U.S. President Joe Biden said Friday his administration will move ahead with a new student loan debt relief program after the Supreme Court struck down his original plan to provide relief to millions of American borrowers.
Speaking hours after the court delivered its ruling, Biden said the Department of Education will also enact a 12-month “on-ramp” for repayments, which are due to begin again in October after a three-year pause, that will ensure borrowers who are unable to begin monthly payments immediately do not go into default or see their credit impacted.
The president blamed Republican opposition for triggering the Supreme Court’s ruling and slammed the decision as wrong.
“These Republican officials just couldn’t bear the thought of providing relief to working-class and middle-class Americans,” he said. He pointed out many of those same Republican lawmakers and lobbyists took advantage of the COVID-19 loan repayment program that was more expensive than the projected cost of the student debt relief plan, which would .
“The hypocrisy is stunning.”
The Supreme Court’s 6-3 decision, with conservative justices in the majority, said the Biden administration overstepped its authority with the plan, and that the administration needed Congress’ endorsement before undertaking so costly a program. The majority rejected arguments that a bipartisan 2003 law dealing with national emergencies, known as the HEROES Act, gave Biden the power he claimed.
The Biden’s administration’s new plan will use the use the Higher Education Act to open a path for debt relief to “as many borrowers as possible, as quickly as possible,” Biden said. The law allows the education secretary to waive or reduce loans under certain circumstances, a power that will be expanded under what the president called a “legally sound” plan.
Biden rejected a report’s question at the end of his remarks suggesting he gave borrowers “false hope” by announcing his original plan when it was based on the shaky legal ground of the HEROES Act. More than 26 million borrowers had applied for relief under the program before it was blocked by lower courts, and the White House has said 16 million applications had been approved.
“I didn’t give any false hope,” he said heatedly. “The Republicans snatched away the hope that they were given.”
The forgiveness program, announced last August, would have canceled US$10,000 in student loan debt for those making less than US$125,000 or households with less than US$250,000 in income. Pell Grant recipients, who typically demonstrate more financial need, would have had an additional US$10,000 in debt forgiven. The program was estimated to cost up to US$400 billion over 30 years.
“Six States sued, arguing that the HEROES Act does not authorize the loan cancellation plan. We agree,” Chief Justice John Roberts wrote for the court.
Justice Elena Kagan, wrote in a dissent, joined by the court’s two other liberals, that the majority of the court “overrides the combined judgment of the Legislative and Executive Branches, with the consequence of eliminating loan forgiveness for 43 million Americans.” Kagan read a summary of her dissent in court to emphasize her disagreement.
Roberts, perhaps anticipating negative public reaction and aware of declining approval of the court, added an unusual coda to his opinion, cautioning that the liberals’ dissent should not be mistaken for disparagement of the court itself. ”It is important that the public not be misled either. Any such misperception would be harmful to this institution and our country,” the chief justice wrote.
Loan repayments will resume in October, although interest will begin accruing in September, the Education Department has announced. Payments have been on hold since the start of the coronavirus pandemic more than three years ago.
Advocacy groups supporting debt cancellation condemned the decision while demanding that Biden find another avenue to fulfill his promise of debt relief.
Natalia Abrams, president and founder of the Student Debt Crisis Center, said the responsibility for new action falls “squarely” on Biden’s shoulders. “The president possesses the power, and must summon the will, to secure the essential relief that families across the nation desperately need,” Abrams said in a statement.
Biden said the 12-month “on-ramp” for repayments will ensure borrowers who aren’t able to immediately begin repayments in October are not referred to credit agencies or debt collectors, giving them a chance to “get back up and running.” Borrowers who are able to begin repayments immediately should do so, he also said.
About 44 million people in the U.S. have outstanding student loans that total more than US$1.6 trillion, according to the Department of Education.
Advocates previously told Global News that immediately turning repayments back on would cause delinquency rates to spike and harm borrowers’ credit at a time when they are already reeling from inflation and other forms of debt incurred during the pandemic.
Persis Yu, deputy executive director of the Student Borrower Protection Center in Washington, told Global News in an interview earlier this month that the three-year pause on repayments has been “a critical lifeline for tens of millions of student loan borrowers, many of whom would have been in financial ruin if they’d had to make student loan payments.”
The loan plan joins other pandemic-related initiatives that faltered at the Supreme Court.
Conservative majorities ended an eviction moratorium that had been imposed by the Centers for Disease Control and Prevention and blocked a plan to require workers at big companies to be vaccinated or undergo regular testing and wear a mask on the job. The court upheld a plan to require vaccinations of health-care workers.
The earlier programs were billed largely as public health measures intended to slow the spread of COVID-19. The loan forgiveness plan, by contrast, was aimed at countering the economic effects of the pandemic.
In more than three hours of arguments last February, conservative justices voiced their skepticism that the administration had the authority to wipe away or reduce student loans held by millions.
Republican-led states arguing before the court said the plan would have amounted to a “windfall” for 20 million people who would have seen their entire student debt disappear and been better off than they were before the pandemic.
Roberts was among those on the court who questioned whether non-college workers would essentially be penalized for a break for the college educated.
In contrast, the administration grounded the need for the sweeping loan forgiveness in the COVID-19 emergency and the continuing negative impacts on people near the bottom of the economic ladder. The declared emergency ended on May 11.
At those arguments, Justice Sonia Sotomayor said her fellow justices would be making a mistake if they took for themselves, instead of leaving it to education experts, “the right to decide how much aid to give” people who would struggle if the program were struck down.
—With files from the Associated Press