Updated: Apr 17
The fate of President Biden's ambitious proposal to forgive student loans will soon be decided by the Supreme Court.
Education Secretary Miguel Cardona after filing a legal brief with the Supreme Court on the Student Debt Relief Program. An estimated forty million borrowers were anticipated to be eligible to have their federally administered student loan debt reduced by the Education Department by up to $20,000 if President Biden's plan were implemented.
But the plans of the Biden administration have been derailed by legal challenges brought forward by states led by Republicans and organizations with conservative leanings. The loan forgiveness program has been halted as a result of unfavorable decisions made in two separate cases by the Court of Appeals for the 5th and 8th Circuits. The 8th Circuit Court of Appeals made the decision to implement a nationwide preliminary injunction, while the 5th Circuit Court of Appeals upheld a lower district court's ruling that vacated the program.
A total of 26 million borrowers had submitted applications for relief prior to that happening. However, the application website was taken offline by the Department of Education shortly after going live.
The appeals of both cases that were filed by the Biden administration have been accepted for review by the Supreme Court, and oral arguments are scheduled to take place in February 2023. After that, the court will deliberate on the matter and issue a formal ruling, most likely by the end of June.
Here are three possible rulings from the Supreme Court Cases
1. The Supreme Court rules that the Biden administration's program to forgive student debt is unconstitutional.
2. The Biden administration's program to forgive student debt is upheld by the Supreme Court.
3. The Supreme Court could rule based on procedural considerations
The Supreme Court rules that the Biden administration's program to forgive student debt is unconstitutional.
In one or both of the cases, the Supreme Court might rule in favor of the people who are suing.
In the case heard by the 8th Circuit, a group of Republican-led states say that the Family Federal Education Loan Program (FFELP) illegally takes money from these states through state-affiliated agencies that run the program.
In the 5th Circuit case, on the other hand, the rules of the program meant that some borrowers couldn't get the most help. These people who took out loans said that starting the loan forgiveness program was arbitrary and broke a federal law that says how new federal rules are made.
On the other hand, the Biden administration has said that the program is completely legal. The administration says it set up the program under the HEROES Act of 2003, which lets the executive branch skip normal administrative procedures during a national emergency (like the pandemic) to change federal student loan programs, such as by canceling student debt.
The administration says that the one-time loan forgiveness program is meant to make sure that borrowers are not worse off than they were before the pandemic started. This is what the HEROES Act is all about.
Some people who watch the Supreme Court have said that the conservative majority might be very doubtful about whether or not Biden's one-time loan forgiveness program is legal. Other wide-ranging emergency measures taken by the Biden administration in response to the pandemic, such as requiring people to wear masks and get vaccinated, were recently thrown out by the court because they were not explicitly authorized by a law passed by Congress.
The Biden administration's program to forgive student debt is upheld by the Supreme Court.
In the event that the United States Supreme Court decides to uphold the program, the Department of Education should be given the authority to immediately resume accepting and processing applications for student loan forgiveness.
Officials from the Department of Education have stated that a total of 26 million borrowers had already submitted applications for relief before the initiative was blocked by federal courts, and that 16 million of those applications had been approved. In the event that the Supreme Court issues a ruling in favor of those borrowers, it is possible that their outstanding debt will be discharged in a matter of weeks.
Additionally, the Student Loan Forgiveness Application Portal would be reactivated by the Department of Education, which would make it possible for approximately 14 million additional borrowers who have not yet submitted an application for loan forgiveness to do so. A previous proposal made by the Department of Education indicated that borrowers would have until the 31st of December in 2023 to submit their applications for relief from their student loans.
The Supreme Court could rule based on procedural considerations
There is also a chance that the Supreme Court will decide based on technical reasons. This ruling wouldn't be enough to say for sure if the program is legal or not. By doing this, the court could end up letting the program go forward, even though most of the justices think it might be against the law.
The most important question is whether or not any of the parties who have raised legal objections have the right to file a lawsuit in the first place. "Standing" is the idea that a party who brings a suit must be able to demonstrate a concrete injury that is sufficiently linked to the challenge rule or policy. This is required in order for the suit to be considered valid. It is not sufficient to simply disagree with a policy, nor is it sufficient for a policy to even be unlawful; a challenger must show that they have standing before even getting to the merits of the program's lawfulness.
The Biden Administration has vigorously argued, in both of the contested cases, that none of the parties involved have the legal right to move forward with their case.
The attorneys for the Department of Justice pointed out that in the 8th Circuit case, borrowers who have commercially-held FFELP loans will no longer be able to consolidate their loans in order to take advantage of the one-time loan forgiveness program after September 29, 2022. This information was provided by the attorneys for the Department of Justice. In light of this, the FFELP lenders will not be deprived of revenue, despite the fact that this is what the FFELP lenders argue.
Additionally, the administration contends that no FFELP lender has in fact filed a lawsuit; rather, the states themselves have done so in their individual capacities. In addition, the administration is of the opinion that there is little connection, if any at all, between the revenues of state governments and the FFELP agencies, which have a tendency to be largely autonomous from one another.
The government has also claimed that the plaintiffs in the 5th Circuit case lack standing. This is because the HEROES Act allows the administration to set up emergency regulations outside of the usual public comment periods required by other federal regulations.
Government lawyers have defended the one-time loan forgiveness program's regulations, saying they are not arbitrary and are backed up by research. The lower court's decision declaring the program unconstitutional was made without considering the evidence.
Alternatives to the Biden Forgiveness Program
Existing programs provide forgiveness or discharge to federal student borrowers regardless of the Supreme Court's decision on the Biden Administration. Permanent changes that will make it simpler to get credit for past program payments are coming to two of the most popular repayment plans by the middle of 2023: PSLF and Income Driven Repayment (IDR) Programs.