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How does Supreme Court’s ruling blocking Biden’s student loan forgiveness plan affect borrowers?

The Biden administration had argued that its proposal to cancel student debt was lawful under the Higher Education Relief Opportunities for Students Act or HEROES Act. 
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Despite the Supreme Court's highly anticipated decision Friday that rejected President Joe Biden's plan to completely forgive or reduce federal student debt owed by tens of millions of borrowers, the battle over student debt relief isn't over.

Biden pledged in a statement that he would continue the fight as Republican leaders lauded the high court's 6-3 ruling that found the White House's proposal to cancel student debt was unlawful under the 2003 Higher Education Relief Opportunities for Students Act, or HEROES Act.

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The administration proposed discharging up to $10,000 in debt for those earning less than $125,000 a year or couples who file taxes jointly and earn less than $250,000 annually. Pell Grant recipients, who are the majority of borrowers, would have been eligible for an additional $10,000 in debt relief.

Some 20 million people were poised to see all their remaining federal student loan debt erased under the plan, while 43 million borrowers would have received some reduction — at a total cost of more than $400 billion.

What does the HEROES Act allow?

At the heart of the Supreme Court's ruling, which fell along ideological lines, is when the U.S. education secretary has the right to "waive or modify" the rules for relief to borrowers of student loans under the HEROES Act, which was enacted in the wake of the terrorist attacks of Sept. 11, 2001. Under the Trump administration, student loan repayment requirements were paused as the Covid pandemic became a national emergency under the law. Biden decided to go further, using the law to justify his plan for student debt forgiveness — a signature campaign promise.

Chief Justice John Roberts, writing for the conservative majority, said the Biden administration went too far in its approach.

"From a few narrowly delineated situations specified by Congress, the secretary has expanded forgiveness to nearly every borrower in the country," he said.

Roberts added that such a large-scale program first "requires that Congress speak clearly before a department secretary can unilaterally alter large sections of the American economy."

Justice Elena Kagan, in a dissenting argument joined by the two other liberal justices, disagreed.

"The statute, read as written, gives the Secretary broad authority to relieve a national emergency's effect on borrowers' ability to repay their student loans," she wrote.

What does it mean for student borrowers?

Cody Hounanian, executive director of the Student Debt Crisis Center, a nonprofit advocacy group based in Los Angeles, said the Supreme Court's decision doesn't mean Biden can't find other avenues to allow for student debt forgiveness.

"The decision very narrowly addresses the president's plan based on the authority under the HEROES Act, but it does not prevent the president from moving forward in using his authority in other means," Hounanian said.

Biden discussed the next steps during a news conference later Friday, saying he would direct Education Secretary Miguel Cardona to craft his student debt forgiveness program under a different law, the Higher Education Act, which was signed in 1965 and has a provision that allows the education secretary to waive, release or enforce federal student loans. The alternative is a longer process, Biden acknowledged.

He also announced the creation of a 12-month repayment program.

"Today's decision has closed one path, now we are going down another," Biden said.

In an earlier statement, he touted ongoing programs and resources for student borrowers.

"While today's decision is disappointing, we should not lose sight of the progress we've made — making historic increases to Pell Grants; forgiving loans for teachers, firefighters, and others in public service; and creating a new debt repayment plan, so no one with an undergraduate loan has to pay more than 5% of their discretionary income," he said.

All federal student loan borrowers are eligible for income-driven repayment plans.

What does the ruling mean for student loan payments?

The recent bipartisan budget and debt ceiling agreement passed by Congress is jump-starting the return of federal student loan payments that were halted during the pandemic.

Regardless of how the Supreme Court ruled on the forgiveness program, the student loan payments and interest are being reinstated at the beginning of September and coming due again in October, the Education Department said.

The moratorium during the pandemic did not apply to borrowers with privately held loans.

Student borrower advocates have expressed concern that the Education Department is not positioned to take on the task of informing the tens of millions of student borrowers that they must begin paying back their loans in the fall.