Supreme Court strikes down student loan forgiveness program, Biden pushing ahead with new plan

The program would have benefited 43 million Americans at a cost of $400 billion.

ByDevin Dwyer and Alexandra Hutzler ABCNews logo
Friday, June 30, 2023
US Supreme Court releases major speech, loan rulings
The US Supreme Court released 2 major rulings Friday.

WASHINGTON -- President Joe Biden is offering an alternative student debt plan designed to ease borrowers' threat of default if they fall behind on their payments, after the Supreme Court struck down his original initiative.

Biden on Friday blamed Republican opposition for triggering the Supreme Court's ruling and slammed the decision as wrong.

The president said he will work under the authority of the Higher Education Act to begin a new program that would begin loan repayment but remove the immediate threat of default. He said the plan would take longer but provide relief to millions of borrowers.

The White House said Biden's chief of staff, Jeff Zients, has been holding meetings about once a week to prepare for the Supreme Court ruling, and administration officials also have met and spoken with dozens of advocates and allies in the congressional community, so they would have a fully formed response once the court had ruled.

Biden was briefed after Friday's ruling and met with senior staff to push ahead with an alternative plan given its implications, the White House said, without providing any details.

This all comes after the 6-3 decision, written by Chief Justice John Roberts, the court ruled the Department of Education exceeded its authority when it moved to wipe out more than $400 billion in federal student loan debt.

The program, which invoked emergency powers because of the economic hardship brought by the pandemic, would have canceled $10,000 in student debt for all borrowers who made less than $125,000 and up to $20,000 for borrowers who also received Pell grants.

MORE: Student loan payments to restart in October after 3-year COVID pause. Here's what to know

The U.S. Department of Education has announced a broad timeline for when all federal student loan borrowers should expect to restart their payments after a three-year pause for COVID-19.

Six Republican-led states -- Nebraska, Missouri, Arkansas, Iowa, Kansas and South Carolina -- argued the program was executive overreach. The administration pushed back the plan was lawful under the 2003 law HEROES Act, which states the government can provide relief to recipients of student loans when there is a "national emergency."

Roberts rejected the administration's argument, writing precedent "requires that Congress speak clearly before a Department Secretary can unilaterally alter large sections of the American economy."

American students collectively owe $1.76 trillion in college loan debt, GMA Digital reports.

"The Secretary asserts that the HEROES Act grants him the authority to cancel $430 billion of student loan principal. It does not," Roberts wrote. "We hold today that the Act allows the Secretary 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."

Justice Elena Kagan, in her dissent joined by Justices Sonia Sotomayor and Ketanji Brown Jackson, said the court is overstepping its authority.

"From the first page to the last, today's opinion departs from the demands of judicial restraint," Kagan said in her dissent, which she read from the bench. "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."

The court's decision is a blow for Biden, who made tackling student loan debt a key campaign pledge. The loan forgiveness program was rolled out just ahead of the 2022 midterm elections, with Biden highlighting how the relief would have a life-changing impact on middle-class Americans.

Student loan payments are due to restart in October after a three-year pause put in place during the pandemic. Interest on federal student loans will start accruing in September.

Top Democrats criticized the court's decision and quickly called on Biden to explore more options to provide relief to borrowers, while Republicans lauded the ruling.

"This disappointing and cruel ruling shows the callousness of the MAGA Republican-controlled Supreme Court," Senate Majority Leader Chuck Schumer, D-N.Y., said in a statement.

"The fight will not end here," Schumer continued. "The Biden administration has remaining legal routes to provide broad-based student debt cancellation. With the pause on student loan payments set to expire in weeks, I call upon the administration to do everything in its power to deliver for millions of working- and middle-class Americans struggling with student loan debt."

House Speaker Kevin McCarthy said the the decision "builds on" Republican-led legislation to end the student loan payment pause.

"The President must follow the law," McCarthy tweeted.

In a separate opinion, the Supreme Court on Friday unanimously said two individual borrowers who also challenged the program lacked standing and dismissed the case.

The Associated Press contributed to this report.