Student Loan Forgiveness Update 3-02-2023
The fate of Biden’s massive $400 billion student loan forgiveness now lies in the hands of the Supreme Court. On February 28th, the nine justices heard oral arguments from two of the most prominent cases about why the program is unjust and should be blocked.
40 million Americans stand to qualify for some or all of the $20,000 in federal debt that was promised to be forgiven per borrower. Needless to say, there is a lot of attention on this case and a lot of support from those who would benefit. However, it should be noted that the Supreme Court currently has a 6-3 conservative majority. Therefore, it’s expected that this initiative will be heavily challenged.
So what were these two cases and what were their arguments? Here’s what you need to know.
The Two Cases Before the Supreme Court
Since the initial rollout by President Biden and the Department of Education, there have been many who have challenged its merit. To date, at least six of these arguments became formal lawsuits and went to court. Of those contenders, two advanced to the floor of the Supreme Court: Biden v. Nebraska and Department of Education v. Brown.
Biden v. Nebraska
The first lawsuit, Biden v. Nebraska, was brought forward by six Republican-led states:
- South Carolina
Their main argument is that Biden’s plan would cause financial harm to the companies that service federal student loans for each state. Originally, U.S. District Judge Henry Autrey dismissed the case. However, the Eighth Circuit Court of Appeals concluded that Missouri had a legal claim.
The underlying assertion from the governors of these conservative states is that Biden vastly overstepped his executive authority by moving forward with his plan without any authorization from Congress. The Department of Education defends its position stating that they do in fact have this authority given the national state of emergency caused by the COVID pandemic. This is rooted in the Higher Education Relief Opportunities for Students (HEROES) Act of 2003 following 9-11. The HEROES Act contains language that gives the Department of Education the ability to modify student financial assistance programs in response to national emergencies to alleviate borrowers’ financial hardship.
Department of Education v. Brown
The second lawsuit, Department of Education v. Brown, comes from two plaintiffs in Texas: Alexander Taylor and Myra Brown. Both feel that Biden’s plan unjustly excludes them from the relief they deserve.
Brown is not eligible for any debt forgiveness because she has private student loan debt instead of federal debt. Taylor has federal debt but is only eligible for $10,000 as opposed to the full $20,000 available to Pell Grant recipients.
Included in their argument is the fact that the Biden administration did not follow the Administrative Procedure Act’s notice-and-comment procedure. This is a common practice which allows the public to first hear the proposal and provide feedback over the next few weeks or months. The Department of Education’s position on this issue is that since debt forgiveness was granted under a state of national emergency, they could bypass the notice and comment period.
Recap of the Supreme Court Hearing
On Tuesday, February 28th, these two cases were heard at the same time by the nine justices of the court. Solicitor General of the United States Elizabeth Prelogar served as the lawyer representing the Biden administration.
As the two cases were being presented, one of the initial issues raised by the liberal justices was whether or not these lawsuits lacked legal “standing”. Standing is the right for a grievance to be heard by the court.
For instance, in the case of Biden v. Nebraska, it was argued the state of Missouri lacked standing to sue because the forgiveness program wasn’t going to harm Missouri directly. Instead, it would harm the state’s loan servicer MOHELA (Missouri Higher Education Loan Authority). Therefore, the case would have to be presented by MOHELA in order for it to have standing.
Similarly, the justices argued that in the case of the Department of Education v. Brown, the two plaintiffs not actually suffer any specific harm if the program were to move forward. They would simply be in the same financial position as they are currently.
Unfortunately, given the conservative nature of the Supreme Court, they may simply ignore the standing issues or find some minimal standing to move forward anyways.
Another topic that was highly debated was the premise of whether or not the Department of Education had the legal standing to use the COVID pandemic to grant debt forgiveness without an act from congress.
Recall that under the HEROS Act, the Department of Education has the ability to “modify” student financial assistance programs. Chief justice John Roberts questioned whether the scale of the relief granted – almost half a trillion dollars – counted as a mere “modification of an existing student loan program.”
Associate Justice Brett Kavanaugh further echoed this point by stating that the HEROES Act did not expressly authorize loan cancellation or forgiveness. Instead, he classified Biden’s initiative as a “massive new program.”
In response to Prelogar’s defense, Roberts presented her with a hypothetical scenario involving one person who borrowed to pay for college and another who borrowed to start a lawn service business. “We know statistically that the person with the college degree is going to do significantly financially better over the course of life than the person without. And then along comes the government and tells that person, ‘You don’t have to pay your loan,'” Roberts said. “Nobody’s telling the person who is trying to set up the lawn-service business that he doesn’t have to pay his loan.”
Additionally, Roberts told Prelogar that this case reminded him of the case of the “Dreamers” – the children of immigrants who illegally entered the United States. The Trump administration tried to end a program that protected Dreamers from deportation. However, it was ultimately blocked by the Supreme Court.
What If the Supreme Court Rules Against Biden?
Unfortunately, the Supreme Court will not have a ruling on this hearing until at least the end of June. Until then, the 26 million Americans who’ve applied for student loan forgiveness, 16 million of whom have already been fully approved for relief, will have to wait to find out what comes next.
In the meantime, the White House has other tricks up its sleeve that it can utilize. For example, Secretary of Education Miguel Cardona already announced in January the newly proposed regulations for revising the income-driven repayment (IDR) program REPAYE.
Additionally, it’s important to remember that the question before the Supreme Court is whether or not the president has the authority to execute an order based on the HEROES Act. Even if one or both of these cases wins, Congress could always propose and vote to pass a completely new loan forgiveness program – even one that’s similar to Biden’s current plan. For now, federal borrowers have until 60 days after the Supreme Court makes its decision or 60 days after June 30th (whichever comes first) until payments will resume.