Five takeaways on the Supreme Court’s student debt decision

The Supreme Court on Friday struck down President Biden’s student debt relief plan, with the court’s six conservatives ruling the administration did not have the power to forgive loans for more than 40 million borrowers.

The decision is a major win for Republicans who declared the plan unfair and balked at the $400 billion price tag it would have cost.

White it’s a defeat for the White House, Biden later on Friday announced a new plan to provide relief to borrowers through the Higher Education Act. It’s unclear who would ultimately qualify under the new plan and how much relief they would receive. 

Here are five takeaways from the big decision:

Biden takes a loss on a campaign promise

President Biden delivers remarks on the economy June 28 at the Old Post Office in Chicago. Associated Press/Evan Vucci

President Biden promised borrowers on the 2020 campaign trail that he would deliver $10,000 in student debt relief if he became president. 

His plan to deliver that relief by tying it to the COVID-19 pandemic was his first shot at delivering on his promise. That’s now dead in the water. 

The president is already looking to pin the issue on Republicans, who have been vocal in their opposition to the plan and opposed legislative measures to provide relief.

“You know, these Republican officials just couldn’t bear the thought of providing relief to working-class, middle-class Americans,” Biden said in his remarks after the court’s decision.

Biden is also catching flack from his primary opponent Robert F. Kennedy Jr. for his plan failing at the Supreme Court.

“The unfortunate SCOTUS ruling striking down President Biden’s #studentloan forgiveness program was the predictable result of Biden’s failure to bring Congress together on this issue of crucial importance to young Americans,” Kennedy said.

Biden isn’t going down without a fight

Education Secretary Miguel Cardona answers questions with President Joe Biden as they leave an event about the student debt relief in the South Court Auditorium on the White House complex in Washington, Oct. 17, 2022. Cardona has tested positive for COVID-19 the Education Department says on Nov. 1, 2022. (AP Photo/Susan Walsh, File)

Biden quickly announced another path to debt relief for borrowers through the Higher Education Act (HEA), although it will take much longer to see an end result.

Under the HEA, advocates have long argued the Education secretary has the power to forgive student loans. 

Biden said Education Secretary Miguel Cardona took the first step Friday in the “rulemaking” process by sending out a notice to create the new regulation geared towards debt relief. The next step will be a public hearing with written comments from stakeholders on July 18. 

In the notice, the administration argues the authority for student debt relief in the HEA falls under the section that relates to “modification, waiver, or compromise of Federal student loans.”

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 More on SCOTUS’s student loans ruling from The Hill

• Supreme Court blocks student loan forgiveness: What should borrowers do now?
• READ: Kagan’s dissent in Biden v. Nebraska student loan forgiveness case
• READ: Supreme Court rulings on Biden’s student loan forgiveness plan
• Supreme Court strikes down Biden’s student debt forgiveness plan

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The negotiated rulemaking process could last well into the end of 2023, but Biden said they are going to move “as quickly as possible.” 

Another step the administration announced for borrowers is a 12-month “on ramp” plan for repayments. From October 2023 to September 2024, borrowers who miss payments will not be considered delinquent or in default and won’t get reported to credit bureaus or collection agencies. 

“If you can pay your monthly bills you should, but if you cannot, if you miss payments, this on-ramp temporarily removes the threat of default or having your credit harmed,” Biden said.

Decision signals court’s skepticism of executive branch action

FILE – Chief Justice of the United States John Roberts arrives before President Joe Biden delivers the State of the Union address to a joint session of Congress at the Capitol, Feb. 7, 2023, in Washington. (AP Photo/Jacquelyn Martin, Pool)

The court once again invoked the “major-questions doctrine” in striking down the administration’s plan that would have had vast implications on the economy. 

The doctrine says that Congress must give direct authorization for the executive branch to implement a policy that has major economic and political impacts on the country. 

