U.S. Supreme Court rules against Biden administration student loan debt relief plan

More than 43M Americans have student loan debt, with the estimated total pegged at more than $1.76T

By: - June 30, 2023 12:07 pm
Black borrowers hold a disproportionate share of student loan debt, and many likely were recipients of Pell Grants.

Student loan borrowers gather near The White House to tell President Biden to cancel student debt at a rally in Washington, DC. (Photo by Paul Morigi/Getty Images for We, The 45 Million)

(*This story was updated at 2:58 p.m. on Friday, June 30, 2023, to include additional reporting)

WASHINGTON — The U.S. Supreme Court on Friday ruled that the Biden administration does not have the legal authority to enact a one-time student debt relief program, dealing a blow to the 40 million Americans who would have qualified for the program.

Last year, the Biden Administration rolled out a debt forgiveness plan for borrowers with federal student loans that would be a one-time cancellation of up to $10,000.

Those student loan borrowers who had received Pell Grants — federal aid to help low-income students pay for higher education — could qualify for an additional $10,000 in forgiveness, a policy that was meant to provide equitable relief to Black borrowers.

In a 6-3 decision, Chief Justice John Roberts, writing for the conservative majority of the court, deemed that a loan servicer in Missouri, the Higher Education Loan Authority, known as MOHELA, would have its revenue threatened by the debt relief.

The case was filed by Republican attorneys general of Nebraska, Missouri, Arkansas, Iowa, Kansas and South Carolina, and they argued the Biden administration overstepped its reach and that MOHELA would be harmed by a loss of profits from federal student loan debt relief.

The court majority agreed. “(T)he Secretary’s plan would cost MOHELA, a nonprofit government corporation created by Missouri to participate in the student loan market, an estimated $44 million a year in fees,” Roberts wrote.

“MOHELA is, by law and function, an instrumentality of Missouri: Labeled an ‘instrumentality’ by the State, it was created by the State, is supervised by the State, and serves a public function. The harm to MOHELA in the performance of its public function is necessarily a direct injury to Missouri itself.”

All three liberal Justices, Sonia Sotomayor, Elena Kagan and Ketanji Brown Jackson, dissented. Kagan, writing for the dissenters, did not agree with the finding the states had standing.

“The plaintiffs here are six States: Arkansas, Iowa, Kansas, Missouri, Nebraska, and South Carolina,” Kagan wrote. “They oppose the Secretary’s loan cancellation plan on varied policy and legal grounds. But as everyone agrees, those objections are just general grievances; they do not show the particularized injury needed to bring suit.”

The justices unanimously decided that a second case challenging the debt relief plan did not have legal standing. That case was brought by a two people with student loan debt who would either partially or entirely not qualify for the White House’s debt relief program. That case was backed by the conservative advocacy group  the Job Creators Network Foundation.

The Biden administration’s student debt relief plan has not only been challenged in the courts by Republicans, but also in Congress. The House and the Senate voted to overturn the policy through the Congressional Review Act, but Biden vetoed the resolution.

More than 16 million borrowers had already been approved for relief,  according to the Department of Education, before the agency was blocked from accepting more applicants following a nationwide injunction.

Repayments on federal student loan are set to resume Oct. 1, but interest accrual will begin starting Sept. 1, according to the Department of Education.

​​More than 43 million Americans have student loan debt, and the Federal Reserve estimates that the total U.S. student loan debt is more than $1.76 trillion.

A law passed in early June to address the nation’s debt ceiling codified that the White House would not be able to extend the pause on repayment for federal student loans unless approved by Congress.

For three years, there has been a pause on federal student loan repayment due to the coronavirus pandemic that was initially put in place by the Trump administration and extended by the Biden administration.

Taking to Twitter, U.S. Rep. Summer Lee, D-12th District, called the ruling “shameful, cruel, and completely illegitimate.”

In a statement, U.S. Rep. Brendan Boyle, D-2nd District, said the ruling will “increase the already unbearable burden currently placed on students and graduates.

“The formidable costs that students face as they leave college or trade school pose an enormous obstacle to their personal and professional development,” Boyle said, adding that Friday’s ruling “only worsened this crisis.

“Our national educational performance is being outpaced and  [President Joe Biden’s] student debt-relief plan would have allowed our country to maintain our edge in both the academic and industrial realms. It is vital to the stability of our nation to fully invest in the potential of the American people, who are our most potent resource,” Boyle said.

In a tweet, U.S. Rep. Dwight Evans, D-3rd District, vowed to keep working on student debt relief and college affordability issues.

Capital-Star Editor John L. Micek contributed additional reporting. 

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Ariana Figueroa
Ariana Figueroa

Ariana covers the nation's capital for States Newsroom. Her areas of coverage include politics and policy, lobbying, elections and campaign finance.