The Supreme Court Friday ruled against President Joe Biden’s student loan forgiveness program that would have canceled up to $20,000 in student loan debt for millions of eligible borrowers. 

In the 6-3 decision, the court’s majority ruled that the Biden administration overstepped its power by attempting to forgive more than $400 billion in student loans because it had not been explicitly approved by Congress. 

The court considered two cases: one brought by six states—Arkansas, Iowa, Kansas, Kentucky, Missouri and South Carolina—and the other brought by two people who have student loan debt outstanding, Myra Brown and Alexander Taylor. The court ruled that the six states that challenged the loan relief program had the proper legal standing to do so, but that Brown and Taylor did not.  

In the Department of Education et al. v. Brown decision, the court rejected the argument that Biden’s plan was lawful under the 2003 Higher Education Relief Opportunities for Students Act, or HEROES Act. The law stated that the government can provide relief for recipients of student loans when there is a “national emergency,” allowing it to act to ensure people are not in a “worse position financially” due to an emergency. 

“The secretary asserts that the HEROES Act grants him the authority to cancel $430 billion of student loan principal. It does not,” Chief Justice John Roberts wrote. “We hold today that the act allows the secretary to ‘wave or modify’ existing statutory or regulatory provisions applicable to financial assistance programs under the Education Act, not to rewrite that statute from the ground up.” 

Roberts also argued that the HEROES Act language was not specific enough, arguing that the court’s precedent “requires that Congress speak clearly before a department secretary can unilaterally alter large sections of the American economy.” 

Payments on federal student loans have been on pause since the start of the pandemic, but these payments will now resume in October, according to the Department of Education. Interest on federal student loans will also resume accruing in September. 

Justice Elena Kagan wrote in the dissent, joined by Justices Sonia Sotomayor and Ketanji Brown Jackson, that: “In every respect, the Court today exceeds its proper, limited role in our Nation’s governance.” 

In response to the decision, President Biden released a statement expressing his disappointment, but also said that “this fight is not over.” 

“I believe that the Court’s decision to strike down our student debt relief plan is wrong,” Biden said. “But I will stop at nothing to find other ways to deliver relief to hard-working middle-class families.” 

What This Means for Plan Sponsors 

While this ruling now puts pressure on the Biden administration to find an alternative way to forgive student debt that could withstand legal challenge, it also brings to light the importance of student loan benefits, which plan sponsors have the option of offering to employees. 

The SECURE 2.0 Act of 2022 includes an optional provision that permits employers to make matching contributions to an employee’s retirement account when the employee makes “qualified student loan payments.” The intention is that people would not have to forgo entirely retirement savings while repaying student debt. 

This provision applies to 401(k), 403(b), SIMPLE IRAs and governmental 457(b) plans and is meant to benefit those who were not previously participating in their retirement plans.  

Kristen Carlisle, vice president and general manager of Betterment at Work, said in a statement that the Supreme Court decision “provides a moment for employers to really step up for employees, knowing the heavy financial and mental burden that this debt places on individuals.” 

“It’s time for student loan support to go from a ‘nice to have’ to a fundamental go-to for any company that’s looking to offer a modern financial wellness benefits package,” Carlisle said. “Support can be provided in a variety of ways: whether it’s by offering a student loan management solution to help employees better understand and easily pay down their debt, offering direct contributions through student loan/401(k) matching programs, or offering sessions with a financial advisor.”