Defeat for Biden as U.S. Supreme Court rejects plan to cancel $400B in student loans

The U.S Supreme Court handed President Joe Biden a painful defeat on Friday, blocking his plan to cancel $430 billion US in student loan debt — a move that had been intended to benefit up to 43 million Americans and fulfil a campaign promise.

The justices ruled against Biden in a 6-3 decision favouring six conservative-leaning states that objected to the policy. The court's action dealt blow to the 26 million U.S. borrowers who applied for relief after Biden announced the plan in August 2022 and a political setback for the Democratic president.

Arkansas, Iowa, Kansas, Missouri, Nebraska and South Carolina challenged the debt relief plan, as did two individual borrowers opposed to the its eligibility requirements. The court acted on its final day of rulings in its term that began in October.

Twenty-six million U.S. borrowers applied for relief between when Biden announced the plan in August 2022 and last November, when lower courts blocked the plan.

Biden's plan fulfilled his 2020 campaign promise to cancel a portion of $1.6 trillion in federal student loan debt but was criticized by Republicans who called it an overreach of his authority and an unfair benefit to college-educated borrowers while other borrowers received no such relief. Biden is seeking re-election next year.

Under the plan, the U.S. government would forgive up to $10,000 in federal student debt for Americans making under $125,000 who obtained loans to pay for college and other post-secondary education, and $20,000 for recipients of Pell grants to students from lower-income families.

Affirmative-action ruling

The ruling came a day after the Supreme Court effectively prohibited affirmative-action policies long used by U.S. colleges and universities to raise the number of Black, Hispanic and other underrepresented minority students. Biden on Thursday said the court, with its conservative majority, was an institution out of touch with the country's basic values.

During February arguments in the loans case, Biden's administration said the plan was authorized under a 2003 federal law called the Higher Education Relief Opportunities for Students Act, or HEROES Act, which empowers the U.S. education secretary to "waive or modify" student financial assistance during war or national emergencies.

WATCH | Supreme court's blow to affirmative action:

Biden condemns affirmative action ruling: ‘This is not a normal court’

16 hours ago

Duration 2:08

The conservative majority on the United States Supreme Court has struck down race-conscious affirmative action programs for entry to higher education as unconstitutional. President Joe Biden denounced the decision, saying he continued to believe in the need for such programs.

Both Biden and his Republican predecessor Donald Trump relied upon the HEROES Act beginning in 2020 to repeatedly pause student loan payments and halt interest from accruing to alleviate financial strain on student loan borrowers during the COVID-19 pandemic.

During the arguments, a Justice Department lawyer portrayed the debt relief as a benefits program rather than an assertion of regulatory power not authorized by Congress.

In response to the legal challenge brought by the states, a federal judge in Missouri in October 2022 ruled that they lacked the legal standing to sue. On appeal, the St. Louis-based 8th U.S. Circuit Court of Appeals found that at least one of the states, Missouri, had proper standing.

In the case brought by individual borrowers named Myra Brown and Alexander Taylor, a federal judge in Texas ruled in November 2022 that the plan exceeded the Biden administration's authority — a ruling that the New Orleans-based 5th U.S. Circuit Court of Appeals declined to put on hold pending appeal.

Some 53 per cent of Americans said they support Biden's debt relief, with 45 per cent opposed, according to a Reuters/Ipsos poll from March, with respondents dividing sharply along partisan lines with Democrats broadly supportive and Republicans generally opposed.