The US Supreme Court has struck down President Joe Biden’s plan to forgive up to $20,000 in federal student loan debt per eligible borrower.
“This fight is not over,” Biden said in a statement following the announcement of the opinion. “I believe that the Court’s decision to strike down our student debt relief plan is wrong.”
On Friday, in a 6-3 split along ideological lines, the court agreed with the six state attorneys general in Biden v. Nebraska, who argued that the forgiveness plan wasn’t authorized under the Higher Education Relief Opportunities for Students Act of 2003.
Associate Justices Elena Kagan, Sonia Sotomayor and Ketanji Brown Jackson dissented.
Quoting the 2014 decision in the Supreme Court case Utility Air Regulatory Group v. EPA, Chief Justice John Roberts wrote, “We expect Congress to speak clearly if it wishes to assign to an agency decisions of vast ‘economic and political significance.'”
On a second challenge, Department of Education v. Brown, the court decided unanimously that the plaintiffs — two borrowers who claimed the Biden administration failed to allow for the traditional comment period — had no standing in the case.
Here’s what to know about student loan forgiveness, including what the Supreme Court said and what the Biden administration’s next steps are for helping borrowers.
For more on student loans, find out when payments will resume, who your student loan provider is and which banks have the best personal loans right now.
What did the Supreme Court decide about Biden’s student loan forgiveness plan?
At the end of its term on Friday, the Supreme Court ruled that the administration’s debt forgiveness plan is unconstitutional. It determined that Biden and Education Secretary Miguel Cardona don’t have the authority to forgive $430 billion in student loans without congressional approval.
When Biden introduced the plan in August 2022, he argued that it fell under the Heroes Act, which grants the Department of Education authority to waive student loan repayments for those affected by “a war or other military operation or national emergency.”
The legislation was passed in 2003, in anticipation of the Iraq War. On Friday, the high court ruled that it didn’t apply to the COVID-19 pandemic and economic upheaval of the past three years.
“We hold today that the Act allows the Secretary to ‘waive or modify’ existing statutory or regulatory provisions applicable to financial assistance programs under the Education Act, not to rewrite that statute from the ground up.” Roberts wrote.
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Biden’s plan would’ve eliminated up to $10,000 in student loan debt for borrowers earning up to $125,000 annually, or up to $250,000 for married couples. Borrowers who’d received Pell Grants would be eligible for an additional $10,000.
According to the White House, 44 million Americans would’ve benefited from the education debt forgiveness program, with 20 million seeing their balances erased entirely.
What’s next for student debt forgiveness?
The court’s ruling is a major blow to Biden’s campaign promise to tackle education debt. But after Friday’s ruling, the president said he would “stop at nothing to find other ways to deliver relief to hard-working middle-class families.”
Later in the day, Education Secretary Miguel Cardona announced a new income-driven repayment plan, Saving on a Valuable Education, which would cap payments at 5% of a borrower’s discretionary income, down from the previous 10%.
“It will cut monthly payments to zero dollars for millions of low-income borrowers, save all other borrowers at least $1,000 per year, and stop runaway interest that leaves borrowers owing more than their initial loan,” Cardona said in a statement.
Biden and Cardoza both said they would try authorizing broad relief via a different path, but offered few details other than the formation of a “rulemaking committee” to prepare proposed regulations.
From 2021 to 2023, the administration approved roughly 615,000 borrowers for $42 billion in loan forgiveness under the Public Service Loan Forgiveness Program, a division of the Higher Education Act of 1965. The HEA grants the Department of Education authority to release borrowers from federal student loans but, unlike the Heroes Act, isn’t dependent on a national emergency.
Using the HEA as a basis for widespread forgiveness, however, would likely spark a new set of legal challenges for the Supreme Court to weigh in on.
Congress could also pass legislation to help education loan borrowers. But with Biden having to veto a bill this month that would’ve killed his relief plan, a legislative path may not be open.
When do I have to start repaying my student loans?
Payments and interest on federal student loans have been paused since the start of the pandemic, in March 2020. A provision in the debt ceiling deal passed by Congress cemented a June 30 deadline for the end of the forbearance and prevents any further pauses without congressional approval.
The Department of Education has announced that interest will restart on Sept. 1, with payments resuming in October.
On Friday, Education Secretaru Cardona said the administration would establish a 12-month transition period to help borrowers return to making payments without falling into delinquency or default, receiving negative credit reports or having loans referred to collection agencies.