Student Loans

Supreme Court Has Taken Up The Student Loan Forgiveness Plan — Here’s What To Know

As the Supreme Court agrees to hear whether Biden overstepped his authority in canceling student loans, here’s what that means for the rest of us.

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WASHINGTON, DC - NOVEMBER 18: Student loan borrowers protest the GOP outside the Republican National...
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With millions of borrowers’ financial futures in limbo, the battle over the Biden Administration’s beleaguered plan for student loan forgiveness has an end date in sight. Yesterday, the Supreme Court announced it would agree to hear arguments over the plan's legality in February, with a final decision scheduled to come sometime in June.

This tracks with Biden’s timeline on extending the student loan payment pause until the end of June 2023 — or, per the administration’s own words, at least 60 days until the student loan case is resolved in the courts.

The Supreme Court did not agree to the administration’s request that debt relief be allowed to commence this month but did agree to fast-track the hearing.

The case the Supreme Court will hear in February is one of two currently clogging the works of Biden’s plan to forgive up to $10,000 in student loan debt per qualified borrower and up $20,000 for Pell Grant recipients who make below a certain income threshold. Conservative lawmakers have decried the plan as both unlawful and unfair ever since it was announced over the summer.

What Are the Cases Blocking Student Loan Forgiveness?

The Supreme Court Lawsuit

The case that will be argued before the Supreme Court, Biden, Et Al, v. Nebraska, Et Al, is a lawsuit brought by six state Attorneys General representing Arkansas, Iowa, Kansas, Missouri, Nebraska, and South Carolina. The group of Attorneys General argues that debt forgiveness will be economically injurious to the state economies by decreasing tax revenue.

Biden’s plan would allow privately held student loans to be consolidated into federal loans, making them eligible for forgiveness, and some states derive income from privately held loans.

The Attorneys General also claim that President Biden usurped Congressional authority when he signed the executive order to implement his debt forgiveness plan.

"The act requires a real connection to a national emergency," top officials from the states wrote. "But the department's reliance on the COVID-19 pandemic is a pretext to mask the president's true goal of fulfilling his campaign promise to erase student-loan debt."

As a result, on Nov. 14, the 8th Circuit Court issued an injunction, freezing the debt forgiveness program and application process in its tracks. The Supreme Court did not decide to lift that freeze but did agree to decide on the case faster than it usually would.

The Job Creators Network Lawsuit

A second lawsuit originating being heard in the 5th Circuit Court was brought by two student loan borrowers backed by the conservative advocacy group Job Creators Network. The advocacy group was founded by billionaire Trump-backer and former Home Depot CEO Bernie Marcus.

The lawsuit, brought to court in October 2022, and the plaintiffs of the suit, who are not eligible for full loan forgiveness or all of the program’s benefits, claimed wrongdoing by the Biden Administration because they were not allowed to voice their disagreement with the plan since there was no formal public comment period.

The federal judge overseeing the case, Mark Pittman, agreed with Job Creators Network and declared the loan forgiveness plan unlawful because “Biden did not follow federal procedures to allow for public comment prior to the policy’s announcement,” per Texas Tribune.

The Biden Administration argued they have the authority to cancel student debt under the 2003 Higher Education Relief Opportunities for Students(HEROES) Act. That law provided loan assistance to military members. That law also “exempts the government from otherwise applicable procedural requirements, including notice-and-comment rulemaking.”

The judges denied the Education Department’s request that the a hold on that ruling be placed while the administration’s appeal against that lawsuit is heard — effectively freezing the plan in its place — but agreed to an expedited timeline in moving the case forward. The Biden Administration, per Forbes, is “likely to appeal” the 5th Circuit’s decision to the Supreme Court as well due to the continued block on the plan.

What Do These Lawsuits Mean For Debt Forgiveness, And The Payment Pause?

Ultimately, it means that courts will have the final say.

Forbes analysis suggests that both lawsuits — the one being heard by the Supreme Court and the one in the 5th Circuit — “will have to be resolved in the Biden Administrations’ favor for student loan forgiveness to take effect.”

The Biden administration is expected to ask the Supreme Court to consider both cases — the 8th and 5th circuit cases — but it is unclear, for now, whether the Supreme Court will look at both cases together. Per Politico, “the court could consolidate [the 5th circuit court case] with the one it agreed to hear on Thursday,” which could decide the legality of the move in in one fell swoop, or the legal battle could play out for longer, if the Supreme Court decides not to take up the 5th Circuit case for now or lets it play out in lower courts first.

But will the Supreme Court rule in Biden’s favor? The Supreme Court has stonewalled several Biden Administration plans since his inauguration, including COVID-19 protocols such as pandemic eviction moratoriums and vaccinate-or-test mandates for large companies, as well as immigration and environmental policies.

President Biden announced another student loan payment pause extension in the wake of his forgiveness plan’s legal turmoil. Instead of student loan payments resuming on Jan. 1, 2023, after having been paused since March 2020, they will now resume 60 days after the forgiveness plan is implemented or court litigation ends.

“It isn’t fair to ask tens of millions of borrowers who are eligible for relief to resume their student debt payments while the courts consider the lawsuit,” the President said in a Twitter video announcing the extension of the payment pause.

About 26 million people had applied for forgiveness before the injunctions were placed, and 16 million had already been approved. The total debt forgiveness that could result from the plan is estimated to be around $400 million, providing families with much-needed additional income during a time of economic instability.

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