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In June 2023, the US Supreme Court struck down the Biden administration’s proposed plan to cancel federal student loans/Student Loan Relief amounting to around $430 billion. The proposed debt forgiveness law sought to forgive student debt for tens of millions of college-educated Americans.
In the 6–3 majority decision written by Judge John Roberts, the Supreme Court held that the 2003 Higher Education Relief Opportunities for Students Act (HEROES) Act did not grant Biden’s administration authority to excuse hundreds of billions of student loans.
“The HEROES Act only allows the Secretary of Education to ‘modify and waive’ existing regulatory and statutory provisions applicable to student financial assistance programmes under the Education Act. It does not allow the secretary to rewrite the law to the extent of cancelling $430 billion in student loan principal,” noted Roberts in the loan forgiveness ruling.
During the COVID-19 pandemic, the Department of Education suspended student debt repayment in accordance with the HEROES Act. This suspension was legal as the Act allows the secretary of education to waive or modify provisions of debt forgiveness law in the event of a national emergency, war or other military activity.
However, in August 2022, before Biden declared the COVID-19 pandemic over, the Department of Education received a memorandum from the Office of the General Counsel advising that the HEROES Act allows the secretary to effectuate a programme for loan cancellation aimed at addressing the financial harm of the pandemic.
A few months later, the Department of Education invoked the Act to eliminate or reduce student debt for most borrowers in the country. In response, the states of Nebraska, Missouri, Iowa, Arkansas and South Carolina challenged this move, arguing that the loan forgiveness programme went beyond the department’s authority as delegated under the HEROES Act.
During the 2020 campaign, Biden had promised to forgive student loan debt, but his effort to fulfil this promise was challenged in court. The Supreme Court ruling in Biden v Nebraska was issued in favour of six states that argued that the administration was overstepping its authority under the country’s debt forgiveness law.
Agreeing with the plaintiffs, Roberts wrote: “The modifications made by the Department of Education created a fundamentally different loan forgiveness programme that seeks to extend forgiveness to nearly every student borrower in the country.”
The student loan Supreme Court ruling came after an optimistic year for federal student loan borrowers who were promised by Biden in August 2022 that the government would cancel up to $20,000 of student debt for anyone who had received a Pell Grant to attend college, and up to $10,000 for the majority of the remaining borrowers.
The ruling left millions of borrowers devastated, as some would have seen their entire student loan cancelled under the new programme. When arriving at the student loan Supreme Court ruling, the justices applied the “major questions doctrine”, which holds that when Congress wants to delegate power to make decisions of vast political and economic significance to an administrative agency, it must expressly say so.
According to the country’s apex court, the political and economic significance of the secretary of education’s decision was staggering. Therefore, the justices found that Congress did not grant such power to the secretary of education.
After the Supreme Court ruled against Biden’s student loan forgiveness programme, his administration applied existing debt forgiveness laws to forgive more than $48 billion in student loans since the ruling. This was made possible through federal debt forgiveness programmes limited to specific categories of borrowers, including public-sector workers, borrowers who have made repayments for at least 20 years, as well as people defrauded by for-profit colleges.
According to CNN, The Biden administration has been granting student debt forgiveness through these programmes on a rolling basis since his inauguration. It has cancelled $127 billion of student loans for around 3.6 million Americans. This is the highest student loan forgiveness ever granted under any administration in the US, and is partly due to Biden’s efforts to correct past administrative errors made to borrowers’ accounts – and to temporarily expand loan relief programmes.
Around $42 billion has been cancelled for nearly 855,000 student borrowers enrolled in income-driven repayment plans. Since taking office, the administration has also forgiven $51 billion of federal student loans for around 715,000 borrowers through the Public Service Loan Forgiveness programme.
Additionally, Biden’s government cancelled $37 million worth of student debt for around 1,200 borrowers who attended the University of Phoenix under the borrower defence programme created by Congress decades ago. The university was found to have defrauded students by misleading them regarding job prospects.
Under Biden’s administration, The Department of Education has made significant progress in whittling down the backlog of borrower defence programme claims.
In August 2024, The Supreme Court declined the government’s request to temporarily lift an Appeals Court ruling that frustrated its student debt relief programme. The administration sought to speed up loan forgiveness for borrowers and lower monthly payments for others.
Following the 2023 student loan Supreme Court ruling, the White House launched the Saving on a Valuable Education (SAVE) plan to implement an affordable student loan repayment programme. The policy would have seen the monthly college undergraduate loan payments reduce from 10% to only 5% of the borrower’s discretionary income.
The policy also aimed to pause payments by borrowers earning less than $32,000 annually until their income exceeded the amount. Furthermore, small loans would have qualified for forgiveness in 10 years, compared to 20–25 years.
Cumulatively, the administration estimated that the SAVE plan would cost $156 billion in taxpayers’ money. However, in April 2024, seven Republican-led states went to court to challenge the plan, arguing that the Department of Education had acted outside its power and authority by enacting the plan. In June, the US District Judge John Ross blocked the administration from implementing the plan on a preliminary basis.
The US Court of Appeals for the Eighth Circuit later blocked the student debt relief plan entirely, prompting the administration to file with the Supreme Court, which declined to revive the plan.
Since taking office, the Biden administration has cancelled more than $17 billion of student debt for borrowers defrauded by for-profit colleges. The borrower defence rule has been in effect since 1994, with slight revisions in 2016, 2019 and 2022. The last revision was made by the Biden administration in an effort to clarify grounds for filing a claim.
In 2023, Career Colleges and Schools of Texas sued the administration over revising the borrower defence rule, claiming that it made it too easy for all students to engage in the claim process. According to the plaintiffs, a claimant can only file a borrower defence claim after default and after a debt collection suit is filed by the government. The trial court ruled in favour of the plaintiff, and its decision was upheld by the US Court of Appeals for the Fifth Circuit.
In January 2025, the Supreme Court agreed to consider whether the lower courts erred in finding that the Higher Education Act of 1965 does not permit borrowers to file a borrower defence claim before default.
Source: CNN
References:
Politico
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