What Supreme Court rejection of student loan relief means
The U.S. Supreme Court today nullified President Joe Biden鈥檚 federal student loan relief plan, a decision that reinforces the high court鈥檚 muscular policing of the limits of executive power while plunging millions of borrowers around the country into financial uncertainty.
Within hours, President Biden 鈥� who had campaigned on forgiving federal student debt 鈥� announced new actions on student loan relief. But the new actions will likely face legal challenges, and they will have to survive review from a high court skeptical of executive action in the area.
Expanding on a pandemic-era temporary freeze on federal student loan payments, last year the Biden administration launched a program aimed at providing up to $20,000 in federal student loan relief for eligible borrowers. The administration cited the HEROES Act, a higher education assistance law that Congress passed in the aftermath of 9/11, as justification for the program, which the Congressional Budget Office found would cancel about $430 billion in debt principal.
Why We Wrote This
The Supreme Court鈥檚 rejection of President Joe Biden鈥檚 student loan forgiveness plan could affect millions of borrowers 鈥� and curtail the powers of the presidency.
High court justices struck down the program with their last two decisions of the current term. While they ruled unanimously that two borrowers who didn鈥檛 qualify for the plan didn鈥檛 have authority to challenge it, they ruled 6-3 along ideological lines that the plan harmed the state of Missouri through a loan servicing agency the state created.
And while the court鈥檚 substantive ruling was in some sense narrow, it鈥檚 the latest example of the court fleshing out the relatively new, and vague, 鈥渕ajor questions鈥� doctrine. The doctrine holds that the executive branch can鈥檛 regulate in areas of聽major importance without explicit approval from Congress.
鈥淭he question here is not whether something should be done; it is who has the authority to do it,鈥� wrote Chief Justice John Roberts in the majority .
The administration 鈥渁sserts that the HEROES Act grants [it] the authority to cancel $430 billion of student loan principal,鈥� he added. 鈥淚t does not.鈥�
Angela Wynn, a mother of five and director of stewardship and donor relations at Tennessee State University in Nashville, had been hoping it did.
Before getting married and moving to the Volunteer State, she鈥檇 been a single mother of three in Washington, D.C. After getting a bachelor鈥檚 degree there, and a master鈥檚 degree online, she now owes $64,000. After she saw the Supreme Court ban affirmative action in college admissions yesterday, another decision disadvantaging people of color 鈥� Black students start out with more debt than white students, and pay it down more slowly, 鈥� today鈥檚 news doesn鈥檛 surprise her.
鈥淚 was disappointed, but definitely not shocked,鈥� she says.
The debt relief program 鈥渨as a great idea,鈥� she adds, 鈥渂ut unfortunately we know how the system works, and it鈥檚 not always to our benefit, and this would have benefited us the most in terms of closing that wealth gap.鈥�
Student loans and the French Revolution
National student loan debt increased from about $500 billion to $1.7 trillion between 2006 and 2020, the Education Data Initiative, with rising tuition rates affecting generations of students who see a college degree as the surest route to a middle-class life.
President Biden entered office having at least $10,000 in federal loans per person. The day before he announced the debt relief program last year, the Department of Justice issued a saying that the HEROES Act vests the administration 鈥渨ith expansive authority to alleviate the hardship鈥� of federal student loan recipients as a result of emergencies.
Within months of this announcement, multiple lawsuits had been filed challenging the program. The two challenges that reached the Supreme Court came from a pair of individual borrowers and a coalition of six states, including Missouri.
The court rejected the individual borrowers鈥� challenge on procedural grounds, writing in a short, unanimous opinion that they couldn鈥檛 prove they suffer an injury 鈥渇airly traceable鈥� to the debt relief program. The second challenge, brought by the states, resulted in a more substantive ruling.
The states also faced a notable procedural question. Specifically, did the state of Missouri have standing to sue because the debt relief program would financially harm MOHELA, a state-created but independent loan servicing agency? Chief Justice Roberts wrote that because the agency is 鈥渁n instrumentality鈥� of the state of Missouri, direct harms to the agency also directly harm the state.
But in dissent, Justice Elena Kagan noted that MOHELA doesn鈥檛 pass any losses from loan cancellations on to the state. She also noted that MOHELA did not challenge the debt relief program itself, and didn鈥檛 even cooperate with Missouri鈥檚 lawsuit.
鈥淭he separateness, both financial and legal, between MOHELA and Missouri makes MOHELA alone the proper party鈥� to bring this suit, she wrote.
鈥淲here鈥檚 MOHELA? The answer is: As far from this suit as it can manage,鈥� Justice Kagan wrote.
Standing doctrine typically requires a party to have suffered a concrete injury to bring a lawsuit, she added. In this case, 鈥渢he Court ignores that principle in allowing Missouri to piggy-back on the 鈥榣egal rights and interests鈥� of an independent entity.鈥�
The court鈥檚 six-justice conservative majority disagreed, however, and the majority further held that the Biden administration had exceeded its authority in launching the debt relief program. Primarily, the court found that the secretary of education鈥檚 actions exceeded the plain language of the HEROES Act.
