Why To Invest Regardless Of The Supreme Court Decision On Student Loan Debt Relief

Key takeaways

• The Biden Administration’s student loan debt relief plan will debut before the Supreme Court on February 28
• Two lawsuits against the plan argue that the Biden Administration overstepped its legal authority in canceling billions in student loan debt
• The Administration – alongside the Departments of Education and Justice – hold that the HEROES Act of 2003 permits such relief

For the last three years, millions of student loan borrowers have enjoyed a little more wiggle room in their budgets.

The culprit: a Covid-era policy enacted under the Trump Administration and extended under President Joe Biden that paused federal loan payments.

According to the Biden Administration, that pause is set to be lifted this year. (Though the exact date remains nebulous.) Another point of unclarity: whether millions of student borrowers will receive student loan debt relief by the Supreme Court.

Q.ai is here to break down this complicated financial mess into sensible, bite-sized pieces. And when you’re ready, we can help you invest with AI-backed strategies so you can protect your financial future – no matter how the Supreme Court rules.

Student loan debt relief, in short

Last August, President Joe Biden released a student debt relief plan that would cover over 43 million borrowers.

Under the plan, individuals who earned under $125,000 ($250,000 for households) will see $10,000 of their student debt wiped out. Pell Grant recipients – who demonstrate greater financial need when starting college – qualify for an additional $10,000.

Justification for widespread relief is rooted in the Higher Education Relief Opportunities for Students (HEROES) Act of 2003. The Act, which stems from the 9/11 terrorist attacks, grants the Secretary of Education sweeping authority to adjust the federal student loan framework during national emergencies.

Proponents of the plan believe it’s a vital step to relieve debts for the borrowers who suffered most during the pandemic. Namely: modest- to low-income households.

However, a number of legal challenges have since arisen, arguing that the plan exceeds the Biden Administration’s authority.

That’s where the Supreme Court comes in.

Legal challenges to student loan forgiveness

Soon after the plan was announced, several conservative-backed lawsuits were filed around the nation.

Two of those lawsuits resulted in rulings that paused the Department of Education’s application process nationwide. Following challenges by the Biden Administration, those lawsuits are headed to the Supreme Court.

Biden v. Nebraska

Biden v. Nebraska was filed on behalf of six states that make a multi-pronged argument:

• The Department of Education doesn’t have the legal authority to cancel student debt en masse
• Mass student debt relief violates the separation of government powers
• The plan would cause financial harm to states and companies that would see a loss of student debt-related profits
• President Biden is using the pandemic as pretext to fulfill campaign promises to wipe out student loan debt

Initially, a district court dismissed the challenge, stating that the plaintiffs lack the legal standing to sue.

But in November, the 8th US Circuit Court of Appeals reversed the ruling and issued a nationwide injunction. The Court argued that one state (Missouri) had legal standing, as its Higher Education Loan Authority would lose profits under the plan. As a result, it permitted the lawsuit to continue and blocked the plan pending appeal.

In response, the Biden Administration elevated its plea to the Supreme Court.

Department of Education v. Brown

Department of Education v. Brown was filed on behalf of two student loan borrowers who argued they were “improperly denied” input on the plan. They added that if the plan had been subject to “notice and comment, they would have urged [the Administration] to adopt broader eligibility criteria and to provide greater debt relief.”

Notably, one of the plaintiffs in the lawsuit is ineligible to receive student debt relief under the current plan. The other is set to receive just $10,000 in relief.

The Northern District of Texas dismissed the plaintiffs’ arguments, as the HEROES Act exempts normal notice and comment requirements. However, the Court also ruled that the plan exceeded the Secretary of Education’s authority and vacated it nationwide.

After a failed appeal to the United States Court of Appeals for the 5th Circuit, the Biden Administration took the case to the Supreme Court.

The student loan debt relief Supreme Court timeline

The Supreme Court agreed to pick up these cases, with oral arguments beginning on February 28. A decision is expected around May-June.

Initially, the Biden Administration had set student loan repayments to begin in February 2023 after announcing the plan. But in light of the impending lawsuits, it has pushed back the repayment date.

