The Supreme Court Strikes Again: Student Loans

Ryan Heshmati

July 07, 2023

The United States Supreme Court ruled on June 20, 2023, that the Secretary of Education lacked the power to implement the Biden administration’s plan to forgive over $400 billion of student loans. In Biden v. Nebraska’s 6 to 3 decision, split along the party lines of the presidents that appointed them to the bench, the justices ruled against the administration in a major blow to the president’s agenda. In response, President Biden signaled a tone of defiance moving forward, saying, “Today’s decision has closed one path. Now we’re going to pursue another.” 

Regarding the majority opinion, the justices took issue with how the Biden administration sought to waive student loans: using the HEROES Act. Essentially, the Secretary of Education wanted to use the piece of legislation from the Bush era, which allows waivers and relief of financial aid programs due to war or another type of national emergency, to offer around 40 million Americans up to $20,000 in debt forgiveness each. Justice Roberts, writing for the majority, found the HEROES Act does not enable “... the Secreatary [to] use his powers to abolish $430 billion in student loans, completely cancelling loan balances for 20 million borrowers, as a pandemic winds down to its end.”

The defeat was followed with the release of a “Plan B,” as the Biden administration put forth a new proposal later in the month to help Americans struggling with large student loan balances. The new proposal relies on the 1965 Higher Education Act’s delegation of power to the Secretary of Education to “... compromise, waive or release loans under certain circumstances.” The potential legal challenges this new plan will have to undergo remain to be seen, but if the fight in Biden v. Nebraska is any indication, the issues might work their way up to the Supreme Court.

Democrats like Senator Elizabeth Warren of Massachusetts have been vocal supporters of relief for student loan borrowers from the outset of the initial proposal’s release. Warren previously tweeted, “Make no mistake: … [The forgiveness of up to $20,000 in loans] will directly help hard-working people who borrowed money to go to school because they didn’t come from a family that could write a big check.” Many Republican lawmakers are critical of Democrats’ attempts to cancel student loan debt, with South Carolina Senator Tim Scott stating plainly, “If you take out a loan, you pay it back.” The American people are similarly divided, with a recent Reuters/Ipsos poll pegging the percentage in support of President Biden’s initial forgiveness plan at 47%. 

Biden v. Nebraska went poorly for the Biden administration, but how the Court would rule on the White House’s “Plan B” remains unclear at this juncture. The Court’s June holding indicated a firm opposition to the view that power to relieve $430 billion in loans rests with the Secretary of Education; however, the White House likely closely examined the decision to form their “Plan B” with the best chance of withstanding a legal fight. On a policy level, just like virtually every other issue in the United States today, America is quite divided. Democrats hail attempts to curb student loan debt, while Republicans argue they are not fair (and thus recently proposed their own, much more limited bill on student loan debt called the Federal Assistance to Initiate Repayment (FAIR) Act). The steps the government actually ends up taking to address student loan borrowers’ challenges will certainly be closely watched in the coming months as not only are hundreds of billions of dollars in loans going to be affected but more importantly, tens of millions of Americans will be.