The act allows the secretary of education to 鈥渨aive or modify鈥� provisions of federal student assistance programs in connection with a national emergency.
But the debt relief program modified the act 鈥渙nly in the same sense that 鈥榯he French Revolution 鈥渕odified鈥� the status of the French nobility鈥� 鈥� it has abolished them and supplanted them with a new regime entirely,鈥� wrote Chief Justice Roberts.
The Biden administration also ran afoul of the major questions doctrine, the court ruled. The court relied on the doctrine 鈥� which holds that federal agencies can鈥檛 take major actions without clear legal approval from Congress 鈥� in a controversial decision last term, striking down an Obama-era climate regulation.
The doctrine was not as central to the decision nullifying the student debt relief program, but Justice Amy Coney Barrett devoted a separate opinion to defending the majority opinion and downplaying the potential breadth of the doctrine.
鈥淭he major questions doctrine has an important role to play when courts review [major] agency action,鈥� she wrote. But 鈥渙ur decision today does not 鈥榯rump鈥� the statutory text, nor does it make this Court the 鈥榓rbiter鈥� of 鈥榥ational policy.鈥欌��
Decision fallout
The court鈥檚 ruling is narrow in the sense that it doesn鈥檛 preclude all forms of federal debt relief from the executive branch. But a short-term consequence will be financial shocks for many student borrowers, says John Pelletier, director of the Center for Financial Literacy at Champlain College.
鈥淲e鈥檙e going to see a reduction in the average credit scores across the country,鈥� he adds, and student loan default rates could reach levels higher than after the Great Recession.
And it鈥檚 not like a legal challenge, or even a legal defeat, should have been a huge surprise. Trump administration lawyers had advised that the executive branch couldn鈥檛 forgive student loans.
鈥淟awyers that worked for the Biden administration knew, or should have known, that where we are today is probably where we would end up,鈥� says Mr. Pelletier. 鈥淢y concern is, did people rely on this and make decisions that are going to hurt them economically?鈥�
Biden response
Hours after release of the Supreme Court decision, President Biden appeared in the White House and said that the decision 鈥渉as closed one path. ... Now we鈥檙e going to try another.鈥�
Mr. Biden said that the Department of Education will establish a new 鈥渞amp鈥� repayment program for borrowers who will be forced to resume payments on their loans due to the end of the pandemic-era pause. Under this program, the Department of Education will not refer delinquent borrowers to collection agencies for at least 12 months, so they have time to get their finances in order.
The president also said his administration would explore a new legal pathway consistent with the Supreme Court ruling to allow loan forgiveness for 鈥渁s many borrowers as possible.鈥�
This new attempt will be based on a different statute, the 1965 Higher Education Act, he said.
Mr. Biden added that he disagrees with the court鈥檚 ruling, in particular its implications for restraining executive power.
鈥淚 think the court misinterpreted the Constitution,鈥� he said.
His comments echoed Justice Kagan鈥檚 dissent, which criticized the major questions doctrine as a way for the Supreme Court to hold an effective veto power over executive branch policies.
鈥淭he Court once again substitutes itself for Congress and the Executive Branch 鈥� and the hundreds of millions of people they represent 鈥� in making this Nation鈥檚 most important, as well as most contested, policy decisions,鈥� she wrote.
Court watchers have a more mixed view of how the justices used the doctrine in this case 鈥� and how the doctrine could be used in the future.
鈥淚t鈥檚 fair to read the opinion in that case [last term] as having relied primarily and heavily on the major questions doctrine,鈥� said Jack Fitzhenry, a legal fellow at The Heritage Foundation, during a press briefing.
鈥淭he court took pains in this decision in a way it did not in [that one] to analyze the statute on its own terms, kind of independent of the major questions doctrine.鈥�
The court is increasingly using the doctrine to narrow the scope of administrative power, says Derek Black, a professor at the University of South Carolina School of Law. But narrowing power in one area may be broadening it in another, like the Supreme Court.
鈥淭he idea that this little ant hole provision in a statute produces sort of elephant-sized power is something the court is skeptical of,鈥� he adds. 鈥淚t also means that the court鈥檚 interpretation becomes incredibly important.鈥�
For Ms. Wynn, the mother in Tennessee, the decision means worrying about sending her children to college while she鈥檚 still having to pay for her own education. Because of the size of her family, they need seven-seater vehicles, and gas is almost $4 a gallon where she lives. She buys cheaper generic brands at grocery stores, but her grocery bill has doubled.
鈥淚t鈥檚 like every time there鈥檚 something being pushed to the forefront to help this country to get back to where it should be 鈥� and that is not having this huge wealth gap between the super wealthy and everyone else 鈥� it just gets ripped away from us,鈥� she says.
鈥淭he middle class is disappearing so fast,鈥� she adds. 鈥淎ll of us were hoping that this would [not] happen, but it was cautious optimism.鈥�
