Student Debt Forgiveness At Supreme Court Tuesday—Here’s What You Need To Know

Topline

The Supreme Court will hear oral arguments Tuesday in two cases that will determine whether President Joe Biden’s student loan forgiveness can go back into effect, with millions of Americans’ debt hanging in the balance as justices decide whether the Biden Administration had authority to implement the program.

Demonstrators hold a lit sign reading “Student Loan Relief is Legal” as they gather in front of the … [+] US Supreme Court in Washington, DC, on February 27.

AFP via Getty Images

Key Facts

The Supreme Court is hearing arguments in two cases: Biden v. Nebraska, in which six GOP-led states are suing to overturn the program, and Department of Education v. Brown, which is brought by two individual borrowers backed by the conservative Job Creators Network, one who doesn’t qualify for any forgiveness and one who only qualifies for $10,000 in relief rather than the $20,000 given out to Pell Grant recipients.

Both groups of challengers argue that the Biden Administration overstepped its authority by imposing student loan forgiveness, which the White House justified under the HEROES Act, legislation that allows the secretary of education to “waive or modify” any student financial assistance programs during national emergencies, as the Biden Administration argued the Covid-19 pandemic is.

The Biden Administration has argued it does have authority to implement the loan forgiveness, and claims the challengers don’t have standing to bring the lawsuits in the first place and they should be thrown out.

Student loan forgiveness has been on hold while these legal challenges have been playing out, after appeals courts sided with the challengers in both cases and the Supreme Court declined to restart the program while the litigation moved forward.

If the justices decide any of the challengers do have standing that justifies them bringing the case, they’ll decide whether the Biden Administration has authority to relieve student debt under what’s known as the “major questions doctrine,” which says Congress needs to authorize actions by the executive branch that have very sweeping political or economic consequences.

While the Biden Administration argues debt forgiveness does have that congressional authority under the HEROES Act, legal experts cited by Bloomberg, NBC News and other outlets project it’s likely the 6-3 conservative court will overturn the student loan forgiveness and declare it should be left up to Congress, as they’ve ruled in similar cases that concern the major questions doctrine.

What To Watch For

The Supreme Court will issue its final rulings on student loan forgiveness sometime before its term wraps up in late June or early July. The Biden Administration will have to be successful in both cases for student loan forgiveness to move forward, and if the court upholds the program in one case but strikes it down in the other, debt relief will remain blocked. If the Biden Administration loses in court, it’s possible it will try to retool the student loan forgiveness program to justify it under a different federal statute, though that will likely also result in legal challenges.

Tangent

The timing of the Supreme Court’s ruling will also determine when federal student loan borrowers will start having to make payments on their loans again, as after freezing payments throughout the pandemic, payments are now set to resume either 60 days after student loan forgiveness resumes or 60 days after June 30. The Biden Administration has warned student loan forgiveness being overturned could result in more borrowers defaulting on their loans once payments resume, given either ongoing financial hardship or confusion, as they may not realize that debt forgiveness isn’t happening and they’re still responsible for their loans.

Big Number

26 million. That’s how many people applied for student debt forgiveness before the program was suspended in November, according to the Education Department, which is more than half of the 43 million borrowers eligible for the program. Of those applications, 16 million borrowers have been approved so far to have their debt forgiven, though no funds have actually yet been disbursed due to the ongoing litigation.

Surprising Fact

The Biden Administration’s argument that the Covid-19 pandemic justifies student loan forgiveness—given the fact it negatively impacted many borrowers’ finances—comes even as the White House intends to end its emergency declaration for Covid-19 in May. An administration official cited by the Hill said the White House believes the pandemic still justifies debt forgiveness even if funds are disbursed once the Covid-19 emergency is over, as the program “is needed to prevent defaults and delinquencies as student borrowers transition back to repayment after the end of the payment pause.”

Key Background

The Biden Administration announced in August that it would forgive $10,000 in federal student debt for borrowers earning less than $125,000, or $20,000 in forgiveness for Pell Grant recipients. Though hailed by many borrowers, the program quickly attracted widespread criticism from Republicans, leading to a slew of legal challenges including the two successful lawsuits that made it to the Supreme Court. Applications for the program opened in October before being suspended a few weeks later as lower courts blocked funds from being disbursed, and the Supreme Court decided to take up both cases in December. The court’s decision came after Justice Amy Coney Barrett rejected multiple other legal challenges to the forgiveness plan that were considered legally weaker, acting on her own as the justice who considers cases from that appeals court.