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USA | Jun 30, 2023

US Supreme Court blocks Biden student loan forgiveness

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A sign calling for student loan debt relief is seen in front of the Supreme Court as the justices are scheduled to hear oral arguments in two cases involving President Joe Biden’s bid to reinstate his plan to cancel billions of dollars in student debt in Washington, U.S., February 28, 2023. (Photo: REUTERS/Nathan Howard)

WASHINGTON (Reuters)

The US Supreme Court handed President Joe Biden a painful defeat on Friday (June 30), blocking his plan to cancel $430 billion in student loan debt – a move that had been intended to benefit up to 43 million Americans and fulfill a campaign promise.

The justices ruled against Biden in a 6-3 decision favouring six conservative-leaning states that objected to the policy. The court’s action dealt blow to the 26 million US borrowers who applied for relief after Biden announced the plan in August 2022 and a political setback for the Democratic president.

Arkansas, Iowa, Kansas, Missouri, Nebraska and South Carolina challenged 7 debt relief, as did two individual borrowers opposed to the plan’s eligibility requirements. The court acted on its final day of rulings in its term that began in October.

Twenty-six million US borrowers applied for relief between when Biden announced the plan in August 2022 until last November, when lower courts blocked the plan.

Biden’s plan fulfilled his 2020 campaign promise to cancel a portion of $1.6 trillion in federal student loan debt but was criticised by Republicans who called it an overreach of his authority and an unfair benefit to college-educated borrowers while other borrowers received no such relief. Biden is seeking re-election next year.

Under the plan, the US government would forgive up to US$10,000 in federal student debt for Americans making under $125,000 who obtained loans to pay for college and other post-secondary education and $20,000 for recipients of Pell grants to students from lower-income families.

The ruling came a day after the Supreme Court effectively prohibited affirmative action policies long used by US colleges and universities to raise the number of Black, Hispanic and other underrepresented minority students. Biden on Thursday said the court, with its conservative majority, was an institution out of touch with the country’s basic values.

During February arguments in the loans case, Biden’s administration said the plan was authorised under a 2003 federal law called the Higher Education Relief Opportunities for Students Act, or HEROES Act, which empowers the US education secretary to “waive or modify” student financial assistance during war or national emergencies.”

Both Biden and his Republican predecessor Donald Trump relied upon the HEROES Act beginning in 2020 to repeatedly pause student loan payments and halt interest from accruing to alleviate financial strain on student loan borrowers during the COVID-19 pandemic.

U.S. President Joe Biden speaks to the media before departing the White House for Camp David, in Washington, U.S., May 26, 2023. (Photo: REUTERS/Evelyn Hockstein)

During the arguments, a Justice Department lawyer portrayed the debt relief as a benefits programme rather than an assertion of regulatory power not authorised by Congress.

In response to the legal challenge brought by the states, a federal judge in Missouri in October 2022 ruled that they lacked the legal standing to sue. On appeal, the St. Louis-based 8th US Circuit Court of Appeals found that at least one of the states, Missouri, had proper standing.

In the case brought by individual borrowers named Myra Brown and Alexander Taylor, a federal judge in Texas ruled in November 2022 that the plan exceeded the Biden administration’s authority – a ruling that the New Orleans-based 5th U.S. Circuit Court of Appeals declined to put on hold pending appeal.

Some 53 per cent of Americans said they support Biden’s debt relief, with 45 per cent opposed, according to a Reuters/Ipsos poll from March, with respondents dividing sharply along partisan lines with Democrats broadly supportive and Republicans generally opposed.

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