The 6-3 decision finds that states had standing to sue, and the debt relief plan did not have merits under federal law. A separate case was dismissed for lack of standing.
07/03/2023 12:25 P.M.
6.5 minute read
The U.S. Supreme Court has issued its decision in two cases challenging the Biden administration’s student loan relief plan, ultimately striking down the plan.
Oral arguments in both cases were held in February.
In the Biden v. Nebraska decision (PDF), authored by Chief Justice John Roberts, the court ruled 6-3 agreeing with the state attorneys general that brought the case “that the HEROES Act does not authorize the debt forgiveness plan,” according to ScotusBlog.com.
In the case, a group of six Republican-led states challenged the student loan forgiveness plan, claiming the loss of tax income and other revenue from state organizations’ business dealings with some loan servicers would cause their economies to suffer, ACA International previously reported.
The 8th Circuit Court of Appeals issued a temporary injunction in November 2022 to halt the program until the legality of the debt relief was decided.
In addition to Roberts, Associate Justices Clarence Thomas, Samuel Alito, Neil Gorsuch, Brett Kavanaugh and Amy Coney Barrett agreed with striking down the student loan debt relief plan.
Associate Justice Elena Kagan filed a dissenting opinion, joined by Associate Justices Sonia Sotomayor and Ketanji Brown Jackson.
Standing was an issue in this case related to one of the student loan servicers in Missouri and the impact the student loan debt relief would have had on their operation.
“By law and function, MOHELA (the Missouri Higher Education Loan Authority) is an instrumentality of Missouri: It was created by the State to further a public purpose, is governed by state officials and state appointees, reports to the State, and may be dissolved by the State. The [debt forgiveness] plan will cut MOHELA’s revenues, impairing its efforts to aid Missouri college students. This acknowledged harm to MOHELA in the performance of its public function is necessarily a direct injury to Missouri itself,” the decision states.
MOHELA was not a party in the case, but the state had the right to sue to remedy the harm the student loan debt relief would have had on the servicer’s ability to collect fees.
“The Secretary [of Education’s] plan would cost MOHELA, a nonprofit government corporation created by Missouri to participate in the student loan market, an estimated $44 million a year in fees,” the decision states.
With standing established, moving to the merits of the student loan debt relief plan, the Biden administration had focused on the HEROES Act, a law enacted after Sept. 11, 2001, that allows the Secretary of Education to “waive or modify any statutory or regulatory provision applicable to the student financial assistance programs under [T]itle IV of the [Education Act] as the Secretary deems necessary in connection with a war or other military operation or national emergency.”
Roberts wrote that the HEROES Act “does not authorize the Secretary’s loan forgiveness program. The Secretary’s power under the Act to ‘modify’ does not permit ‘basic and fundamental changes in the scheme’ designed by Congress.”
Roberts continued, “The authority to ‘modify’ statutes and regulations allows the Secretary to make modest adjustments and additions to existing regulations, not transform them.”
The “modifications” by the Department of Education, Roberts added, “created a novel and fundamentally different loan forgiveness program” that “expanded forgiveness to nearly every borrower in the country.”
In his conclusion, Roberts also noted that it “has become a disturbing feature of some recent opinions to criticize the decisions with which they disagree as going beyond the proper role of the judiciary,” adding that the decision used “the traditional tools of judicial decisionmaking” and although reasonable minds may disagree, “[w]e do not mistake this plainly heartfelt disagreement for disparagement. It is important that the public not be misled either. Any such misperception would be harmful to this institution and our country.”
Justice Kagan’s Dissent
In her dissent, Kagan said the court’s “first overreach is deciding it at all … The plaintiffs in this case are six [s]tates that have no personal stake in the Secretary’s loan forgiveness plan. They are classic ideological plaintiffs: They think the plan a very bad idea, but they are no worse off because the Secretary differs.”
A summary from Scotusblog.com notes that Kagan dedicates most of her 30-page dissent to the merits of the case and in favor of the student loan debt relief plan under the HEROES Act.
“The statute provides the Secretary with broad authority to give emergency relief to student-loan borrowers, including by altering usual discharge rules. What the Secretary did fits comfortably within that delegation. But the Court forbids him to proceed. As in other cases, the rules of the game change when Congress enacts broad delegations allowing agencies to take substantial regulatory measures.”
Biden “would have been accountable for its success or failure. But this [c]ourt today decides that some 40 million Americans will not receive the benefits the plan provides, because (so says the [c]ourt) that assistance is too significant.”
Borrowers’ Case Dismissed
In the Department of Education v. Brown decision (PDF), authored by Justice Samuel Alito, the Supreme Court unanimously found the plaintiffs did not have standing to sue.
The case was brought by two individuals and backed by the Jobs Creators Network Foundation. A Texas district judge ruled in the initial complaint that the Biden administration lacked the authority to establish the student debt relief program.
In November 2022, the 5th Circuit Court of Appeals maintained the district court’s decision.
The decision came as Congress attempted to overturn Biden’s student loan relief plans, but the president vetoed that measure on June 7, The Hill reports.
The U.S. Senate voted 52-46 on June 1 to overturn the plans for 40 million borrowers to receive up to $20,000 back on their loans, ACA International previously reported. The Senate’s vote followed one from the Republican-led House of Representatives.
The student loan payment pause that had been connected to the Supreme Court decision will end this fall. The Biden administration and House Speaker Kevin McCarthy, R-Calif., reached a deal on the payments resuming as part of the debt ceiling negotiations.
Student loan interest will resume in September, and payments will resume in October, The Hill reports.
Biden also announced new details on student loan forgiveness following the Supreme Court’s decision, according to The Hill.
“This decision is the right one for so many reasons. For our economy to continue working properly, we have to have citizens who understand the importance of paying debt,” said David Williams, president of Williams & Fudge Inc., which specializes in education receivables. “Teaching a generation to not do that would certainly have a long-lasting negative impact. While we need to continue working on the cost/benefits of higher education, forgiving debt is an inequitable way to help solve this. In addition, forgiveness would put the tax burden of higher-earning college educated people on the backs of those that did not attend college.”
Several other cases in courts across the U.S. are on the books challenging the student loan forgiveness plan, but these cases from the 5th and 8th Circuits carry the most weight. With the Supreme Court’s decision set, more cases could still surface on the issue.
ACA members in student loan servicing have successfully helped consumers develop income-driven repayment programs that work. They also explain the options for consumers who truly cannot afford to pay. In many cases, discussions with servicers can also rectify past financial decisions that were not a consumer’s best option.
“These cases also mirror issues at other regulators, such as the Consumer Financial Protection Bureau, that they are acting outside of legislative mandates. This hurts consumers by taking away their voice through elected officials by circumventing the congressional process,” said ACA CEO Scott Purcell.
“If the country wants to change the scope of its education system, it needs to happen through voters demanding this change,” added Leah Dempsey, shareholder at Brownstein Hyatt Farber Schreck and ACA’s lobbyist. “It should, and cannot, be done by individuals with certain ideological views.”