I need a better understanding of Protestant teaching on who has the authority to interpret Sacred Scripture.
Protestants believe in the Priesthood of all Believers, which is to say that protestants believe that all Christians have a direct connection with God--there is no need to go through a Priest. That's not to say that they don't have Priests or Pastors or other figures of leadership, but they don't fulfill the role of mediator between man and God, that they do in the Catholic tradition.
As such, every protestant believer is essentially expected to read scripture directly--not simply listen to teachings from scripture, presented by priests (as I know many Catholics choose to do).
This leads to two distinct phenomenon:
Some protestants try for a sort of "Lone Ranger Christian" approach, interpreting scripture on their own, sometimes cherry-picking the interpretations they like, discarding others.
This phenomenon is a point of great criticism from Catholics, but I believe is much more spoken about than actually experienced in practice.
The more common and practical experience is that by encouraging all protestants to do their own Bible study and interpretation, the end result is that all protestants interpret scripture. As the as Proverbs says, iron sharpen iron. When protestants examine scripture individually, and in groups, and discuss their views and opinions, it allows the group as a whole ownership over the interpretation, which can be a big benefit.
Of course, there can be drawbacks, and all methods of scriptural interpretation can be abused.
Some of the other answers have highlighted the Evangelical and Mainstream Protestant positions on the interpretation of scripture. I wanted to draw attention to a different position adopted by Anabaptist churches, specifically Mennonite, Amish, Brethren and some related churches. In those churches interpretation of the scriptures is done by the community.
The Priesthood of all believers is upheld by everyone in the community having the right and ability to contribute to the interpretation. The community can (and should) give special weight to those with the skills, knowledge and training in biblical interpretation: however there is no hierarchical 'priest' who can dictate to the rest of the community what the interpretation is.
This 'community interpretation' happens at multiple levels. A small group may work on interpreting some piece of scripture within itself. That interpretation might be communicated to the church as a whole, which takes account of it, making its own interpretation by which it guides its own life. The church might contribute its understanding to a denominational group, and might take account of denominational understandings in its own interpretation.
This approach also upholds the role and status that Christ gives to the Church as more than simply individual believers who happen to meet together. It is also related to the Orthodox approach, which reserves to the church the role of interpreting scriptures, but does not do it through the church hierarchy in the same way the Catholic church does.
Unlike the Roman Catholic Church, in Protestant Churches there is no central single authority for interpreting scriptures and to layout fixed doctrines to follow. This is why there are many denominations among the Protestants. Denominations within themselves have their own doctrines to follow but it's always slightly different from other Protestant denominations.
Examples: Seventh Day Adventist Church has a strong doctrine on observing the Sabbath and against consuming unclean animals while other Protestant churches consider these laws as obsolete. Some churches like United Pentecostal Church does not adhere to the Trinity doctrine while most of the other Protestant churches adhere to it.
Anyone with influential personalities can start a new church or denomination. See this question. This has a positive side and negative side. Without a mature knowledge about the scripture it is very easy to become a heretic knowingly and unknowingly. But even the Roman Catholic way of single authority for interpreting scripture also has a positive side and negative side. The positive side is that there is less confusion regarding doctrines for the members and the negative side is that the Church can exercise it's authorities for it's own benefits and no one can question it. This was the reason why Martin Luther stood against the Catholic Church for the wrong doctrines prevailed in the Roman Catholic Church and his actions sparked the beginning of Protestant Churches.
As others have remarked, Protestantism doesn't recognize a central authority, or any intermediary but Christ between the faithful and God. This (like other Protestant teachings) is a reaction to the perceived abuses of the Catholic Church of the time (the mere naming of the faith is a witness to its reactive origins).
Others have expounded the doctrine of Universal Priesthood. I am going to focus more upon the consequences of Sola Scriptura, another tenet of Protestantism. Martin Luther asserted, "a simple layman armed with Scripture is greater than the mightiest pope without it". The formal version that emerged during Reformation is Sola Scriptura, which states that the Bible has all the information required for salvation. This is demonstrated by its
- inspiration (the Word of God)
- clarity (the doctrine is clear and accessible to an ordinary man of average IQ),
- efficacy (the Scripture produces immediate submission in readers),
- authority (the Scripture is the will of God and must be obeyed without exception) and
- sufficiency (there are no holes in the Scripture that need to be filled by science, tradition or later clarification of doctrine).
In particular, clarity means that any man can interpret Scripture in good faith (though he must take into account history and tradition, a requirement which is perhaps ignored by those who start a new faith or write a new book for selfish goals, or through ignorance and lack of humility).
