The Supreme Court struck down President Biden’s plan to forgive $10,000 to $20,000 in student loans for 43 million people. In a 6-3 decision, the justices ruled that Congress did not authorize the secretary of education and President Biden to take the sweeping and expensive action unilaterally. The program was expected to cost more than $400 billion dollars over 30 years.
This decision involved two cases.
In Department of Education v. Brown, the justices ruled unanimously that the individuals who filed the suit lacked the standing to sue.
But in Biden v. Nebraska, which included multiple states, the justices ruled the Biden administration went too far, and needs to get this type of forgiveness approved by Congress.
Chief Justice John Roberts wrote for the majority, “The authority to ‘modify’ statutes and regulations allows the Secretary to make modest adjustments and additions to existing regulations…not transform them.”
The justices made their decision based on the Heroes Act. The law was passed in 2003 and gives the education secretary the authority to waive or modify student financial assistance in the event of a war or national emergency.
The court heard oral arguments in February, during which, conservative justices cast doubt on the president’s authority to execute his plan.
Student loan interest and payments were frozen March 13, 2020, and extended nine times during the pandemic. President Biden extended the freeze for the final time in November to give the Supreme Court enough time to make a final decision as to whether or not his plan was constitutional.
Now that the justices made their final ruling, student loan interest will resume September 1 and payments will be due in October.
Automatic repayment plans will not restart automatically for all borrowers.
According to the Department of Education’s Financial Aid Office, student loan servicer providers will reach out to their clients to ask if they want to restart the auto-debit. Borrowers who do not respond could have their auto-debit canceled.
The interest rate will remain the same as it was before the pandemic in most cases. It could change for borrowers who consolidated their loans, they’ll need to check with their service provider.
