The Supreme Court on Wednesday temporarily blocked a new effort by President Biden to wipe out tens and perhaps hundreds of billions of dollars of student debt.
The plan was part of the president’s piecemeal approach to forgiving debt after the Supreme Court rejected a more ambitious proposal last year that would have canceled more than $400 billion in loans. Mr. Biden has instead pursued more limited measures directed at certain types of borrowers, including people on disability and public service workers, and refined existing programs.
The decision leaves in limbo millions of borrowers enrolled in a new plan, called Saving on a Valuable Education, which ties monthly payments to household size and earnings.
The emergency application was one of two related to the program that the justices decided on Wednesday. The brief order did not give reasons, which is typical, and no public dissents were noted.
Republican-led states had filed a number of challenges to the plan, including a lawsuit in the U.S. Court of Appeals for the Eighth Circuit, in St. Louis, which earlier this summer issued a broad hold on the loan plan while it considers the merits of the case.
That case could soon make its way back to the justices, who indicated that they expected the lower court to act swiftly on the matter.
The Biden administration had argued the new program was authorized by a 1993 law that allowed the secretary of education to fashion “income contingent repayment” plans. The law authorizes the secretary to determine repayment schedules based on “the appropriate portion of the annual income of the borrower.”
Over the years, the secretary has invoked that law several times to relax repayment requirements. The latest plan, the subject of the Supreme Court’s order, was the most generous one.
It reduced the required payments for undergraduate loans to 5 percent from 10 percent of the borrower’s discretionary income, and it redefined discretionary income to be above 225 percent of the poverty line. People making less than that pay nothing. Loans of $12,000 or less are canceled after 10 years — down from 20 or 25 years — so long as the borrower made payments if required to do so.
The SAVE program, issued in June 2023, was challenged nine months later by the attorneys general of 11 Republican-led states, who said it was flawed in ways similar to the one the justices rejected last year. The 1993 law, they said, contemplates repayment rather than actual or effective forgiveness.
In the administration’s Supreme Court brief in response to one of the challenges, Solicitor General Elizabeth B. Prelogar wrote that the new plan “relies on a different statute with different language to provide a different set of borrowers with different assistance from the one-time loan forgiveness the court held invalid.”
The old plan invoked the Higher Education Relief Opportunities for Students Act of 2003, often called the HEROES Act. That law, initially enacted after the terrorist attacks on Sept. 11, 2001, gave the secretary of education the power to “waive or modify any statutory or regulatory provision” to protect borrowers affected by “a war or other military operation or national emergency.”
In its decision last year, the Supreme Court ruled by a 6-to-3 vote that the 2003 law did not authorize forgiving the loans at issue there. That same day, President Biden vowed to find other ways to provide debt relief.
“Today’s decision has closed one path,” Mr. Biden said. “Now we’re going to pursue another.”
The new program was based on a federal law that contemplated reduced payments based on income.
In the Eighth Circuit lawsuit, filed in Missouri, the appeals court temporarily blocked the entire SAVE plan. The Biden administration had asked the justices earlier this month to clear the way for the plan to take effect.
The administration initially estimated that the SAVE plan would cost $156 billion over 10 years, but that amount assumed that the Supreme Court would uphold the earlier plan. The real cost of the new plan, the states challenging it said, is $475 billion over 10 years. The administration says the real number is smaller, particularly as parts of the SAVE plan have not been blocked.
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