By Hugh T. Ferguson, NASFAA Senior Staff Reporter

The United States Supreme Court on Friday ruled in favor of a challenge to President Joe Biden’s student loan debt cancellation program, halting the administration from carrying out its executive action that would cancel up to $20,000 in federal student loan debt for eligible borrowers.

The 6-3 decision, penned by Chief Justice John Roberts, found that a challenge brought forward by a group of six GOP-led states attorneys general had standing to challenge the program, and ultimately determined that the administration’s plan was not legal.

Specifically, the majority of the court sided with the six state attorneys general who argued that the debt cancellation program could cause financial harm to Missouri's Higher Education Loan Authority (MOHELA), and found that the administration exceeded its authority under the Higher Education Relief Opportunities for Students (HEROES) Act of 2003.

“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,” Roberts wrote in explaining why the attorneys general had standing to bring the challenge to the program. “The harm to MOHELA in the performance of its public function is necessarily a direct injury to Missouri itself.”

The opinion goes on to explain that the administration’s development of the loan cancellation program exceeded the powers granted by the HEROES Act’s “waivers and modifications” provision.

“Instead, ‘modify’ carries ‘a connotation of increment or limitation,’ and must be read to mean ‘to change moderately or in minor fashion,’” Roberts wrote. “That is how the word is ordinarily used and defined, and the legal definition is no different. The authority to ‘modify’ statutes and regulations allows the Secretary to make modest adjustments and additions to existing provisions, not transform them.”

Roberts writes that the program’s implementation did not confine itself to the “waivers” provision.

“In sum, the Secretary’s comprehensive debt cancellation plan is not a waiver because it augments and expands existing provisions dramatically. It is not a modification because it constitutes ‘effectively the introduction of a whole new regime,’” Roberts writes. “And it cannot be some combination of the two, because when the Secretary seeks to add to existing law, the fact that he has ‘waived’ certain provisions does not give him a free pass to avoid the limits inherent in the power to ‘modify.’ However broad the meaning of ‘waive or modify,’ that language cannot authorize the kind of exhaustive rewriting of the statute that has taken place here.”

In the dissenting opinion, Justice Elena Kagan argued that the court’s decision was an overstep in judicial authority and that neither of the challenges to the program had the standing to do so.

“The plaintiffs in this case are six States that have no personal stake in the Secretary’s loan forgiveness plan,” Kagan wrote. “They are classic ideological plaintiffs: They think the plan a very bad idea, but they are no worse off because the Secretary differs.”

Kagan argued that the court’s decision interferes with the national policymaking process.

“The result here is that the Court substitutes itself for Congress and the Executive Branch in making national policy about student-loan forgiveness,” Kagan wrote. “Congress authorized the forgiveness plan (among many other actions); the Secretary put it in place; and the President would have been accountable for its success or failure. But this Court today decides that some 40 million Americans will not receive the benefits the plan provides, because (so says the Court) that assistance is too ‘significan[t].’”

NASFAA President and CEO Justin Draeger said NASFAA will remain committed to helping students access and succeed in their pursuit of higher education and that the court’s decision underscores the urgent need for student loan reform.

“Today’s decision will be difficult — if not devastating — news for millions of student loan borrowers nationwide who have had their financial futures held in limbo for nearly a year while this plan worked its way through the courts,” Draeger said. “And as we prepare for student loan payments to resume after more than three years, we must get on with the work of helping these same borrowers face the reality of student loan repayment.”

The White House panned the court’s ruling, and pledged to offer more details on Friday afternoon that would highlight the administration’s efforts to help student loan borrowers.

“I believe that the Court’s decision to strike down our student debt relief plan is wrong,” Biden said. “But I will stop at nothing to find other ways to deliver relief to hard-working middle-class families. My Administration will continue to work to bring the promise of higher education to every American.” 

Reactions in Congress

On Capitol Hill, Democrats and Republicans have been divided across near unanimous party lines when it came to the debt cancellation program. Since Biden announced the plan last year, Republicans have attacked the executive action, arguing that such a move was an overreach of executive authority, that such a program was unfair to taxpayers who did not attend college, and that the varying price tags were unreasonable.

Democrats were less unified, but in large part voiced support for the administration’s plans. When the House considered a resolution to rescind the debt cancellation program, all but two House Democrats opposed the effort, and in the Senate only Sens. Joe Manchin (D-W.Va.), Kyrsten Sinema (I-Ariz.), and John Tester (D-Mont.) broke ranks to vote in favor of the measure.

Rep. Virginia Foxx (R-N.C.), chairwoman of the House Committee on Education and the Workforce, celebrated the court’s ruling.

“Mr. President, good riddance to your illegal, economically disastrous taxpayer-funded bailout for the wealthy,” Foxx said. “I had hoped you would have greater respect for taxpayers and the Constitution, but I am pleased the Court stepped in to hold you accountable.”

Likewise, Sen. Bill Cassidy (R-La.), ranking member of the Senate Health, Education, Labor and Pensions (HELP) committee, welcomed the ruling.

“Today’s Supreme Court ruling confirmed what we have known all along: the Biden administration’s student loan plan is an overreach of executive power,” Cassidy said. “President Biden’s student loan scheme does not ‘forgive’ debt, but unfairly transfers the burden from those who willingly took out loans onto those who chose not to attend college or already fulfilled their commitment to pay off their loans.”

Rep. Bobby Scott (D-Va.), ranking member of the House Committee on Education and the Workforce, said his primary focus moving forward will be finding ways to address burdensome debt levels through legislation. He specifically highlighted his bill, the Lowering Obstacles to Achievement Now (LOAN) Act, as a pathway to improving the student loan system.

“Moving forward, I am focused on solving the root causes that created the student debt crisis in the first place,” Scott said. “Simply put, by making loans cheaper to take out and easier to pay off, the LOAN Act will help improve the lives of student loan borrowers — both now and in the future.”

Sen. Patty Murray (D-Wash.), chair of the Senate Appropriations Committee and former chair of the chamber’s education committee, pledged to protect borrowers who were relying on the debt cancellation program.

“This is a devastating setback for tens of millions of hardworking student borrowers who have been crushed with student debt & were counting on this relief,” Murray wrote. “But the fight does not end here—we can and must do more to show up & deliver for students & borrowers across the country.”

The Road to Repayment

The decision now turns to the issue of the impending resumption of student loan repayment and interest accrual, which has been frozen for over three years due to the pandemic.

The Biden administration offered its latest extension of the pause due to the uncertainty of the legal challenges to the program and set the latest expiration date to 60 days after the ED is permitted to implement the program or the litigation is resolved. ED also said that the repayment pause would sunset within 60 days if the litigation has not been resolved by June 30, 2023.

Most recently, a provision included in the debt ceiling agreement would also codify the Biden administration’s planned resumption of student loan repayments — and also prevent another possible extension — by sunsetting the payment pause and interest accrual 60 days after June 30, 2023.

As of today’s decision borrowers are expecting to enter repayment sometime this fall and ED will need to detail the onboarding process now that the legal challenge to the program has made its way through the court system.

The parameters and implementation of the administration’s plan are still unfolding. According to recent reporting from POLITICO, the administration is preparing to implement a “safety-net” period for borrowers by offering a three-month grace period for missed payments that occur following the planned fall restart.

In order to prepare for this transition, NASFAA’s Resumption of Loan Repayment Task Force, developed institutional considerations that schools can follow to communicate with borrowers and assist them as they prepare to resume student loan repayment or begin repayment for the first time. 

Stay tuned to Today’s News for more coverage and developments concerning the student loan payment pause.

Publication Date: 6/30/2023

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