Nearly 1.4 million Texans could be impacted by U.S. Supreme Court decision blocking student loan forgiveness

9 months 2 weeks 6 days ago Friday, June 30 2023 Jun 30, 2023 June 30, 2023 10:44 AM June 30, 2023 in News - Texas news
Source: https://www.texastribune.org/
A student sits by the Littlefield Fountain at the University of Texas. The U.S. Supreme Court on Friday ruled that the Biden Administration's student loan forgiveness program is unconstitutional, which affects more than 1 million Texans. Credit: Leila Saidane/The Texas Tribune

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Nearly 1.4 million Texans poised to have some or all their student debt canceled by the federal government will have to continue paying off their loan balances after the U.S. Supreme Court ruled Friday that the Biden administration’s student loan forgiveness plan is unconstitutional.

The court handed down opinions in two cases challenging President Joe Biden’s authority to issue his loan forgiveness plan under the Higher Education Relief Opportunities for Students Act. In a 6-3 ruling, the court ruled in favor of the six GOP-led states that alleged Biden overstepped his authority as president with his loan forgiveness plan.

The court unanimously ruled that the two Texas students who said the federal government did not provide a public comment period for them to register their dissent did not have standing to sue and threw out their case.

In Biden v. Nebraska, the court ruled that Biden did not have the authority to issue the forgiveness plan under the HEROES Act, a federal law passed in the wake of the Sept. 11, 2001, terrorist attacks that allows the education secretary to change student loan programs for those affected by the attack. In 2003, Congress extended the law so the federal government could provide loan relief to students impacted by war or a national emergency.

When Biden released his plan last August, he said he had the power to provide student loan relief to students impacted by the COVID-19 pandemic, a national emergency.

“The HEROES Act allows the Secretary to ‘waive or modify’ existing statutory or regulatory provisions applicable to financial assistance programs under the Education Act, but does not allow the Secretary to rewrite that statute to the extent of canceling $430 billion of student loan principal,” Chief Justice John Roberts wrote in the majority opinion.

The ruling means all students with debt will need to resume repaying their loans in October.

It is a major blow for Biden, who promised during his presidential campaign that if elected he would address student debt.

Former President Donald Trump initially paused student debt payments at the start of the COVID-19 pandemic, and Trump and Biden have since extended the pause nine times. But earlier this month, the federal government announced that interest would start accruing again in September with payments resuming in October.

Under Biden’s plan, individuals earning $125,000 or less annually would see $20,000 in student loan debt erased if they received a federal Pell Grant to help pay for college. Those who took out loans but did not qualify for those federal grants would have $10,000 eliminated from their student loan debt. The loan forgiveness program, which applies to borrowers regardless of whether they earned degrees, was halted in November as the cases made their way through the courts.

In the dissenting opinion, Justice Elena Kagan wrote that the court’s decision overstepped the authority Congress granted to the U.S. Secretary of Education under the HEROES Act.

“In establishing the loan forgiveness plan, the current Secretary scratched the pre-existing conditions for loan discharge, and specified different conditions, opening loan forgiveness to more borrowers,” she wrote. “That may have been a good idea, or it may have been a bad idea. Either way, the Secretary did only what Congress had told him he could.”

Data from the office of Federal Student Aid shows that as of March, Texas has 3.8 million residents with student loan debt totaling $127.3 billion. Texas has the second-highest amount of borrowers and debt, behind California, where nearly 4 million students owe $149.7 billion.

In 2021, 56% of students who graduated from four-year public universities in Texas had approximately $25,000 in student debt, according to the Texas Higher Education Coordinating Board. Biden’s decision to forgive more money for low-income students who qualified for federal Pell Grants would have especially impacted low-income borrowers and people of color, who are more likely to qualify for federal financial aid and carry higher amounts of student loan debt.

In a statement, the Texas chapter of Democrats for Education Reform slammed the court’s back-to-back decisions to strike down the loan forgiveness plan and Thursday’s decision to end the use of race in college admissions.

While first-generation college students, students from low-income families and students of color begin to navigate back-to-back Supreme Court decisions designed to undermine their ability to access the transformative power of higher education, advocates and policymakers must redouble our efforts to create effective and affordable pathways to higher education and career training for ALL students,” said Garry Jones, the group’s executive director.

The Supreme Court heard two cases challenging Biden’s plan earlier this year. One was filed by six GOP-led states, not including Texas. In that lawsuit, the states argued that Biden used the pandemic as a pretext to deliver on a campaign promise, exceeding his authority as president. During oral arguments, the federal government argued that the states do not have standing to argue their case.

The second lawsuit was filed by the Job Creators Network Foundation on behalf of two Texas students who argued the program was illegal because it didn’t allow for a public comment period. In November, a federal judge in Texas agreed with the plaintiffs and struck down the plan. The Justice Department has argued it did not have to ask for public comment.

The Job Creators Network Foundation is a conservative advocacy group bankrolled by Home Depot co-founder Bernie Marcus. In the lawsuit, those borrowers alleged they were not given an opportunity to voice their disagreement with the program’s eligibility criteria.

Alexander Taylor, one of the plaintiffs who graduated from the University of Texas at Dallas, is not eligible for $20,000 in forgiveness because he did not receive a Pell Grant, which is only available to low-income students, and therefore would have been entitled to $10,000 off his student loans.

The other plaintiff, Myra Brown, has privately held loans that are no longer covered by Biden’s plan. Earlier in the program’s existence, commercially held loans like Brown’s could be consolidated into loans borrowed directly from the federal government rather than a lender, which meet the eligibility requirements of Biden’s program, but the Education Department changed this policy after fielding multiple lawsuits from conservative states.

Brown graduated from the University of Texas at El Paso and the Cox School of Business at Southern Methodist University in Dallas.

Student loan forgiveness has long been a major policy objective among Democrats. Its backers say student debt is holding back graduates from economic mobility and discouraging potential students from pursuing levels of education that could improve their financial prospects.

But Republicans have argued that loan forgiveness is unfair to students who have paid off their loans and that it could pour more cash into the economy and exacerbate inflation. They also protest against using tax dollars from Americans who never went to college to help those who did. Texas Gov. Greg Abbott wrote in a letter in September that student loan forgiveness would harm the working class.

Disclosure: Southern Methodist University, University of Texas - Dallas and University of Texas at El Paso have been financial supporters of The Texas Tribune, a nonprofit, nonpartisan news organization that is funded in part by donations from members, foundations and corporate sponsors. Financial supporters play no role in the Tribune's journalism. Find a complete list of them here.

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Correction, : A previous version of this story misspelled the name of a Supreme Court justice. Her name is Elena Kagan, not Elena Kagen.

This article originally appeared in The Texas Tribune at https://www.texastribune.org/2023/06/30/texas-supreme-court-biden-student-loans-ruling/.

The Texas Tribune is a member-supported, nonpartisan newsroom informing and engaging Texans on state politics and policy. Learn more at texastribune.org.

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