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The US Supreme Court’s conservative majority appeared sceptical of president Joe Biden’s $400bn student loan relief programme, possibly paving the way for one of the administration’s flagship economic policies to be struck down later this year.
In oral arguments before the court on Tuesday, conservative justices who hold a majority on the nine-member body questioned whether Biden had the power to wipe out student debt for some borrowers as well as whether the measure was fair. They also suggested that such a step should have been adopted by Congress through legislation, rather than executive action from the White House.
“I think most casual observers would say if you’re going to give up that much money, if you’re going to affect the obligations of that many Americans on a subject that is of great controversy, they would think that’s something for Congress to act on,” Chief Justice John Roberts said.
Clarence Thomas, a conservative justice, added: “As the cancellation of $400bn in debt, in effect, this is a grant of $400bn and it runs into Congress’s appropriations authority.” Neil Gorsuch, another conservative justice, raised concerns that the administration had failed to properly take into account the interests of people who chose not to borrow money to pay for college and university.
The Biden administration has defended the student loan relief programme as essential to offering some respite to American households in the wake of the coronavirus pandemic. To authorise the scheme it relied on a provision in the Heroes Act — passed in the aftermath of the September 11, 2001 attacks — that allows the administration to grant student loan relief in a national emergency.
Announced in August, the plan helped Biden win plaudits from the left flank of the Democratic party and shore up support among younger voters.
“We’re confident it’s legal,” Biden wrote in a tweet on Tuesday. “And we’re fighting for it in court.”
Sonia Sotomayor, a liberal justice, highlighted the effect of the policy during the oral arguments. “There’s [40mn] students who will benefit from this,” she said. “The evidence is clear that many of them will default. They are going to continue to suffer from this pandemic in a way that the general population doesn’t.”
Progressive lawmakers, including senators Elizabeth Warren and Bernie Sanders and House representative Ayanna Pressley, rallied outside the Court on Tuesday morning.
Critics of the policy have suggested that it disproportionately helps wealthier households compared to other government programmes. The University of Pennsylvania’s Wharton School budget model estimates that two-thirds of the benefits will go to households earning less than $88,000 a year. The debt relief, which applies to individuals earning as much as $125,000 a year, is capped at $10,000, or up to $20,000 for recipients of aid under the federal Pell Grant programme for low-income borrowers.
Joni Ernst, the Republican senator from Iowa, called the student debt cancellation “unfair” and accused the president of “transferring” the debt burden on to “working families”, adding: “Student debt will continue to rise as long as students and their families are misled by colleges about the true costs associated with education.”
A ruling in the case is expected over the summer, possibly becoming the latest landmark case following the court’s decision to overturn the constitutional right to an abortion in 2022.
Beacon Policy Advisors predicted the White House would try and find ways to circumvent the court if the justices strike down the executive order.
“It is far too important politically for the 2024 election to just accept defeat,” Beacon analysts said in a note to investors, predicting that the administration might direct the education department to find alternate avenues to forgive student debt.
“What we are certain of is that the Biden administration does not want to oversee a huge uptick in defaults and increased debt collections leading up to its re-election campaign when it promised student borrowers relief. Blaming a rightwing Supreme Court can only go so far and just as with access to abortion in the aftermath of Roe vs Wade, the Biden administration cannot be seen to be doing nothing,” the analysts added.
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