Now, federal student loan repayments will begin 60 days after the Supreme Court rules or 60 days after June 30 – whichever comes first.

Arguments for student debt relief

Advocates for the plan maintain that the Biden Administration is within its authority to authorize widespread debt relief. More specifically, the Administration believes that the HEROES Act accounts for national emergencies like the Covid-19 pandemic. (The U.S. has been under a national emergency declaration since March 2020.)

Last August, the Justice Department released a legal opinion to that effect, noting that the HEROES Act grants “sweeping authority” to adjust student debt “when significant actions with potentially far-reaching consequences are required.”

And in January, President Biden tweeted: “Let me make one thing clear. Despite Republican officials’ attempts to block student debt relief, my Administration is confident in our legal authority to carry out our plan. We’ll keep fighting to get millions of Americans the relief they need.”

The plan has also received support from Rep. George Miller, a member of the House Education and Workforce Committee. As one of the original constructors of the HEROES Act, he argues that “the text of the HEROES Act [makes clear] that the Education Secretary has extensive authority to respond to national emergencies.”

Challenges to student debt relief

Aside from impending lawsuits, several conservative groups have filed a series of amicus curiae briefs with the Supreme Court expressing opposition to the plan. (An amicus curiae brief expresses advice or opinions on a case from an outside party.)

On Friday, one such brief was signed by 128 House Republicans, while another was joined by 43 Republican senators. A third was filed on behalf of five former Republican U.S. education secretaries, including Betsy DeVos.

Each brief argues, in various ways, that President Biden’s Administration lacks the authority to cancel debt en masse under the HEROES Act. Many also add that the power to clear the board at this magnitude lies solely in the hands of Congress.

One brief, filed by a cohort of U.S. senators, sums up the argument thusly: “The HEROES Act cannot plausibly be read to authorize the forgiveness of loan principal that places borrowers in a better position financially than before the emergency, much less to cancel half a trillion dollars.”

The Congressional Budget Office (CBO) estimates that the student debt relief plan will cost $400 billion over 10 years. (The cost extends from “making up” the gap due to not collecting debts, rather than spending new money.) For reference, the latest National Defense Authorization Act allotted nearly $817 billion in defense spending in 2023.

How these lawsuits impacts student loan borrowers

These lawsuits haven’t just paused student loan forgiveness – their effects continue to ripple outward.

As relief hangs in the balance and repayment dates keep shifting, many borrowers are unsure what they owe and when.

Additionally, many federal student loan servicers sold, shifted or shut down operations during the pandemic. For affected borrowers, that complicates knowing who to pay, too.

Education Department Undersecretary James Kvaal also argued in a November court filing that Americans have benefitted from life without student loan payments consuming their budgets. Shoving debt back on their plates, he argued, may lead to “higher loan default rates” without relief.

Investing your way to greater wealth – regardless of student debt

If you have student loans – and even if you don’t – it’s crucial to not let debt define your financial life. At times, it can make sense to finance your education, a car – even a house.

But failing to build long-term wealth in the process can set you up for financial hardship down the road. With recession predictions mounting, stashing wealth is more important than ever.

That’s why we believe in investing young, whether you’re still in college, recently graduated or forging your own path. Even if you’re still paying down debt, investing just $25 a week adds up over time.

Starting young also means you benefit from greater compound interest in your life. The longer you save, the more you contribute – and the more you earn on your contributions.

Plus, as you move into better-paying jobs, establishing good investing habits means that larger contributions fit seamlessly into your budget.

The bottom line

It’s difficult to predict how the Supreme Court will rule on student loan forgiveness. But regardless of what the future holds, Q.ai is here to help you prepare for it. With a variety of AI-backed Investment Kits to select from, you can build your future, your way.

Protect against inflation? Check.

Hedge against the changing value of the dollar with precious metals? You bet.

Profiting from the future of technology and clean energy? Absolutely.

Investing with the expertise of a hedge fund and the budget of an average retailer? That’s what we’re here for.

Download Q.ai today for access to AI-powered investment strategies.