The Supreme Court has struck down the Biden administration’s plan to forgive up to $20,000 in student loans for qualifying borrowers under a policy the president announced Aug. 24, 2022. The move would have helped borrowers of all ages, including people 50 and over, who owe nearly 22 percent of all student loan debt.
The court, voting 6 to 3, held that the administration didn’t have the authority under the under the Higher Education Relief Opportunities for Students Act of 2003 to forgive the debt.
“We hold today that the Act allows the Secretary [of Education] to ‘waive or modify’ existing statutory or regulatory provisions applicable to financial assistance programs under the Education Act, not to rewrite that statute from the ground up,” Chief Justice John Roberts wrote in the majority opinion.
Justices Elena Kagan, Sonia Sotomayor and Kentanji Brown Jackson disagreed. “Congress authorized the forgiveness plan (among many other actions); the Secretary put it in place; and the President would have been accountable for its success or failure,” Kagan wrote in her dissent. “But 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 ‘significant.’”
How it would have worked
The administration proposed debt forgiveness for individuals with less than $125,000 in annual income and couples with less than $250,000 in income. Nearly 8 million borrowers could have been eligible to receive relief automatically because the U.S. Department of Education (DOE) already has the income information it needs to determine eligibility.
Students with Pell grants who meet the income limits would have had up to $20,000 in federal student loans forgiven. Pell grants are for students with the greatest financial need. Students without Pell grants would have had $10,000 in federal student loans forgiven.
Payments to resume in October
The moratorium on federal student loan payments began in March 2020 because of the COVID-19 pandemic, and that relief has been extended several times. The DOE says that interest on student loans will begin to accrue on Sept. 1 and that loan payments will resume in October.