Student Loan Forgiveness Will Go to Supreme Court: Arguments Explained

The Supreme Court is set to hear arguments over President Joe Biden’s plan to ease student debt, which affects millions of borrowers who could see their loans canceled or reduced.

So far, Republican-appointed judges have prevented the Democratic president’s plan from taking effect, and it remains to be seen how the 6-3 conservative-dominated court will react. The judges have scheduled two hours of deliberations on Tuesday, although they are likely to last longer. The public can listen on the court’s website starting at 10:00 am EST.

What to look for and what to expect:

How does the forgiveness plan work?

The debt relief plan announced in August calls for the elimination of $10,000 in federal student loan debt for those earning less than $125,000 or households with incomes less than $250,000 a year. Pell Grant recipients, who typically demonstrate greater financial need, will receive an additional $10,000 in debt forgiveness.

College students are eligible if their loans were paid off before July 1st. Under the plan, 43 million borrowers are eligible for some debt relief, and 20 million can have their debt canceled entirely, according to the Biden administration.

The White House reports that 26 million people have applied for debt relief, and 16 million people have already received approval for debt relief. The Congressional Budget Office said the program would cost about $400 billion over the next three decades.

How did the case get to the Supreme Court?

The Supreme Court is considering two objections to the plan. One concerns six Republican-led states that have sued. The other is related to a lawsuit filed by two students.

The lower court dismissed the lawsuit involving the following states: Arkansas, Iowa, Kansas, Missouri, Nebraska, and South Carolina. The court said the states could not challenge the program because they were not affected by it. But a panel of three federal appeals court judges in the U.S. Court of Appeals for the 8th Circuit — all appointed by Republican presidents — suspended the program on appeal. The Supreme Court then agreed to weigh in.

The student case concerns Myra Brown, who is not eligible for debt forgiveness because her loans are commercially owned, and Alexander Taylor, who is eligible for only $10,000, not the full $20,000, because he did not receive a grant. Pella. They say the Biden administration, among other things, did not go through due process in passing the plan.

Texas U.S. District Judge Mark Pittman, appointed by President Donald Trump, sided with the students and ruled to block the program. Pittman ruled that the Biden administration did not have clear congressional authorization to proceed with the program. A federal appeals court upheld Pittman’s decision, and the Supreme Court agreed to hear the case along with the states’ objection.

How did Biden manage to write off the debt?

To write off student loan debt, the Biden administration relied on the Higher Education Student Assistance Opportunities Act, commonly known as the HEROES Act. Originally enacted in the aftermath of the September 11, 2001, terrorist attack, the law was originally intended to prevent the deterioration of the financial situation of military personnel during the wars in Afghanistan and Iraq. Now expanded, it allows the Secretary of Education to cancel or change the terms of federal student loans as needed due to the national emergency.

Trump, a Republican, declared the COVID-19 pandemic a national emergency in March 2020, but Biden recently announced that the status would expire on May 11. writing off loan debt because the pandemic has affected millions of student borrowers who may have defaulted on their loans during the emergency.

What can judges ask?

Expect the judges to focus on a few important issues. The first is whether the states and the two borrowers have the right to sue the plan in the first place, a legal concept called “standing.” If they don’t, it will open the way for the Biden administration. To prove they have a reputation, states and borrowers will have to partly show that the plan is causing them financial harm.

In addition to standing, the judges will also be asking whether the HEROES Act gives the Biden administration the power to enact the plan and how it was done.

When will borrowers know the result?

It will likely be months before borrowers know the outcome of the case, but there is a deadline of sorts. As a rule, the court makes all its decisions by the end of June, before going on summer vacation.

Regardless of whether the debt is repaid, the decision of the case will make a difference. While federal student loan payments are currently on hold, they will end 60 days after the case is resolved. And if the case is not resolved by June 30, payments will begin 60 days after that.

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