019, when the housing market was more stable. But that has brought a lot of financial challenges, she said, and she filed for bankruptcy in 2022. To help reduce some of her debts, she rents out the home while she lives in an undesirable apartment, she said.
The first in her family to earn a college degree, Casias said she financially supports most of her loved ones even though she earns a modest salary.
“It’s hard to think about the future with this looming debt,” she said. “It feels suffocating and kind of like trying to climb a muddy mountain. It just feels like every day, there’s a new debt.”
Cameron DeTello, who applied for $10,000 of debt relief, graduated from the University of Colorado-Denver with a degree in sociology in 2017 and finished a master’s program in nonprofit management at Regis University in 2019.
She has accrued almost $90,000 in student debt and was supposed to begin payments in March 2020, when the Trump administration suspended student loan repayment, interest and collections due to the COVID-19 pandemic.
“I do have a lot of people around me — friends and family — who were counting on this relief because it would wipe out the majority, if not, all of their debt. Most of them are young people of color with low-income backgrounds,” DeTello said. “Most of us that have debt are really going to struggle with how we’re going to get back into the groove of paying that debt and accounting for that debt in our monthly or weekly expenses and having to really adjust to what the next 10 to 15 or 20 years will look like.”
DeTello said she doesn’t know how much money she will have to spend each month to pay back her loans. She’s also expecting a child on Aug. 30.
“Our education system on the higher education side really did not set up young people for success,” she said. “Most of our generation grew up hearing you have to go to college to be able to get a good job and make something of yourself and then, after all of us did go to college and have a lot of debt, it was, either, we weren’t saving enough during it, or we weren’t working enough, or ‘we did it wrong, or we should have not gone to college and went to trade school.”
Those conflicting narratives have made it difficult for many young Americans to make ends meet during and after receiving higher education, she said. More young people would have been able to hopefully start purchasing homes, starting families or investing in whatever ventures are important to them rather than having to face increasing debt, she said.
Either way, DeTello said, she hopes the Supreme Court’s ruling will shed light on a need to reduce the “outrageous” cost of college and graduate school before the next generation falls into the same cycle of looming debt and similar financial struggles.
“I just hope this sparks change somewhere,” she said.
Associated Press writers Mark Sherman, Collin Binkley and Colleen Long contributed to this report.