Citing harm to Missouri, Supreme Court kills Biden’s student loan forgiveness

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The U.S. Supreme Court on Friday struck down President Joe Biden’s student loan forgiveness program, as a Missouri-created student loan agency helped six conservative-led states dash the hopes of millions of Americans hoping to be relieved of up to $20,000 of their debt.

In an 6-3 opinion, Chief Justice John Roberts wrote the Biden administration had gone too far in relieving up to 40 million Americans of some or all of their student loans, saying the plan went beyond the power Congress granted the Department of Education under a 9/11-era law that gave the administration the ability to change the student loan program in emergencies.

“Today, we have concluded that an instrumentality created by Missouri, governed by Missouri, and answerable to Missouri is indeed part of Missouri; that the words “waive or modify” do not mean “completely rewrite”;” and that our precedent – old and new – requires that Congress speak clearly before a Department Secretary can unilaterally alter large sections of the American economy,” Roberts wrote.

The case was brought by six states, including Kansas and Missouri, which claimed that the Biden administration had overstepped its authority by forgiving up to $10,000 in student loan debt and up to $20,000 in debt for Pell Grant recipients. Pell Grants are reserved for people from low-income families.

More than 16 million Americans, including 305,000 Missourians and 143,000 Kansans had already been approved for loan forgiveness. When the Biden administration introduced the program, it was during a state of emergency for the COVID-19 pandemic.

In order to prove they had the right to sue, the states focused on Missouri’s state-affiliated student loan program, called the Missouri Higher Education Loan Authority, but better known as MOHELA.

MOHELA was created by the Missouri legislature in 1981, but operates as an independent entity. Missouri law says the legislature can’t be held liable for decisions made by the student loan servicer, but also uses money from MOHELA to fund scholarship programs in-state.

Lawyers for the states argued that Missouri was directly harmed by the Biden administration’s student loan forgiveness because it would potentially cut the agency’s operating revenue by around 40%, jeopardizing the funding for those scholarships.

The Biden administration argued that because it has the independent right to sue, Missouri can’t sue on its behalf. The conservative justices on the court disagreed.

“The Secretary’s plan harms MOHELA in the performance of its public function and so directly harms the State that created and controls MOHELA,” Roberts wrote. “Missouri thus has suffered an injury in fact sufficient to give it standing to challenge the Secretary’s plan.”

Missouri joined the lawsuit under Republican Sen. Eric Schmitt, who was Missouri attorney general at the time. It was part of a wave of lawsuits Schmitt launched against the Biden administration, as it has become increasingly common for both Republican and Democratic state attorneys general to build political capital by suing a president of the opposing political party.

Schmitt immediately took credit on Twitter, saying that the Biden administration didn’t have the authority to wipe out billions in debt, part of a larger effort Schmitt has undertaken to pry power from the executive branch and give it to Congress.

“Joe Biden’s student loan bailout was nothing more than a thinly veiled political ploy on a shaky foundation to score cheap points,” Schmitt said in a longer statement. “The bailout was inherently unfair to those who responsibly paid off their debt or those who chose not to take on debt, and the truck driver or the waitress shouldn’t have to subsidize the theater degree of the tenured professor.”

Missouri’s current attorney general, Republican Andrew Bailey, also claimed credit for the decision.

“I’m proud to have led in the fight to halt Biden’s unconstitutional plan in its tracks and to protect everyday Americans from being saddled with the enormous cost of the plan,” Bailey said.

The lawsuit was led by Nebraska, and was argued in court by Nebraska’s solicitor general, James Campbell.

In determining that Missouri was harmed by the loan program, the six conservative justices decided Congress had not given the Biden administration the express authority to forgive student debt when it passed a law called the HEROES Act in 2003, which gave the Department of Education the power to relieve hardship people may have from student loans in emergency situations.

The Biden administration had enacted the student loan forgiveness program under the state of emergency for COVID-19, which ended in May.

“My Administration’s student debt relief plan would have been the lifeline tens of millions of hardworking Americans needed as they try to recover from a once-in-a-century pandemic,” Biden said. “Nearly 90 percent of the relief from our plan would have gone to borrowers making less than $75,000 a year, and none of it would have gone to people making more than $125,000. It would have been life-changing for millions of Americans and their families.”

On Friday, Biden said he would attempt a new approach to forgive student debt grounded in the Higher Education Act, which would allow the Department of Education to compromise, waive or release loans under certain circumstances. The details are still unclear, but Biden said it would take longer than his original plan.

He also announced a program to help student loan borrowers from defaulting on their loans for 12 months, where if people miss payments, they’re not immediately referred to credit agencies for 12 months.

The ruling puts an already unpopular court on the side of eliminating a program that would have helped millions of Americans financially. Groups in favor of eliminating student loan debt immediately called for Biden to find other means to eliminate student debt — though it is unlikely a divided Congress will be able to enact any such law before the presidential election in 2024.

It comes a day after the court declared race-based college admission policies unconstitutional, striking down more than 50 years worth of affirmative action programs.

Kansas Attorney General Kris Kobach, a Republican, celebrated the two decisions. Kansas joined the student loan case under Kobach’s predecessor, Republican Derek Schmidt.

“This opinion, in tandem with yesterday’s opinion, brings constitutionality and reason back to college education,” Kobach said. “Your race should not serve to get you into college or exclude you from college, and if you take out a loan, you need to repay it. The vast majority of Americans would agree with those common sense statements.”

Rep. Cori Bush, a St. Louis Democrat who supports adding justices to the Supreme Court, denounced the ruling and said Biden “must keep the promise he made to cancel student debt for over 40 million people by pursuing one of the several alternative paths at his disposal to deliver debt relief.”

Other Democrats, like Rep. Sharice Davids, from Kansas, have criticized Biden’s loan forgiveness program and welcomed the ruling.

“I took out student loans to put myself through school, so I understand the hardships facing Kansas families as they pay their monthly bills,” said Davids, who represents a key swing district in the Kansas City suburbs. “But as I’ve said before, I don’t believe the Administration’s plan for canceling student debt gets to the root of higher education affordability. We should focus on bipartisan solutions that bring down higher education costs and expose students to skilled trades and apprenticeships that help them get good-paying jobs.”

In the dissent, Justice Elena Kagan wrote that the court had overstepped its authority in eliminating the program. Kagan argued that MOHELA should have brought the case instead of Missouri and that the HEROES Act gave the administration wide latitude when it came to handling debt in emergencies.

“The result here is that the Court substitutes itself for Congress and the Executive Branch in making national policy about student-loan forgiveness,” Kagan wrote. “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. 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 ‘significan[t].’”

Roberts chided the liberal justices for indicating the court went beyond its authority, saying it has become common for people to claim the court overstepped when they disagree with an opinion.

“We do not mistake this plainly heartfelt disagreement for disparagement,” Roberts said. “It is important that the public not be misled either. Any such misperception would be harmful to this institution and our country.”

Star reporters Jonathan Shorman and Kacen Bayless contributed reporting.