Supreme Court Rules to Block Biden’s Student Debt Forgiveness Plan

• Six justices ruled in favor of blocking the one-time forgiveness program.
• President Biden announced a plan in August 2022 to cancel up to $20,000 in debt for most student loan borrowers.
• The court's majority opinion stated such a debt relief program would need to be approved by Congress.

The U.S. Supreme Court ruled on Friday that President Joe Biden’s plan for student loan debt forgiveness is unconstitutional.

The court's decision impacts over 40 million federal student loan borrowers hoping for up to $20,000 in debt to be erased. Over 26 million borrowers applied for forgiveness within the first month of the application process before court orders convinced the Biden administration to take down the application.

Chief Justice John Roberts wrote the majority opinion and was joined by conservative-leaning justices Clarence Thomas, Samuel Alito, Neil Gorsuch, Brett Kavanaugh, and Amy Coney Barrett. Justice Elena Kagan penned the dissenting opinion and was joined by liberal-leaning justices Sonia Sotomayor and Ketanji Brown Jackson.

Biden's debt forgiveness program would have erased up to $10,000 in federal student loans for all borrowers making less than $125,000 per year, or couples making less than a combined $250,000. People who received at least one Pell Grant while in college are eligible for up to $20,000 in total loan forgiveness.

The court's decision came down to whether the debt forgiveness plan is an appropriate application of the Higher Education Relief Opportunities for Students Act of 2003 (HEROES Act). Roberts' decision stated that using the HEROES Act for blanket forgiveness extends past Congress' initial intent for the law, which was passed in the wake of terrorist attacks on Sept. 11, 2001.

"We hold today that the [HEROES] Act allows the Secretary [of Education] to 'waive or modify' existing statutory or regulatory provisions applicable to financial assistance programs under the [Higher] Education Act," Roberts wrote, "not to rewrite that statute from the ground up."

He added that the HEROES Act allows the federal government to make "modest adjustments" to the federal student loan system.

"The [loan cancellation] plan has 'modified' the cited provisions only in the same sense that 'the French Revolution "modified" the status of the French nobility' — it has abolished them and supplanted them with a new regime entirely," Roberts wrote.

Kagan Dissent Questions Plaintiff's Standing

Justice Kagan's dissenting opinion offered a scathing critique not only of the majority opinion, but also of the court’s choice to decide this case to begin with.

"The [Supreme] Court's first overreach in this case is deciding it at all," she wrote.

Six states who sued the Department of Education over this loan forgiveness program did not have standing to sue, Kagan wrote. The case essentially hinges on the belief that the Missouri Higher Education Loan Authority (MOHELA) will be harmed by the forgiveness plan, and therefore Missouri had a right to sue.

Kagan disagreed, stating that MOHELA is an independent corporation.

Moreover, Missouri failed to prove that any negative impact to MOHELA would have an adverse effect on the state, she wrote.

"Not even Missouri, and not even the majority, claims that MOHELA's revenue loss gets passed through to the state," Kagan said. "MOHELA is financially independent from Missouri—as corporations typically are, the better to insulate their creators from financial loss."

The majority opinion, meanwhile, classifies MOHELA as a "public instrumentality" of the state.

MOHELA could have sued on its own, Kagan said, but chose not to.

"Which leads to an obvious question: Where's MOHELA? The answer is: As far from this suit as it can manage," Kagan wrote. "MOHELA is not a party here. Nor is it an amicus. Nor is it even a rooting bystander."

Next, Kagan focused on whether the lawsuit has any merit to dispute the lack of standing. The HEROES Act intentionally provides broad powers to the secretary of education to respond to national emergencies, she said. The majority opinion's declaration that the secretary overstepped his bounds, she said, is contrary to the powers that Congress assigned to the position.

"That may have been a good idea, or it may have been a bad idea," Kagan wrote. "Either way, it was what Congress said."

A Prolonged Court Battle Comes to an End

The Supreme Court heard oral arguments for the case on Feb. 28.

That hearing centered on two primary legal questions:

• Does the state of Missouri have legal standing to sue on behalf of the Missouri Higher Education Loan Authority (MOHELA)?
• Did the Department of Education (ED) have the authority to cancel outstanding debt without congressional approval?

Ultimately, the court decided that Missouri did, in fact, have the authority to sue the federal government.

"The plan's harm to MOHELA is also a harm to Missouri," Justice Roberts wrote. "MOHELA is a 'public instrumentality' of the state."

The pause on federal student loan payments will end after Aug. 29, thanks to the debt ceiling deal negotiated between President Biden and Speaker of the U.S. House of Representatives Kevin McCarthy in early June. Interest will begin accumulating on loans once again Sept. 1.

A BestColleges survey of 1,000 current undergraduate and graduate students in March 2023 found that the majority (56%) of students would be angry or disappointed if the Supreme Court were to block Biden's one-time forgiveness plan. About one-quarter (24%) thought that Biden's administration overstepped its authority with the plan.