Supreme Court Declines Biden's Student Debt Relief Plan: What's Next for Borrowers?

On Wednesday, the U.S. Supreme Court declined to revive President Joe Biden's student debt relief plan, dealing a blow to efforts aimed at reducing the financial burden on millions of student loan borrowers. The decision marks the second time the Supreme Court has intervened to block a major debt forgiveness initiative by the Biden administration.

What Was Biden’s Student Debt Relief Plan?

The plan, known as the Saving on a Valuable Education (SAVE) plan, was designed to make student loan repayments more affordable. It proposed reducing monthly payments for borrowers to 5% of their discretionary income, down from the current 10%, which could save the average borrower around $1,000 annually. Additionally, the plan aimed to provide debt forgiveness for smaller loans in as few as 10 years and pause payments for borrowers earning less than $32,000 per year. The administration estimated that the plan would cost taxpayers approximately $156 billion over 10 years. 

Why Did the Supreme Court Decline the Plan?

The Supreme Court's decision came after several Republican-led states challenged the plan, arguing that the Biden administration had overstepped its authority by implementing such a wide-reaching policy without Congressional approval. The states argued that the plan would cost much more than estimated, with some placing the figure at around $475 billion. They also contended that only Congress, not the executive branch, has the authority to authorize such significant expenditures.

The court’s conservative majority invoked the "major questions" doctrine, which prevents executive agencies from enacting policies with significant economic impacts without explicit approval from Congress. The court's ruling emphasized that such major policy decisions should come from elected representatives, not executive actions.

Different Perspectives: For and Against the Plan

Supporters of the plan, including many Democratic lawmakers and advocacy groups, argued that it was necessary to address the growing student debt crisis in the United States. They believe that reducing or forgiving student debt would help millions of borrowers struggling with high monthly payments, and it could stimulate the economy by allowing young people to buy homes, start businesses, and invest in their futures. They also argue that the Education Department has the authority to adjust repayment terms under a 1993 federal law.

Opponents, including Republican lawmakers and several state attorneys general, believe the plan was an overreach of executive power and would unfairly burden taxpayers, including those who did not attend college or had already paid off their loans. They argued that the plan would set a dangerous precedent of allowing the executive branch to enact costly policies without Congressional approval. They also pointed out that the plan did not address the root cause of rising tuition and student debt.

Why Does This Decision Matter?

The Supreme Court is the highest judicial body in the United States, and its decisions have far-reaching consequences. By declining to revive the debt relief plan, the court has effectively paused the implementation of key parts of the Biden administration's student debt relief efforts. The ruling reinforces the idea that significant policy changes, especially those with major economic impacts, require clear authorization from Congress.

The decision also highlights the court's role in balancing power between the executive branch and the legislative branch, ensuring that the President does not exceed the authority granted by the Constitution.

The Impact of Student Debt in America

Student debt remains a significant financial challenge for many Americans. As of July 2024, the total student loan debt in the United States stood at $1.753 trillion, with federal student loans making up 91.2% of this amount. The average federal student loan balance is around $37,853, but including private loans, the average total balance may be as high as $40,681. This massive debt burden can delay important financial milestones, such as buying a home or saving for retirement.

The SAVE plan aimed to alleviate some of this pressure by making repayments more manageable and speeding up loan forgiveness for eligible borrowers. However, with the Supreme Court's latest decision, the future of the plan is uncertain.

What’s Next?

For now, the Supreme Court has declined to lift a lower court's injunction that blocks the SAVE plan from going into effect. The appeals court handling the case has been instructed to "render its decision with appropriate dispatch," which means it will continue to hear arguments from both sides before making a final ruling.

While this decision does not permanently end Biden's student debt relief efforts, it does place significant obstacles in the way of the administration's plans. The Biden administration may need to seek alternative methods or Congressional approval to implement any form of student debt relief moving forward. This ongoing legal battle will likely shape the future of student debt policy in the U.S. for years to come.

High schoolers and future college students should stay informed about these developments, as they could affect their own financial futures when it comes to higher education.