Supreme Court Rejects Biden’s Student Loan Forgiveness Plan

The Supreme Court ruled on Friday that the Biden administration had overstepped its authority with its plan to wipe out more than $400 billion in student debt, dashing the hopes of tens of millions of borrowers and imposing new restrictions on presidential power.

It was a resounding setback for President Biden, who had vowed to help borrowers “crawl out from under that mountain of debt.” More than 45 million people across the country owe $1.6 trillion in federal loans for college, according to government data, and the proposed debt cancellation, announced by Mr. Biden last summer, would have been one of the most expensive executive actions in U.S. history.

The decision, the last of a tumultuous term, was part of a trio of muscular rulings on Thursday and Friday in which the court divided 6 to 3 along partisan lines. In addition to rejecting the loan forgiveness program, the court’s conservative majority also sharply limited affirmative action in higher education and dealt a blow to gay rights.

The dismissal of the plan intensified pressure on Mr. Biden to try to fulfill a promise to a key constituency as his bid for re-election gets underway, and he made clear in remarks on Friday that he would seize on the ruling as a campaign issue.

“Today’s decision has closed one path,” Mr. Biden said, adding that he had directed his education secretary to examine a different law by which his administration could forgive debt. “Now we’re going to pursue another.”

But the Supreme Court’s decision, the latest in a series of rulings curbing presidential power in the absence of clear congressional authorization, limited Mr. Biden’s alternatives and suggested that other attempts to address student debt would be met with skepticism at the court.

Chief Justice John G. Roberts Jr., writing for the majority, said a 2003 law, which allows the secretary of education to “waive or modify” relevant statutes and regulations in emergencies, had not authorized the administration to cancel the debt.

“The secretary’s plan has ‘modified’ the cited provisions,” the chief justice wrote, quoting an earlier opinion, “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.”

Justice Elena Kagan summarized her dissent from the bench, a rare move and a sign of deep disagreement. In siding with six Republican-led states that sued to block the program, she said, the majority opinion was opportunistic, unprincipled and infected by politics.

“From the first page to the last,” she added in her written dissent, “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.”

Borrowers and advocates expressed dismay at the decision and pressed Mr. Biden to find another way.

Claude Reed, 74, has spent decades trying to pay off student loans, and half a century after finishing college, still owes $4,600, more than he borrowed to start. Mr. Biden’s plan would have freed him from debt, but the ruling on Friday means he again faces the prospect of having money deducted from his only source of income, Social Security.

“This is like football,” said Mr. Reed, who lives in Idaho Falls, Idaho. “Instead of me starting at the 20-yard line, I’m behind in the other end zone, you know?”

Republicans, for their part, cast the decision as a victory for taxpayers and reiterated that the plan was unfair.

“The 87% of Americans without student loans are no longer forced to pay for the 13% who do,” Speaker Kevin McCarthy, Republican of California, said on Twitter as he praised the dismissal of what he called “President Biden’s student loan giveaway.”

The Biden administration said its plan was meant to address the coronavirus pandemic and its lingering effects and was authorized by the Higher Education Relief Opportunities for Students Act of 2003, usually called the HEROES Act. That law, initially enacted after the terrorist attacks on Sept. 11, 2001, gives the secretary of education the power to “waive or modify any statutory or regulatory provision” to protect borrowers affected by “a war or other military operation or national emergency.”

In March 2020, President Donald J. Trump declared that the coronavirus pandemic was a national emergency, and his administration invoked the HEROES Act to pause student loan repayment requirements and to suspend the accrual of interest.

The Biden administration followed suit. The payment pause has cost the government more than $100 billion, according to the Government Accountability Office.

In August, the administration said it planned to switch gears, ending the repayment pause but forgiving $10,000 in debt for individuals earning less than $125,000 per year, or $250,000 per household, and $20,000 for those who received Pell grants for low-income families.

Nearly 26 million borrowers have applied to have some of their student loan debt erased. While the government has approved 16 million applications, no debt has been canceled yet. The Education Department, which owns and manages the government’s $1.5 trillion student debt portfolio, stopped accepting applications in light of the legal challenges.

In separate cases, the six Republican-led states — Nebraska, Missouri, Arkansas, Iowa, Kansas and South Carolina — and two individuals sued to stop the new plan. They relied on recent decisions employing the so-called major questions doctrine, which says that Congress must speak particularly clearly when authorizing the executive branch to act on important political and economic questions.

