The Supreme Court — in a 6-to-3 vote — on Friday struck down a plan from the Biden Administration to cancel as much as $20,000 in student loans for borrowers making under $125,000 a year, saying that the federal government exceeded its authority with the plan, saying that under the government’s interpretation of the Higher Education Relief Opportunities for Students Act, it would have “virtually unlimited power” to rewrite the Education Act. The Biden Administration immediately set to work in trying to find other ways to lessen the student loan burden for individuals, announcing a new rulemaking and a new “onramp” process that will prohibit individuals who miss student loan payments from having information furnished to the credit reporting agencies or having their accounts placed with debt collection agencies.
A copy of the Supreme Court’s ruling in Biden v. Nebraska can be accessed by clicking here.
Last August, the Biden Administration announced a plan to forgive $10,000 of student loan debt — up to $20,000 if Pell grants were involved — for anyone making less than $125,000 per year. The plan was expected to wipe out at least some, if not all, of the unpaid student loans for about 40 million individuals. More than 26 million people filed applications for relief, but a number of lawsuits were filed seeking to block the plan from going into effect. The case before the Supreme Court was filed by six states — led by Republicans — who claimed the program was unlawful because the president exceeded his authority by taking action without first obtaining congressional approval.
President Biden announced his new plan during a press conference on Friday afternoon, admitting that providing debt relief to students is “going to take longer.” Individuals with student loans are set to resume making payments in September, more than three years after a payment moratorium was announced at the onset of the COVID-19 pandemic.
The Department of Education announced a new rulemaking “aimed at opening an alternative path to debt relief for as many borrowers as possible” using the department’s authority under the Higher Education Act. The administration also announced an income-driven repayment plan, called the Saving on a Valuable Education plan that will cut borrowers’ monthly payments in half, to 5% of their discretionary income, while also raising the amount of income that is considered non-discretionary to 225% above the federal poverty level.