The supreme court just threw millions of American student debtors under the bus
Last August, President Biden did something no president has done before. He announced a plan to mass cancel student debt, offering $10,000 to $20,000 of relief for borrowers who earn under $125,000 annually.
The triumph of this policy was more than the sliver of debt that it potentially sliced off the second-largest type of household debt in the US. More fundamentally, Biden’s policy proposal put an ideological dent in the American doctrinal belief that a creditor’s right to repayment is the first-order business of any economy.
On Friday, in a 6-3 vote on ideological lines, the US supreme court undid all that. The court ruled against Biden’s student-loan forgiveness policy and put millions of Americans’ financial futures in peril.
Debt intensifies existing inequalities in society: those who have the least rely on debt the most, for everything from housing to healthcare to higher education. Debtors end up paying higher costs for the same goods than those who can pay cash upfront. Black people and women bear the highest student debt burdens; over time, they pay a higher sticker price for the same degrees as white people and men. For these reasons, Biden’s proposed plan was also a major attempt to chip away at the racial wealth gap.
It was no wonder, then, that within weeks of Biden’s policy announcement, half a dozen rightwing lawsuits sued to stop the president’s program. Although most of the suits were thrown out, two stuck, and temporarily halted the program. Late last fall, Biden requested that the US supreme court intervene. Although there has been much handwringing about the student debt case in front of the court – its role as a bargaining chip in debt-ceiling negotiations, its prospects to drive voters to polls in 2024 – most of the discussion misses the point.
That’s because the supreme court case in question was not actually about whether the president can cancel debt. It was about whether the plaintiffs in the case – six Republican attorneys general – could reasonably prove that cancelling millions of people’s student debt harms their state, and whether judges would believe their lies.
The state of Missouri contended that it will be harmed because a quasipublic loan servicing company there, Mohela, may lose revenue from cancellation, making it more difficult for Mohela to repay an old debt owed to the state of Missouri. But that violates a basic legal principle: you can’t sue on behalf of somebody else. My roommate can’t sue my employer for laying me off and making it harder for me to pay my half of the rent, yet this case would set such a precedent.
In fact, internal emails between Mohela employees revealed utter confusion about the case. One employee bluntly pointed out that Missouri has no standing; another worried: “Are we the bad guys?” Even conservative legal experts ideologically opposed to the concept of student debt cancellation acknowledged that the plaintiffs weren’t bringing a legitimate claim.
But putting aside the fact that Missouri has no standing to sue, the state’s claim that Mohela’s revenue loss from cancellation would endanger its ability to repay a $105m debt owed from 2008 is patently wrong, as research I recently co-authored reveals. Even with Biden’s pledged cancellation, Mohela is poised to have a gangbuster year, raking in more revenue than at any other point in its history.
Yet Trump-appointed judges in the eighth circuit, yielding to dubious conservative claims, issued a nationwide injunction on Biden’s relief policy. Within weeks, the case was whisked to the highest court in the land, skirting over basic fact-finding and discovery processes. In oral arguments, the plaintiffs offered little more than the phrase “it stands to reason” to justify their claim that Mohela would lose money.
The plaintiffs rigged up such a
convoluted suit in an attempt to avoid a legal reality: the president and the Department of Education have full authority to cancel debt under a provision, the Heroes Act, to cancel debt in national emergencies such as a pandemic. This is just one of many legal authorities that Biden has at his disposal to cancel student loans.
Now that the court has struck down Biden’s first policy stab, Biden can, and must, swiftly exercise other legal authorities to automatically cancel debt. The court’s ruling is not the death of debt cancellation – it’s merely a blockade on one channel to get there.
But the fact that we have found ourselves in this position – with a couple of frivolous lawsuits delaying relief for millions of struggling Americans
– should not be misread as merely yet another failure of our increasingly conservative and out-of-touch court.
Debt relief is on the precipice in part because Biden failed in his execution. Despite warnings and pleas from experts and advocates, Biden insisted on routing cancellation through an application, rather than automatically and universally discharging debt. This choice was costly, in more ways than one. It took the Biden administration 52 days between announcing the policy to ready the application program. Rightwing groups seized the opportunity and sued to block the whole program.
When Biden takes another crack at his generation-defining policy, he should have a strategy that reflects the ambition of the goal, rather than wavers and offers half measures. The fate of the 2024 elections doesn’t just rest on the bold policies Biden announces, but the boldness of his strategy to actually get them done.
Eleni Schirmer, a writer and postdoctoral fellow at the Concordia University Social Justice Centre in Montreal, is part of the Debt Collective