On Tuesday, February 28, the Supreme Court heard arguments for and against the student loan forgiveness plan to cancel borrower debt. Now, all that’s left is deciding whether the Biden administration can legally wipe out $400 billion in student debt.
Here’s what to know about the loan forgiveness plan’s day in the highest court.
A quick primer on student loan forgiveness
During the pandemic, repayments on student loan interest and principal were put on hold. Last August, the Biden administration announced that the pause was going to end.
Instead, the Department of Education would forgive up to $10,000 in federal student loans for borrowers under the income limit. ($125,000 per individual or $250,000 per household.) Students who’d received Pell grants would see even more relief: up to $20,000 each of debt cancellation.
All told, the Congressional Budget Office estimates that the plan will cost some $400 billion in the next decade. (That’s $40 billion annually for those counting.)
Immediately, the plan was met with relief – and lawsuits. As a result, courts issued orders blocking the student debt relief program.
The lawsuits before the Supreme Court
The Supreme Court ultimately accepted two lawsuits, bundling both into Tuesday’s hearing. At their core, they argue that the administration and the Secretary of Education don’t have the authority to cancel student loan debt.
As for the specifics, the lawsuits were:
Biden v. Nebraska
Biden v. Nebraska was filed by six Republican-leaning states: Nebraska, Missouri, Arkansas, Iowa, Kansas, and South Carolina.
Essentially, this suit argues that:
· The Biden administration is using the pandemic as an excuse to fulfill a campaign promise to eliminate student loan debt
· The Department of Education doesn’t have the authority to cancel so much debt
· Loan servicers will lose profits on the canceled debt
· The plan violates the separation of powers in government
Department of Education v. Brown
Department of Education v. Brown was filed by two individual student borrowers who want more debt relief. One plaintiff is not eligible for forgiveness because her loans are privately held. The other qualifies for forgiveness of $10,000 because he didn’t qualify for a Pell grant in school.
The suit argues that the plaintiffs were “improperly denied” a chance to comment on the plan. But if given a chance, they would have argued for more relief and more lenient eligibility criteria.
On Tuesday, the Supreme Court heard 3.5 hours of arguments across both cases. The Biden administration was represented in both by Solicitor General Elizabeth Prelogar.
Here are the major questions dredged up across those 3.5 hours.
Does the HEROES Act of 2003 cover loan forgiveness?
The Biden administration’s forgiveness plan hinges on the Higher Education Relief Opportunities for Students (HEROES) Act of 2003.
In short, the Act permits the Secretary of Education to “waive or modify” federal student loan provisions during wars and national emergencies.
Nebraska’s lawyer, Jim Campbell, argued that forgiving a loan is different than waiving or modifying a program.
On Biden’s side, Ms. Prelogar argued that the plan fits the language of the HEROES Act. She added that the Trump administration used the 2003 law to pause loan payments early in the pandemic.
Conservative justices questioned whether “waive or modify” could include mass student loan cancellation. But Brett Kavanaugh, generally a conservative judge, wondered “Why not just read [the law] as written?”
Does either case have standing?
Before the court answers that question, it must first determine if either case has standing. (That is, the right to sue based on a “direct” and “concrete” injury.)
Nebraska v. Biden
Much of the “standing” arguments focused on MOHELA (Missouri Higher Education Loan Authority), a nonprofit federal loan servicer created by the state.
The plaintiffs argued that MOHELA would lose servicing fees if the loans were canceled, potentially affecting its ability to make payments to the state. As a result, the state of Missouri would lose revenue.
However, MOHELA itself refused to join the lawsuit and even required Missouri to file an official request to gather information. That led both liberal and conservative justices to question how linked the state and MOHELA truly are – and whether the plaintiffs have the standing to sue.
Department of Education v. Brown
The second case saw discussed whether the plaintiffs had a right to sue. While a lower court ruled that the plaintiffs had standing, the Supreme Court was…less receptive.
As conservative justice Neil Gorsuch summed it up: “Talk about ways courts can interfere with processes of government. Two individuals in one state who don’t like a program have sought and obtained universal relief, barring it from everyone.”
Does the “major questions doctrine” apply?
The court also pondered whether the “major questions doctrine” comes into play. This legal theory suggests that government actions with “significant political and economic” consequences require congressional approval.
Nebraska’s plaintiffs called their filing a “major-questions case” that is “undoubtedly a matter of economic and political significance.” They argue that student loan forgiveness should be blocked, given its lack of congressional approval.
Chief Justice Roberts seemed to agree, suggesting that the case presents important implications for the separation of powers. Other justices questioned whether the HEROES Act gave the Secretary of Education the authority to cancel debt outright.
For its side, the Biden administration argued that the Supreme Court only relies on the doctrine in “extraordinary cases.” Plus, given the broad language of the HEROES Act, the law “supplies the clear authorization” required.
What is “fair” when it comes to forgiveness?
Tuesday’s hearing also touched on “fairness” in free debt relief.
Some conservative justices asked whether student loan forgiveness is “fair” to people who won’t benefit, including those who don’t qualify or have loans. Chief Justice Roberts proposed a hypothetical: why should students get forgiveness when a young person taking out a loan to start a lawn care business wouldn’t?
In response, the Biden administration argued that the program only applies to borrowers who aren’t wealthy.
Liberal justice Sonia Sotomayor jumped in, stating that there’s an “inherent unfairness in society” due to limited resources. She added that she’s concerned about the borrowers who will struggle to pay their debts, or even default, if they don’t see relief. She also asked why a panel of judges, and not the better-qualified Secretary of Education, gets “the right to decide how much aid” to give struggling borrowers.
Liberal justice Elena Kagan gave a shorter answer: Congress created the authority to cancel student loan debts during national emergencies – not create lawn business loans.
What’s next for student loan forgiveness?
The current pause on student loan payments will end 60 days after June 30, 2023. Now that arguments have been heard, the Supreme Court is expected to make a ruling by June. For now, it appears that the Biden administration’s best chance of a “win” is that neither plaintiff has the legal standing to sue.
Otherwise, this conservative court might just return student loan debt back to the borrowers.
Head over to TikTok for a quick run down on what happened this week 🎓
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Big love. Cleo 💙