Many North Texans disappointed by Supreme Court's student loan forgiveness ruling

WASHINGTON - Student loan borrowers who were hoping to have some or all of their debt erased should now prepare to repay in full.

In a 6-3 decision, the U.S. Supreme Court struck down President Joe Biden's plan to relieve $400 billion in student loan debt.

According to the court's majority, it is Congress, not the executive branch, that has power over spending decisions on that scale.

Nearly 4 million Texans have federal student loan debt.

Repayments will resume in October after a three-year pause because of COVID-19.

The hopes of more than 40 million borrowers, once eligible for up to $20,000 in federal student debt relief are now dead. 

Plano-based licensed chemical dependency counselor Lisa Sullivan is among the millions of Americans disappointed by the ruling.

The forgiveness program would have canceled $10,000 in student loan debt for those making less than $125,000 or households with less than $250,000 in income.

"I thought, wow, that's amazing, because that would pretty much wipe out my entire debt," Sullivan said.

"Can't say I was surprised [by the decision.] This court has put a lot of importance on the plain meaning of statutes that Congress enacts," constitutional law attorney David Coale said.

In the majority opinion, Chief Justice John Roberts challenged the premise of the administration's plan, saying it created "a novel and fundamentally different loan forgiveness program." 

The conservative majority on the high court claimed the administration overstepped by using the Heroes Act to forgive debt.

That law, dating back to the 9-11 attacks, allows the Secretary of Education to make changes to loans during emergencies. The White House argued COVID-19 was an emergency.

"In this statute, you can't read it that way. Modify allows you to make certain adjustments to certain loans. It doesn't let you go in and forgive a bunch of balances of student loans. You're piling too much on this one word," Coale explained. "Basically, the Supreme Court is saying you're trying to drive a truck through the word modify. Yes, you can read it really broadly, but that's not really what Congress meant here."

In a dissent, Justice Elena Kagan wrote "the Secretary did no more than use that lawfully delegated authority."

"As of right now, it's as if there was no program. Sort of a dream that was talked about, people signed up for it, it was stopped, and it’s now never taking effect," Coale added.

There were 26 million people applied for the relief before the program was put on hold. 

"The field I went into is a lot of hard work, and with not fair pay," Sullivan said.

Sullivan still owes about $11,000 for her associate degree.

She said the court's ruling means she'll also have to put her plan to get a bachelor's degree on hold.

"I'm saving money to try to do it. You know, I work an extra side job and I kind of put that in the savings," she said.

Millions of borrowers haven't had to make student loan payments since 2020 because of a pause instituted during the pandemic.

Those payments are set to resume in October. 

"The question is can the Biden Administration reboot with a revised program that relies on different statute authority," Coale said.

President Biden said he’ll try a new strategy at student loan relief, but there are some wrinkles.

"We will ground this new approach in a different law than my original plan, the so-called Higher Education Act," Biden said.

But as he gears up for re-election in 2024, his administration admits the new strategy could take a long time, and even once finalized, it may not apply to as many people.

"It’s too early to say, but we have clear guidance from the President and secretary that our goal is to provide relief to as many borrowers as possible under this process," Bharat Ramamurti, with the National Economic Council.

There were a couple of other steps President Biden announced Friday.

One is a 12-month on-ramp for restarting payments, where, although interest will start accruing on student loans September 1, if you don’t make payments starting in October, you won’t default and your credit won’t take a hit.

The White House also rolled out a new income-driven repayment plan.

Previously, borrowers would pay 10% of discretionary income. That’s now lowered to 5%, among other benefits.