Supreme Court Invalidates Biden's Student Loan Forgiveness Proposal

The Supreme Court has issued a highly anticipated ruling invalidating President Joe Biden's unprecedented proposal to forgive student loans. 

Last year, President Biden unveiled a plan to alleviate the burden of student debt, which would have granted forgiveness of up to $20,000 to borrowers with federal loans held by the government, based on whether they had received a Pell Grant during their education.

Biden's student loan forgiveness plan was restricted in a legal battle.

The majority of federal loan borrowers, including those in default and Parent PLUS borrowers, would have been eligible as long as their income in 2020 or 2021 did not exceed the program's limits (generally $125,000 for individual borrowers or $250,000 for married borrowers).

However, Biden's student loan forgiveness plan faced legal challenges and was ultimately thwarted in a legal battle.

Despite the Department of Education launching a straightforward online application, which led to the forgiveness of loans for millions of borrowers, the initiative never came to fruition due to legal challenges brought by Republican-led states and conservative groups.

The Biden administration appealed the decision, and the Supreme Court agreed to hear the cases. 

However, court observers noted that the issue of standing for the legal challengers posed a complex challenge. The concept of standing requires the party to demonstrate that they will suffer specific and concrete harm that is directly linked to the challenged program, and that can be remedied by the relief requested (in this case, striking down Biden's student loan forgiveness plan). During the February hearing, four of the nine justices appeared doubtful of the challengers' standing, while several other justices did not comment much on the matter.

Supreme Court Rejects Biden's Arguments on Student Loan Forgiveness

Nonetheless, the majority of the Supreme Court rejected the legal arguments presented by the Biden administration in its decision today. While the Department of Education had unanimously ruled that the challengers lacked standing, the Court found that Missouri had standing in a 6-3 decision in Nebraska v. Biden, and that Biden's student loan forgiveness plan was not authorized under the 2003 HEROES Act.

The Court differentiated the circumstances in student loan forgiveness cases from several recent rulings, in which the Court had held that states did not have standing to challenge federal laws or regulations.

The Court has sided with six states that filed the lawsuit, arguing that the HEROES Act does not permit a plan for loan forgiveness. The Court stated, 'We conclude today that the law allows the Secretary to 'waive or modify' current legal or regulatory requirements applicable to financial assistance programs under the Higher Education Act, not to rewrite that law from scratch.

What is the Biden Administration's Next Move on Student Loan Forgiveness?

With the Supreme Court invalidating Biden's student loan forgiveness plan, the Education Department will not be able to implement the program in its current form. The Biden administration will need to explore alternative options, none of which are certain to succeed or ideal.

Previously, advocates had recommended that Biden extend the student loan moratorium again if the Supreme Court ruled against him. However, the recent debt ceiling bill prevents Biden from doing so, unless there is another national emergency that would justify a new student loan pause.

Numerous advocacy groups and progressive lawmakers are urging Biden to reintroduce a student debt relief plan under a different legal authority, the Higher Education Act, which they argue contains a separate provision that could authorize mass student loan forgiveness.

However, recreating the program under a different authority may take time and may encounter similar legal hurdles. Administration officials have stated repeatedly that there is no alternative plan for student loan forgiveness.

If Biden is unable to extend the temporary student loan moratorium or reintroduce the student loan forgiveness plan under a different authority, he may resort to existing student loan forgiveness programs to provide relief to borrowers.

Furthermore, the administration has proposed a repayment plan correction to reduce the cost of student loan repayment for many borrowers. This proposal may be modified further to provide additional benefits to borrowers, such as expediting student loan forgiveness.