hold or not - Biden's $430 billion student debt forgiveness program has lost the Supreme Court battle

Misc

Jun 30, 2023, 03:59 PM
by qz.com

Biden's $430 billion student debt forgiveness program has lost the Supreme Court battle

TL;DR The US Supreme Court ruled that the Biden administration cannot forgive $430 billion worth of student debt, ruling 6-3 that the education secretary does not have the power to do so. Chief Justice John Roberts wrote the majority opinion, while justice Elena Kagan penned the dissenting opinion in which she was joined by justices Sonia Sotomayor and Ketanji Brown Jackson. The court also unanimously vacated the judgement in Department of Education [DOE] v.

The US Supreme Court ruled that the Biden administration cannot forgive $430 billion worth of student loans. In a 6-3 majority decision, the court ruled that the secretary of education does not have the power to forgive student loans.

According to chief justice John Roberts, who authored the majority opinion, the education secretary made changes too broad to existing regulation, and did not have sufficient congressional approval: “The authority to ‘modify’ statutes and regulations allows the Secretary to make modest adjustments and additions to existing provisions, not transform them,” he wrote.

In February, the court’s nine justices heard oral arguments in two cases—Biden v Nebraska et al., in which six Republican states took on White House, and the other, Department of Education [DOE] v. Brown, wherein two graduate students sued the DOE. In relation to this latter case, however, the court issued an unanimous opinion vacating the judgement because the graduates weren’t directly affected by the issue. In the US court of law, if there is no harm or injury, there is no right to sue.

In Biden v Nebraska, the court deemed Missouri as having legal standing to bring forth the case, which argued that canceling student loans could leave the Missouri Higher Education Loan Authority (MOHELA) unable to meet its financial obligations to the state. (A New York Times investigation concluded this argument lacked merit. According to their findings, despite the hit from the forgiveness plan, MOHELA’s revenues from servicing loans was in fact set to increase as its new borrowers would far outweigh past non-payers.)

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For justice Elena Kagan, who authored the dissenting opinion in which she was joined by justices Sonia Sotomayor and Ketanji Brown Jackson, the court should have dismissed Biden v Nebraska, too. “In adjudicating Missouri’s claim, the majority reaches out to decide a matter it has no business deciding. It blows through a constitutional guardrail intended to keep courts acting like courts,” Kagan wrote.

Quotable: Roberts compares changes to the Heroes Act to the French Revolution

The Secretary’s plan has “modified” the cited provisions only in the same sense that “the French Revolution ‘modified’ the status of the French nobility”—it has abolished them and supplanted them with a new regime entirely. —Chief Justice John Roberts in his majority opinion

The issue with the Heroes Act

The Biden administration made lessening the burden of student loan repayments on borrowers a priority. The White House has already wiped out debts for eligible public service workers, permanently disabled borrowers, defrauded students and people whose schools abruptly closed while they were enrolled.

In launching the student debt relief program, Biden invoked the 9/11-era Higher Education Relief Opportunities for Students Act (Heroes Act), which helped reduce service members’ debt while they fought in Iraq and Afghanistan. Congress had expanded the act in 2003 to allow the secretary of education to waive debt federal student loan debt in a national emergency—covid-19, in this case.

But Roberts saw the DOE’s action as going too far: “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.”

For Kagan, it’s the court that it’s now going too far, taking on a case it should have dismissed, and making policy decisions affecting millions of taxpayers. “From the first page to the last, today’s opinion departs from the demands of judicial restraint. At the behest of a party that has suffered no injury, the majority decides a contested public policy issue properly belonging to the politically accountable branches and the people they represent,” she wrote.

The Department of Education (DoE), the Federal Reserve, and the Consumer Financial Protection Bureau (CFPB) were all anticipating record levels of default if the payment pause ended without cancellation. Nonetheless, the White House was prepared for the apex court to knock down its debt relief plan. The administration has asked servicers to give borrowers a three-month grace period during falling behind on payments won’t be chalked up as delinquency, Politico reported.

Student loan forgiveness, by the digits

$1.6 trillion: Outstanding student loans in the US, owed by 43 million borrowers

$10,000: How much borrowers would have seen see shaved off their student debt. Recipients of Pell Grant, a type of aid available to low-income families, would have been eligible for an additional $10,000 written off

Less than a month: How long the Biden administration’s forgiveness application had been open for, with the studentaid.gov website going live from Oct. 17 to Nov. 10, 2022

26 million: Borrowers that submitted documents to be considered for debt relief before the halt

16 million: Borrowers who had been approved for debt forgiveness in that short time frame

$175.6 million: How much MOHELA’s annual revenue from direct loan servicing is estimated to be this year—almost double of the year prior—even had the loan cancellation policy kicked in

15 years: How long MOHELA has not made its own debt payments for, and it does not seem to have plans to resume them

12.3%: Increase in credit card debt that borrowers who were already delinquent on student loans before the pandemic, but were eligible for the student loan pause, took on versus those who didn’t get the relief

$30,000: Median student loan debt in Black families is higher than in non-hispanic white families ($20,000) and hispanic families ($14,000). The end of the pause, which disproportionately helped families with children—especially Black families—is poised to exacerbate the racial wage gap.

One more thing: When are student loan repayments due to restart?

While student loan forgiveness was moving through the court, student loan repayments have been halted nine times over. But extensions are no longer on the table. As part of the debt ceiling agreement between Biden and Speaker Kevin McCarthy, the pause will be lifted no later than Aug. 30.

“Congress recently passed a law preventing further extensions of the payment pause. Student loan interest will resume starting on Sept. 1, 2023, and payments will be due starting in October,” a banner on the federal student aid website reads.

The Biden administration has proposed amendments to income-driven repayment plans to help soften the blow. But transition back to loan repayment won’t be smooth, considering a handful of large student loan servicers have ended their contracts with the DO E, and the department is facing a cash crunch for student loan processing.