Mother Jones; Allison Bailey/SOPA/AP; Getty
The Supreme Court struck down on Friday the Biden administration’s plan to wipe out more than $400 billion in student loans for about 40 million Americans. The plan, announced last August, would have canceled up to $10,000 in debt for low- and middle-income borrowers, and double that amount for borrowers from the poorest backgrounds. The decision to undo this relief was handed down by a coalition of the court’s six conservative justices, with the three liberal justices dissenting.
“This Court today decides that some 40 million Americans will not receive the benefits the plan provides because (so says the Court) that assistance is too ‘significan[t],’” Justice Elena Kagan wrote in her dissent.
The decision comes at a fraught moment for student debt borrowers. Millions have been waiting on the Supreme Court to rule while their student loan payments have remained paused, thanks to a historic halt to payments and interest declared by the federal government at the start of the pandemic, and extended nine times—thrice by the Trump administration, and six times by President Joe Biden. This month’s debt ceiling deal ended this pause and prevents the Biden administration from reinstating it.
This reality, combined with Friday’s Supreme Court ruling, means that at the end of August, borrowers will be faced with an economic triple whammy: resuming payments on loan balances that now won’t get any reduction, all while record inflation continues to squeeze household finances.
This ruling responds to two cases that were brought by conservative groups. The first, Department of Education v. Brown, came from two people—financed by a right-wing business advocacy group—who don’t qualify for some or all of Biden’s cancellation plan and argued that this exclusion is unfair. In his opinion Friday, Justice Samuel Alito found that the plaintiffs in Brown didn’t have standing to bring their case. The second, Biden v. Nebraska, was brought by six Republican-led states who argued that Biden’s plan would cause their states to lose money, and also that the administration overstepped its authority when it issued sweeping cancellation.
During oral arguments in February, several of the justices, including Amy Coney Barrett, raised questions about whether these states had standing to bring their case. Their argument hinged on the idea that MOHELA, a student loan servicer in Missouri, would be hurt financially by student loan cancellation—yet MOHELA had declined to participate in the case. This left the state of Missouri to make the flimsy argument that it had standing to pursue this case in MOHELA’s place, because the state and debt servicer have a financial relationship. MOHELA used to give a portion of its revenues to the state to help fund public universities; during oral arguments, it was revealed that MOHELA hadn’t contributed to this fund in the last 15 years and had no plans to do so in the future. What’s more, public records obtained and published by the Debt Collective, an advocacy group that supports cancellation, found that in fact, MOHELA would likely earn more revenue if student debt cancellation were permitted to proceed.
But in an opinion written by Chief Justice John Roberts, the court’s conservative faction decided that Missouri did, in fact, have the right to bring this case.
“By law and function, MOHELA 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,” Roberts wrote. “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.”
In her dissent, Kagan took issue with the court granting standing to these states at all: “The Court’s first overreach in this case is deciding it at all,” she wrote. For years, the court has prevented parties from bringing lawsuits just because there is a policy they don’t like, she explained. These parties must actually show that they would suffer harm from the policy to be given the time of day by the court. Yet “[t]he plaintiffs in this case are six States that have no personal stake in the Secretary’s loan forgiveness plan,” Kagan wrote. “They are classic ideological plaintiffs: They think the plan a very bad idea, but they are no worse off.”
The conservative justices also argued in their decision that the Biden administration overstepped its authority when it issued sweeping cancellation using a 20-year-old law called the HEROES Act. As I explained in February:
The Biden Education Department issued student debt cancellation by relying on the HEROES Act—a 2003 law enacted by President George W. Bush that gives the education secretary the authority to “waive or modify any” (emphasis added) student debt programs in response to national emergencies. The Biden administration argues that the wording there is crystal clear, allowing the Education Department to make whatever changes it sees fit to help borrowers during emergencies, like a once-in-a-lifetime global pandemic—including outright debt cancellation.
But the Republican-led states spent the bulk of their time before the high court arguing that, in fact, the words “waive” and “modify” don’t really mean that. And that they were only ever meant to allow small tweaks to existing programs.
Roberts agreed with them in his decision. “The authority to ‘modify’ statutes and regulations allows the Secretary [of Education] to make modest adjustments and additions to existing regulations,” Roberts wrote, “not transform them.”
Kagan noted in her dissent that the textualist interpretations often favored by conservatives—where legal rules are interpreted literally—would easily be applied to the wording of the HEROES Act. But when faced with a policy they dislike, the court’s conservatives opted to apply a different standard—or, as Kagan put it, “the rules of the game change.”
“For years, this Court has insisted that the way to keep judges’ policy views and preferences out of judicial decisionmaking is to hew to a statute’s text,” she wrote. “The HEROES Act’s text settles the legality of the Secretary’s loan forgiveness plan. 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.”
This is a developing story. Check back for updates.