A visible, though probably unintended consequence of the removal of central authority / censorship (initially meant as a reaction against the Catholic Church) was the unprecedented explosion in the number of denominations after Reformation. While a community might come to an agreement by doctrinal discussions among members and the innate human desire to conform (groupthink), distinct communities (especially widely separated ones, such as New World vs. Old World) will not have an opportunity to reconcile their beliefs.
One common objection to Sola Scriptura is that both the New Testament and the Old Testament books included in the Bible were selected by the church itself, therefore leading to a circular argument. Many non-canonical books, (i.e. books not included in the Bible -- some of which are nevertheless referenced in the "Bible") contain information distinct or apparently contradictory to the canonical books. Protestants answer that the canonical books were widely accepted since the early church, and perhaps selected by Peter, Paul and John. There are other objections to Sola Scriptura (see e.g. the Catholic-inspired article Twenty One Reasons to Reject Sola Scriptura). From a human psychology POV, I suppose it is understandable that in correcting past abuses, reformers might err in the opposite direction.
I came across these rules of Biblical Interpretation more than a year ago. I would like to offer a quote from number 5 for an answer to the question of authority.
5 Scripture must be its own expositor, since it is a rule of itself. If I depend on a teacher to expound it to me, and he should guess at its meaning, or desire to have it so on account of his sectarian creed, or to be thought wise, then his guessing, desire, creed, or wisdom is my rule, not the Bible. Psalms 19:7-11; 119:97-105; Matthew 23:8-10; 1 Corinthians 2:12-16; Ezekiel 34:18,19; Luke 11:52; Malachi 2:7,8
I wish that I had known these rules many years ago. For those who are interested, here is a link: http://www.restoringtheoldpaths.com/uploads/William_Millers_Rules_of_Interpretation.pdf
Protestants believe that the priesthood is given to all Christians and therefore all Christians have the authority to interpret the bible. Sola Scriptura (Bible alone as authority) as another user pointed out resulted in many denominations having their own interpretation.
Also the bible was put together by the church (East and West) only in the 4th century and the early councils reiterated the canon of the bible (although there were disagreements on certain books of the bible). If we look at the early Christians before the 4th century we will find out that what they had was a bunch of books and letters and not the bible as we know it today. And that is one of the defenses the the Catholic church and Orthodox church present that historically what Christ handed to the apostles was the authority to teach. And their teaching was what was translated to a Written tradition (Bible) and Oral Sacred tradition. An example of Sacred tradition is the bible itself. The bible didnt come with a table of contents. so we are trusting that the people who put together the bible had the authority to put it together and were transmitting the right teachings of Christ and his apostles. And that is the reason why the early church believed what was handed over by Christ was a teaching authority (authority of the Apostoles) and not the bible. And that doesnt take away the infallibility of the bible. It is an infallible book but it needs to be interpreted correctly...Otherwise it causes divisions in faith and if we interpret it privately, we end up painting our own image of Christ instead of following what Christ and his apostles really taught. And thats why the witness of the early Christians becomes very important.
This is a supplemental answer, expanding what is meant by the "clarity" of scripture as cited by @justbelieve. Another word used to describe this doctrine is "perspicuity". Protestants believe the Bible is clear enough to be understood in the main by the person of average intelligence, but requires the aid of scholars and the wise when touching on the more difficult passages.
From this source, by Larry D. Pettegrew, prof. of Philosophy: https://www.tms.edu/m/tmsj15i.pdf
The perspicuity or clarity of Scripture in its relation to almost all areas of systematic theology is affected by postmodern hermeneutics that fail to respect the authority of Scripture. The doctrine raises a number of questions difficult to answer in a brief span, but two very basic issues are the meaning of the doctrine of perspicuity and the long-range historical context in which the doctrine has arisen. The basic doctrine means that the Bible can be understood by people through the enlightenment of the Holy Spirit and that people need to search the Scripture and judge for themselves what it means. Scripture itself attests its own perspicuity, but not to the point that it cannot be misunderstood or is in every point equally simple and clear. The doctrine does not rule out the need for interpretation, explanation, and exposition of the Bible by qualified leaders. The doctrine does mean that Scripture is clear enough for the simplest person, deep enough for highly qualified readers, clear in its essential matters, obscure in some places to people because of their sinfulness, understandable through ordinary means, understandable by an unsaved person on an external level, understandable in its significance by a saved person through the illumination of the Holy Spirit, and available to every believer whose faith must rest on the Scriptures. Historically, debates about perspicuity have related to Marcion’s attack on the OT, the fathers’ denial of OT perspicuity, covenant theology’s subordination of the OT to the NT, and the medieval church’s attack on biblical perspicuity. The Reformers, the Protestant scholastics, and the German pietists supported the doctrine which is of primary importance for the practice of contemporary Christians.