STUDENT DEBT
Court inflicts severe economic pain on student borrowers — political impact also worth considering
New evidence suggests the Court’s decision may affect Biden and Democrats in 2024
By Mallory E. SoRelle & Serena Laws
In Friday’s highly anticipated decision, the Supreme Court finally ruled on the fate of President Biden’s executive action to cancel up to $20,000 of debt for eligible student loan borrowers. In a 6–3 decision split along partisan lines, the conservative members of the Court held in Biden v. Nebraska that the President’s debt cancellation plan was unconstitutional.
The decision has substantial consequences for the economic (in)security of millions of borrowers who were set to benefit from the program and now will not. Moreover, overturning Biden’s plan is likely to have important political consequences in the lead-up to the 2024 election.
What exactly did the Supreme Court decide?
The Court was considering two different cases challenging debt cancellation. In US Department of Education v. Brown, brought by two students whose debts would not be fully forgiven, the Court decided unanimously that the petitioners lacked legal standing to bring suit.
In Biden v. Nebraska, however, the court granted that at least one of the six states petitioning — Missouri — had standing to challenge Biden’s plan because, as Chief Justice Roberts wrote, loan servicer MOHELA “is an instrumentality of Missouri… harm to MOHELA in the performance of its public function is necessarily a direct injury to Missouri itself.” Notably, MOHELA wasn’t part of the suit, and recent research found claims that the loan servicer would suffer financially from loan cancellation are false.
Nonetheless, the Court granted standing and ruled that Biden’s plan was unconstitutional. Specifically, the conservative majority argued that the 2003 HEROES Act, which grants the Secretary of Education power to waive or modify federal student loans in a national emergency, could not be used to justify cancellation because Biden’s plan was not a modification but wholesale transformation of the loan program.
What is at stake for student borrowers?
More than 46 million Americans hold over $1.6 trillion of federal student loan debt, and an estimated 90% of them would have benefited from Biden’s debt cancellation plan. Now, after a three-and-a-half year pause that began in March 2020 as part of the federal government’s pandemic relief, borrowers are scheduled to resume repayment at the end of the summer as mandated by the recent debt ceiling compromise bill.
Overturning debt cancellation means that the significant financial hardship from student loans remains. Student debt has been linked to delays in marriage, childbearing, and homeownership among younger borrowers. Moreover, ballooning debt has especially pernicious effects for Black Americans, expanding the racial wealth gap.
Thus, the financial effects of the Court’s decision are substantial for borrowers. Instead of taking a first step toward addressing the student loan crisis, borrowers will return to the status quo, now with the high cost of living sharpening the pain of monthly student loan payments.
What are the potential political consequences of the Court’s decision?
Beyond the effects on borrowers’ pocketbooks, our research suggests there are likely to be major political ramifications of the Court’s decision as we move toward the 2024 election.
Just a few months before Biden announced his debt relief plan, we fielded a survey and series of experiments to explore how people felt about student loan cancellation and how it might influence their decisions at the ballot box.
We found strong support for student debt relief at that critical juncture in late Spring 2022, particularly for Democratic-leaning groups. We also found that support for student loan debt cancellation was generally unaffected by many of the arguments its critics have tried to make against it, suggesting that support for student debt relief is robust, especially among key Democratic constituencies.
And this robust support was politically meaningful — we found that hypothetical candidates who embraced expansive student debt cancellation with few eligibility restrictions were likely to benefit at the ballot box — especially with Democratic-leaning voters. Moreover, among Democrats, young voters, and student borrowers, we found that Biden’s plan increased intended voter support for Congressional Democrats and the President’s 2024 reelection bid.
These findings suggest not only that pursuing debt relief after the Court’s decision is politically smart for Democrats, but also that the public is not likely to take the Supreme Court’s decision lightly. In combination with the unpopular Dobbs decision, the Supreme Court’s choice to overturn a popular policy reinforces the narrative that the Court is out of touch with the views of most Americans. It could also tie Republicans directly to the reversal of a well-liked initiative that would help millions. Biden and the Democrats can now make this a more significant campaign issue in 2024, potentially raising the salience of student debt cancellation moving forward.
What might happen next in the battle over student debt cancellation?
The decision is a blow to the millions of borrowers expecting to benefit from student debt relief, and the pervasive problem of student debt isn’t going anywhere. Though the Court ruled that Biden cannot use the HEROES Act to cancel student debt, other pathways to debt cancellation potentially remain. Given this reality, how might proponents of student debt relief move forward in a politically efficacious manner? Our research suggests some key directions.
While people in our survey typically found borrowers with more financial need and a history of repayment to be most deserving of federal relief, they bestowed the greatest electoral rewards on policymakers who supported generous student debt relief without eligibility restrictions. That means that future executive or legislative action should consider: 1) increasing the amount of debt to be forgiven while 2) limiting means-testing based on income, type of degree, or time in repayment.
It is also important to note that voters were particularly favorable toward the payment pause on federal loans. If the Biden administration doesn’t want to suffer serious political backlash, they should consider ways to delay the upcoming resumption of student loan repayment.
The ball, as they say, is now back in President Biden’s court.
