On June 30, 2023, the Supreme Court of the United States struck down President Biden’s student loan forgiveness plan in a 6-3 decision. The plan, announced back in August 2022, would have canceled $10,000 in federally backed student loan debt for individuals making less than $125,000 a year, or married couples making less than $250,000 a year. Pell Grant recipients would have received $20,000 in debt cancellation. After oral arguments were heard on February 28, 2023, Chief Justice John Roberts wrote the majority opinion for the Supreme Court in Biden v. Nebraska.

The first issue the majority addressed in its opinion is whether any of the challengers to Biden’s student loan forgiveness plan had standing (meaning that the challengers suffered some type of harm because of the plan). The opinion noted that the state of Missouri’s higher education programs receive funding from an entity called MOHELA, which was created by the state of Missouri and acts as a servicer of federal student loans. Estimates demonstrated that the forgiveness of student loans would have cost MOHELA an estimated $44 million in fees that MOHELA would have otherwise earned. This harm would extend to the state of Missouri, as well, according to the majority, because MOHELA’s decreased revenue would lead to a reduction in the funding of Missouri’s higher education programs. Consequently, the majority decided that the state of Missouri had standing to challenge the student loan forgiveness plan.

Having established standing, the majority shifted its focus to whether the student loan forgiveness plan was actually legal. The legal authority relied upon by the Biden administration was the Higher Education Relief Opportunities for Students Act of 2003. This law is often referred to as the HEROES Act and was passed by Congress after the September 11^th attacks. The HEROES Act gives the Secretary of Education the power to “waive or modify” student loan requirements during national emergencies.

In analyzing the HEROES Act, the majority determined that the power to “modify” was limited to “modest adjustments and additions to existing provisions,” and did not include “transform[ing]” the existing law.  Biden’s student loan forgiveness plan, however, went beyond modifying the HEROES Act according to the majority. The HEROES Act provides for a few, narrowly tailored circumstances under which loan forgiveness is allowed (i.e. death, disability, school malfeasance, etc.).  Instead of “modifying” these provisions, the plan created a completely different loan forgiveness program, effectively eliminating all prior limitations on loan forgiveness and covering an estimated 98.5% of borrowers regardless of their circumstances. As a result, the majority found that the “modify” language of the HEROES Act did not grant the Biden administration the authority to implement the student loan forgiveness plan.

Likewise, the majority also decided that the student loan forgiveness plan was not authorized by the “waive” language in the HEROES Act. Past waivers under the HEROES Act involved the Secretary of Education pointing to specific legal requirements and waiving it, such as the requirement to provide written request for a leave of absence or provisions relative to collection of defaulted loans from certain “affected individuals[1]”.  There is no provision in the HEROES Act providing for repayment of the loan, so the Biden administration cannot identify such a particular provision that it was waiving. Accordingly, the majority found that the Biden administration’s student loan forgiveness plan was not permitted by the “waive” language of the HEROES Act’s.

Having established that the HEROES Act’s “waive or modify” language did not authorize the student loan forgiveness plan, the majority addressed the Biden administration’s argument that the student loan forgiveness plan was consistent with the purpose of the HEROES Act. In its examination of this issue, the majority relied on the “major questions doctrine,” which is the principle that Congress does not delegate tasks involving issues of great economic and political significance to the executive branch, unless Congress clearly states so. The majority described the economic and political significance of the student loan forgiveness plan as “staggering by any measure,” citing an estimate that the program would costs taxpayers somewhere between $469 billion to $519 billion. Furthermore, the majority not only determined that clear congressional authorization for the student loan forgiveness plan was lacking under the HEROES Act, but also that Congress simply did not intend to grant such power to the executive branch when it passed the HEROES Act. With no legal authority to support the Biden administration’s student loan forgiveness plan, the majority struck down the plan.

Shortly after the Supreme Court’s ruling, the Biden administration vowed to find other avenues to provide relief to student loan borrowers. On July 14, 2023, the Biden Administration announced that 804,000 borrowers would have $39 billion in federal student loans automatically discharged in the coming weeks. According to the administration, this new student loan forgiveness plan is being implemented to fix historical failures in servicing student loans to accurately count the number of payments that qualify for forgiveness under income-driven repayment plans. The borrowers covered by the new plan include those with Direct Loans or Federal Family Education Loans held by the Department of Education. Whether these additional student debt relief measures will also face legal challenges remains to be seen. However, the Biden v. Nebraska decision set an important precedent on the limits of the executive branch to provide relief to student loan borrowers.

[1] See 68 Fed. Reg. 69316, eliminating the collection requirement for “affected individuals”, such as active-duty military members, National Guard members performing during military operation or natural disaster, those affected by a natural disaster or national emergency, etc.