US Supreme Court strikes down Biden's student loan forgiveness plan

President Joe Biden says ruling on $430 billion in federal student debt forgiveness 'was a mistake'

A sign calling for student loan forgiveness outside the Supreme Court in Washington. Reuters

The US Supreme Court on Friday struck down President Joe Biden's plan to forgive $430 billion in student loans, a major ruling that will affect millions of Americans.

The high court's six-member conservative majority ruled in favour of the six Republican-led states that had sued Mr Biden over the plan.

“I believe the court's decision to strike down my student debt relief programme was a mistake,” Mr Biden said in remarks from the White House.

“We'll use every tool at our disposal to get you the student debt relief you need and reach your dreams. It's good for the economy. It's good for the country. It's going to be good for you.”

The US President said he would introduce student loan debt relief through a “new path” under the Higher Education Act.

Mr Biden's plan rested on a law called the Heroes Act, which would permit the secretary of education to “waive or modify” federal loans due to a national emergency.

Led by Nebraska, the six states argued that the secretary had exceeded that authority.

“From a few narrowly delineated situations specified by Congress, the secretary has expanded forgiveness to nearly every borrower in the country,” Chief Justice John Roberts wrote in his majority opinion.

Justice Elena Kagan wrote in the dissenting opinion that the Supreme Court has exceeded its role in government, saying that in this case, “the majority overrides the combined judgment of the legislative and executive branches, with the consequence of eliminating loan forgiveness for 43 million Americans”.

Mr Biden promised during his 2020 campaign that he would cancel a portion of federal student loan debt. Republicans and critics have argued that doing so would be executive overreach and that the policy would be unfair to those who have already paid off their loans.

His programme would have eliminated up to $10,000 in federal student loan debt per borrower. Those who received a Pell Grant would have seen an additional $10,000 in federal loans forgiven.

Altogether, it would have erased all student loan debt for up to about 20 million people, the White House said.

Mr Biden on Friday said his new plan through the Higher Education Act may take longer, but he is ordering his Department of Education to conduct it as quickly as possible.

“We aren't wasting any time,” he said.

As part of additional steps for financial relief when monthly repayments start soon, he is also ordering a “temporary 12-month on-ramp repayment programme” in which borrowers can avoid default if they have to miss a payment. If a payment is missed, credit levels will not be harmed.

Demonstrators in favour of student loan forgiveness stand outside the Supreme Court in Washington. AFP

The Supreme Court heard two challenges to the programme, one involving six Republican-led states and a second involving two university students.

The Republican states had sued Mr Biden's administration over executive overreach and an appellate court put the programme on hold after the lawsuit was dismissed by a lower court.

Twenty-six million borrowers had applied for the programme before the Department of Education ceased applications.

In the second challenge, university student Myra Brown argued that she was ineligible for the programme because her loans were privately held.

Another student, Alexander Taylor, was eligible for only $10,000 because he did not receive a Pell Grant. Mr Taylor said it was wrong to deny him “full debt forgiveness based on the financial circumstances of his parents many years ago”.

The Supreme Court ruled in a unanimous decision that Ms Brown's case had no standing.

Regardless of the Supreme Court's decision, student loan repayments were set to resume this autumn after a three-year freeze.

Interest on student loans are set to accrue beginning September 1 and payments will restart in October.

In a separate case, the Supreme Court's conservative majority ruled that a Christian graphic designer can refuse to work with same-sex couples.

The court ruled against a Colorado law that prohibits discrimination based on sexual orientation and other characteristics.

Lorie Smith, the graphic designer, argued that the Colorado law violated her free speech rights as part of the First Amendment.