Supreme Court Strikes Down Biden's Loan Forgiveness Program. What Comes Next For Students?

The U.S. Supreme Court on Friday struck down the Biden Administration's plan to forgive vast amounts of student debt.

Last year the Biden Administration unveiled a college loan forgiveness plan to wipe out up to $10,000 in college debt per person, and up to $20,000 for those who have received need-based Pell Grants.

Six states sued. At issue before the court: whether the Biden Administration had the authority to forgive student loans and whether states could challenge the plan.

About the rulings today

The court issued two rulings Friday. In one, a unanimous court found that most of the six states that sued did not have standing to challenge the plan. But in the second, a 6-3 court found that Missouri did have standing, and said the president overreached in its reliance on the HEROES act, a law granting the executive branch emergency powers.

"The text of the HEROES Act does not authorize the Secretary’s loan forgiveness program. The Secretary’s power under the Act to 'modify' does not permit 'basic and fundamental changes in the scheme' designed by Congress," the majority wrote.

The opinion was authored by Chief Justice John Roberts and joined by the court's conservative members. Justices Jackson, Kagan, and Sotomayor dissented.

The Court ruling stands to have a wide impact. Tens of millions of US residents are paying off some kind of college debt.

How bad is student debt in California?

The quick answer: not terrible, relative to other states. Many of the state’s students attend public institutions like community colleges, California State University and the University of California. State leaders have pushed those institutions to keep tuition increases low and financial aid has increased in recent years.

According to a study by The Institute for College Access and Success (TICAS), nearly half of California’s college graduates carried some amount of debt, but the $21,000 average per student is one of the lowest rates in the country.

Critics of Biden's student debt actions said his move meant giving handouts to rich, highly educated elites, and that it betrayed students who already paid off their loans. But many students pay their way through college with a combination of grants, scholarships and loans, all while working at least part-time, and many are first-generation college students.

Inessa Arutunyan grew up in the Glendale area, attended undergrad at UC Santa Cruz and got her masters at San Jose State. She had been approved to receive $10,000 in loan forgiveness, against $36,000 in debt.

“It's affected me a lot," she said. "Anytime I apply for a new credit card, it shows up. You can't buy a house if you have a lot of debt. You can't buy a car if you have a lot of debt. So it's become a stain on my record.”

Kyle Southern, associate vice president of higher education quality at TICAS, said the court decision would be harmful to tens of thousands in Southern California alone.

"If you look around the L.A. area, I just looked, and in the 34th, congressional district representative, just for one, there are nearly 33,000 people who had already had their applications for student debt relief approved...," he said, citing data from the U.S. Department of Education. "Unfortunately for those 32,900 borrowers, today is a day when justice is being denied them."

Madeleine St. Marie accrued nearly $205,000 in college loan debt to pay for undergraduate and graduate schooling. She told LAist via text that she had qualified for the $10,000 forgiveness. She said she wasn't surprised by Friday's ruling from "an activist court with an agenda."

"I have been taking steps to make sure my repayment is not prohibitive, and am in a relatively decent position, but I know that is not the case for everyone,” she said.

What do students do now?

In a statement on its website, the office for Federal Student Aid acknowledged the ruling, saying "We are reviewing the Court’s decision to determine next steps."

Student loan repayments have been paused for years during the COVID-19 pandemic, but as a part of the debt ceiling deal that passed earlier this year, interest will resume Sept. 1, and repayments will start again in October. Borrowers who have defaulted on student loans may be eligible for relief through the Fresh State program.

In remarks that followed the Supreme Court ruling, President Biden said he’s looking at other options. He says he’s directed his education secretary to look into using another federal law, the Higher Education Act of 1965, to provide loan forgiveness to college graduates.

About 16 million people had been approved to receive relief, according to the president. Student debt relief is "good for the economy, it's good for the country, it's going to be good for you," Biden said.

Read the Missouri ruling

Julia Barajas contributed reporting to this story.