Chief Justice Roberts said the doctrine doomed the loan forgiveness program.

Last June, the Supreme Court invoked the doctrine in a decision that curtailed the Environmental Protection Agency’s power to address climate change. Without “clear congressional authorization,” the court said, the agency could not act.

The court also ruled, on similar grounds, that the Centers for Disease Control and Prevention was not authorized to impose a moratorium on evictions and that the Occupational Safety and Health Administration was not authorized to tell large employers to have their workers vaccinated against Covid-19 or undergo frequent testing.

The student loan program, Chief Justice Roberts wrote, also had vast economic and political significance. “The secretary’s action is staggering by any measure,” he wrote.

A budget model prepared by the Wharton School of the University of Pennsylvania, the chief justice wrote, estimated that the program could cost taxpayers as much as $519 billion.

“That is 10 times the ‘economic impact’ that we found significant in concluding that an eviction moratorium implemented by the Centers for Disease Control and Prevention triggered analysis under the major questions doctrine,” Chief Justice Roberts wrote. “It amounts to nearly one-third of the government’s $1.7 trillion in annual discretionary spending. There is no serious dispute that the secretary claims the authority to exercise control over a significant portion of the American economy.”

Justice Kagan argued the 2003 law squarely and plainly authorized the program.

“The statute provides the secretary with broad authority to give emergency relief to student-loan borrowers, including by altering usual discharge rules,” she wrote. “What the secretary did fits comfortably within that delegation. But the court forbids him to proceed. As in other recent cases, the rules of the game change when Congress enacts broad delegations allowing agencies to take substantial regulatory measures.”

Justices Clarence Thomas, Samuel A. Alito Jr., Neil M Gorsuch, Brett M. Kavanaugh and Amy Coney Barrett joined the majority opinion.

Justice Barrett issued an extended concurring opinion exploring the limits of the major questions doctrine. She concluded that “the doctrine should not be taken for more than it is — the familiar principle that we do not interpret a statute for all it is worth when a reasonable person would not read it that way.”

In dissent, Justice Kagan, joined by Justices Sonia Sotomayor and Ketanji Brown Jackson, issued a harsh critique of the doctrine, calling it a way to amplify the court’s power.

“The question, the majority helpfully tells us, is ‘who has the authority’ to make such significant calls,” she wrote. “The answer, as is now becoming commonplace, is this court.”

A key threshold question in the case, Biden v. Nebraska, No. 22-506, was whether the plaintiffs have suffered the sort of direct and concrete injury that gives them standing to sue.

When the case was argued in February, the justices focused on a nonprofit entity that services federal loans, the Missouri Higher Education Loan Authority, also known as MOHELA. The states argued that the entity’s potential losses from the loan forgiveness program were enough to confer standing because it is effectively an arm of the State of Missouri. They also said that the authority might fail to make payments to Missouri if the program were allowed to proceed.

On Friday, Chief Justice Roberts adopted that argument.

“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,” the chief justice wrote. “The secretary’s plan will cut MOHELA’s revenues, impairing its efforts to aid Missouri college students.”

That was the only basis for standing in the case. “We need not consider the other theories of standing raised by the states,” he wrote.

In a separate decision, the court unanimously held that two individual borrowers challenging the program lacked standing.

In dissent in the case brought by the states, Justice Kagan questioned the majority’s eagerness to decide it.

“In giving those states a forum — in adjudicating their complaint — the court forgets its proper role,” she wrote. “The court acts as though it is an arbiter of political and policy disputes, rather than of cases and controversies.”

Deciding the case, she wrote, “blows through a constitutional guardrail intended to keep courts acting like courts.”

She scoffed at the loan service entity’s connection to the case, noting that it had not sued on its own behalf or cooperated in the suit.

“Is there a person in America who thinks Missouri is here because it is worried about MOHELA’s loss of loan-servicing fees?” she asked. “I would like to meet him.”

Chief Justice Roberts concluded his opinion with a lament.

“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,” he wrote.

He added: “We 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 wrote that “there is surely nothing personal in the dispute here.”

“But justices throughout history have raised the alarm when the court has overreached,” she wrote, adding that alarm was warranted now.

“In a case not a case,” she wrote, “the majority overrides the combined judgment of the legislative and executive branches, with the consequence of eliminating loan forgiveness for 43 million Americans.”

Stacy Cowley contributed reporting.