Supreme Court rejects Biden’s student loan forgiveness plan

WASHINGTON – The US Supreme Court ruled on Friday that the Biden administration had overstepped its authority with

its plan to wipe out more than US$400 billion (S$540 billion) in student debt

, dashing the hopes of tens of millions of borrowers and imposing new restrictions on presidential power.

It was a resounding setback for US President Joe Biden, who had vowed to help borrowers “crawl out from under that mountain of debt”.

More than 45 million people across the country owe US$1.6 trillion in federal loans for college, according to government data.

The proposed debt cancellation, announced by Mr Biden last summer, would have been one of the most expensive executive actions in US history.

The vote was 6-3, with the court’s liberal members in dissent.

The administration said its plan was meant to address the coronavirus pandemic and its lingering effects and was authorised by the Higher Education Relief Opportunities for Students Act of 2003, usually called the Heroes Act.

That law, initially enacted after the terrorist attacks on Sept 11, 2001, gives the Secretary of Education the power to “waive or modify any statutory or regulatory provision” to protect borrowers affected by “a war or other military operation or national emergency”.

In March 2020, then-president Donald Trump declared that the coronavirus pandemic was a national emergency, and his administration invoked the Heroes Act to pause student loan repayment requirements and to suspend the accrual of interest.

The Biden administration followed suit. The payment pause has cost the government more than US$100 billion, according to the Government Accountability Office.

In August, the administration said it planned to switch gears, ending the repayment pause but forgiving US$10,000 in debt for individuals earning less than US$125,000 per year, or US$250,000 per household.

Nearly 26 million borrowers have applied to have some of their student loan debt erased.

While the government has approved 16 million applications, no debt has been cancelled yet.

The Education Department, which owns and manages the government’s US$1.5 trillion student debt portfolio, has stopped accepting applications in light of the legal challenges.

In separate cases, six Republican-led states – Nebraska, Missouri, Arkansas, Iowa, Kansas and South Carolina – and two individuals sued to stop the new plan.

They relied on recent decisions employing the so-called major questions doctrine, which says that Congress must speak particularly clearly when authorising the executive branch to act on important political and economic questions.

The court has invoked that doctrine in signalling scepticism towards crucial parts of Mr Biden’s agenda.

Last June, the Supreme Court invoked the doctrine in a decision that curtailed the Environmental Protection Agency’s power to address climate change. Without “clear congressional authorisation”, the court said, the agency could not act.

The court also ruled, on similar grounds, that the Centres for Disease Control and Prevention was not authorised to impose a moratorium on evictions and that the Occupational Safety and Health Administration was not authorised to tell large employers to have their workers vaccinated against Covid-19 or undergo frequent testing.

The states lost the first round in the student loan case.

“While plaintiffs present important and significant challenges to the debt relief plan,” wrote Judge Henry E. Autrey of the US District Court in St Louis, who was appointed by president George W. Bush, “the current plaintiffs are unable to proceed to the resolution of these challenges”.

A three-judge panel of the 8th Circuit blocked that ruling. Two of its three members – Judges Ralph R. Erickson and Leonard S. Grasz – were appointed by Trump. The third, Judge Bobby E. Shepherd, was appointed by Mr Bush.

A key threshold question for the justice was whether the plaintiffs have suffered the sort of direct and concrete injury that gives them standing to sue.

When the case was argued in February, the justices focused on a non-profit entity that services federal loans, the Missouri Higher Education Loan Authority, also known as Mohela.

The states argued that the entity’s potential losses from the loan forgiveness programme were enough to confer standing because it is effectively an arm of the state of Missouri.

They also argued that the authority might fail to make payments to Missouri if the programme were allowed to proceed. NYTIMES