Supreme Court, for Now, Keeps Block on Revamped Biden Student Debt Plan
The Supreme Court on Wednesday maintained a temporary pause on a new effort by President Biden to wipe out tens and perhaps hundreds of billions of dollars of student debt.
The plan was part of the president’s piecemeal approach to forgiving student debt after the Supreme Court rejected a more ambitious proposal last year that would have canceled more than $400 billion in loans. Mr. Biden has instead pursued more limited measures directed at certain types of borrowers, including people on disability and public service workers, and refined existing programs.
The Supreme Court’s order leaves in limbo millions of borrowers enrolled in the Biden administration’s SAVE program, which ties monthly payments to household size and earnings. The plan was upended by an appeals court decision last month.
The justices’ order, in response to an emergency application by the Biden administration, was one of two related to the program released on Wednesday. The brief order did not give reasons, which is typical, and no public dissents were noted.
The decision is the latest blow to the Biden administration’s debt-relief efforts, which Republican-led states have repeatedly challenged.
The justices’ order focused on a lawsuit that had reached the U.S. Court of Appeals for the Eighth Circuit, in St. Louis. In mid-July, the appeals court issued a broad hold on the program, granting a request by a group of Republican-led states to pause the plan while the courts considered the merits of the case.
That case could soon make its way back to the justices, who had indicated that they expected the lower court to act swiftly on the matter.
A White House spokesperson said the Biden administration would continue to defend its debt-relief plan in court.
“We won’t stop fighting against Republican elected officials’ efforts to raise costs on millions of their own constituents’ student loan payments,” the spokesperson, Angelo Fernández Hernández, said.
The Biden administration had argued that the new program was authorized by a 1993 law that allowed the secretary of education to fashion “income-contingent repayment” plans based on the borrower’s annual earnings.
Over the years, the secretary has invoked the law several times to relax repayment requirements. The latest plan, the subject of the Supreme Court’s order, was the most generous under that law.
The plan reduced the required payments for undergraduate loans to 5 percent from 10 percent of the borrower’s discretionary income, and it redefined discretionary income so that people making less than 225 percent of the poverty line pay nothing. Loans of $12,000 or less would be canceled after 10 years — down from 20 or 25 years — so long as the borrower made payments if required to do so.
The Saving on a Valuable Education program, issued in June 2023, was challenged nine months later by the attorneys general of 11 Republican-led states, who said it was flawed in ways similar to the one the Supreme Court rejected last year. The 1993 law, they said, contemplates repayment rather than actual or effective forgiveness.
In the administration’s Supreme Court brief in response to one of the challenges, Solicitor General Elizabeth B. Prelogar wrote that the new plan “relies on a different statute with different language to provide a different set of borrowers with different assistance from the one-time loan forgiveness the court held invalid.”
The old plan invoked the Higher Education Relief Opportunities for Students Act of 2003, often called the HEROES Act. That law gave the secretary of education the power to waive rules to protect borrowers affected by “a war or other military operation or national emergency.”
In its decision in June last year, the Supreme Court ruled 6 to 3 that the 2003 law did not authorize forgiving the loans at issue. That same day, Mr. Biden vowed to find other ways to provide debt relief.
“Today’s decision has closed one path,” Mr. Biden said then. “Now we’re going to pursue another.”
Legal challenges to the new plan began in March, when 11 states led by Kansas filed a lawsuit in U.S. District Court for the District of Kansas.
The next month, Andrew Bailey, the Missouri attorney general, and six other states challenged the plan in U.S. District Court for the Eastern District of Missouri. Lawyers in that lawsuit argued that the president was “unilaterally trying to impose an extraordinarily expensive and controversial policy that he could not get through Congress.”
In mid-July, an appeals court in the Missouri case temporarily blocked the entire SAVE plan.
Shortly after that order, the Biden administration announced it would pause student loan payments for the eight million borrowers currently enrolled in the SAVE plan, placing them in an interest-free forbearance while the administration deals with legal issues.
The Biden administration asked the justices earlier this month to clear the way for the plan to take effect.
In their emergency application to the court, lawyers for the Biden administration called the appeals court order a “vastly overbroad” ruling that “severely harmed millions of borrowers” as well as the federal government “by blocking long-planned changes and creating widespread confusion and uncertainty.”
In response, lawyers for a number of Republican-led states, including Missouri, Arkansas, Florida and Georgia, argued that the Biden administration plan was based on an “unprecedented statutory interpretation” that would give the administration “unfettered power to cancel every penny of every federal student loan.”
In a reply to the states, the Biden administration argued that Congress had imposed limits on the administration’s authority to set the parameters of the plans.
The administration initially estimated that the SAVE plan would cost $156 billion over 10 years, but that amount had assumed that the Supreme Court would uphold the earlier plan. The real cost of the new plan, the states challenging it said, is $475 billion over 10 years. The administration says the actual number is smaller.
Adam Liptak contributed reporting.