Chief Justice John Roberts argued in the decision the HEROES Act, which was authorized after 9-11 as a way to give loan relief during times of war and other emergencies, did not provide that authorization.

“The HEROES Act provides no authorization for the Secretary’s plan even when examined using the ordinary tools of statutory interpretation — let alone ‘clear congressional authorization’ for such a program,” Roberts wrote in the majority opinion.

The doctrine was used in other major cases against the Biden administration such as the federal eviction moratorium during the pandemic and Biden’s plan to require companies with a certain number of employees to implement a vaccination or test policy during COVID-19. 

It could also signal trouble for Biden’s new student debt relief plan that conservatives are already threatening to challenge in court. 

“Job Creators Network Foundation is weighing its legal options to fight these bailout workarounds when they are finalized,” the organization behind one of the student debt relief cases this year said after Biden announced his new plan. 

Borrowers remain stuck with heavy debt

People demonstrate outside the Supreme Court, Friday, June 30, 2023, in Washington. A sharply divided Supreme Court has ruled that the Biden administration overstepped its authority in trying to cancel or reduce student loan debts for millions of Americans. Conservative justices were in the majority in Friday’s 6-3 decision that effectively killed the $400 billion plan that President Joe Biden announced last year. (AP Photo/Jacquelyn Martin)

The decision to strike down student debt is a major blow to the more than 40 million Americans who would have benefited from the relief. 

While some Americans have so much in student loans that the relief might have not made a huge impact, the average student loan borrower has around $30,000 in debt. 

The relief would have cut the average student loan borrower’s debt by one-third, helping a significant number of borrowers. 

Biden’s new plan for debt relief has to undergo a long process before it could be finalized, with the high possibility of another drawn-out court battle also lingering over it.

It also won’t be known for some time the final details of how much debt relief borrowers could receive and who will qualify for it. 

While Biden’s additional student debt relief plan and “on ramp” repayment process is likely welcomed by many, it also adds to the confusion student loan borrowers have had for months about their situation.  

There’s a big campaign fight to come

FILE – President Joe Biden speaks about the student debt relief portal beta test in the South Court Auditorium on the White House complex in Washington, Oct. 17, 2022. A sharply divided Supreme Court has ruled that the Biden administration overstepped its authority in trying to cancel or reduce student loans for millions of Americans. Conservative justices were in the majority in Friday’s 6-3 decision that effectively killed the $400 billion plan that President Joe Biden announced last year. (AP Photo/Susan Walsh, File)

Student loan debt is poised to be a huge issue on the campaign trail in 2024.

Biden is signaling he’ll run against the Supreme Court and GOP lawmakers on a host of court actions that includes student loans as well as abortion rights.

The president will be hoping that young voters will see electing he and other Democrats as a way to get action on student debt.

Yet Biden risks those voters being disappointed in his lack of success on the effort so far.

Some already see his latest proposal as too weak an action and are criticizing the White House for not proposing a stronger plan that would give borrowers relief faster.

“Biden’s Plan B is designed to fail Biden is doing the opposite of fighting for cancellation,” The Debt Collective said. “He is sabotaging any chance that future administrations will be able to cancel student debt.”

Republicans are already decrying the new student loan forgiveness plan Biden has proposed and lawsuits are almost certainly coming his way. 

Yet they also may need to worry about a backlash to the court, which has swung to the right of the country on some issues.

What’s unclear is whether student debt, and issue that can divide voters along generational lines, is one of those issues.

“Today, President Biden announced that taxpayers will be forced to pay for the costliest regulation in our nation’s history, which will only exacerbate inflated college costs and excessive debt balances,” Chairwoman of the House Education and Workforce Committee Virginia Foxx (R-N.C.) said. “Additionally, Biden confirmed plans to ignore the law and extend the repayment pause while also ignoring the Supreme Court and still trying to do blanket loan forgiveness. What the President is pushing is illegal, inflationary, and irresponsible.”