The Supreme Court held two oral arguments in cases challenging the Biden administration’s student loan forgiveness plan, focusing on the legality of the plan and process to get it implemented.
02/28/2023 3:40 P.M.
6 minute read
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The U.S. Supreme Court held oral arguments in two cases Tuesday challenging the Biden administration’s student loan forgiveness plan.
The arguments focused on U.S. Secretary of Education Miguel Cardona’s authority to create a loan cancellation program under the Higher Education Relief Opportunities for Students (HEROES) Act of 2003 and whether a group of Republican state attorneys general and two student loan borrowers had standing to file suit against the federal program.
The Biden administration, with help from the U.S. Department of Justice (DOJ), appealed legal challenges to its student loan forgiveness plan to the Supreme Court in Biden v. Nebraska and Department of Education v. Brown, leading to the oral arguments held in each case Tuesday.
The DOJ is seeking to remove an injunction preventing the plan from moving forward in the U.S. Court of Appeals for the 8th Circuit (Biden v. Nebraska) as well as a pause from the U.S. Court of Appeals for the 5th Circuit in a Texas case that found the plan is illegal (Department of Education v. Brown), ACA International previously reported.
Cardona acted within his authority to enact the student loan forgiveness plan because it was in response to a national emergency, the COVID-19 pandemic, said U.S. Solicitor General Elizabeth Prelogar, on behalf of the Biden administration during the arguments in Biden v. Nebraska.
Prelogar further argued that the plan waived or modified an existing plan, while Nebraska Solicitor General James Campbell, arguing on behalf of the state, said it is an entirely new plan and therefore, only Congress has authority to create such a plan under the HEROES Act.
The law states, “Notwithstanding any other provision of law, unless enacted with specific reference to this section, the Secretary of Education … may waive or modify any statutory or regulatory provision applicable to the student financial assistance programs under title IV of the [a]ct as the [s]ecretary deems necessary in connection with a war or other military operation or national emergency to provide the waivers or modifications.”
Several justices on the court asked about the distinction between the “waive or modify language” and whether Congress or the secretary of education has the authority to create an expansive student loan forgiveness plan.
The HEROES Act does not give the secretary of education the authority to cancel debt, rather “waive or modify,” Campbell responded.
Justice Elena Kagan said that the court argues the secretary does have such authority.
“Congress does not get much clearer than that,” Kagan said.
Campbell reiterated there is no modification or waiver that created the program.
“It’s a creation of a brand-new program that goes well beyond what Congress intended,” he said, adding the program affects 90% of borrowers whether they were impacted by the pandemic or not.
Justice Sonia Sotomayor said the issue comes down to semantics, and the lawsuits are giving judges the authority to decide on the future of the plan instead of leaving it in the hands of the secretary of education.
The justices also discussed that standing to bring the case means the borrowers and the state need to prove “injury-in-fact” because of the new plan.
Additional discussion focused on the costs of the program compared to benefits for borrowers.
Biden’s plan would reinstate student loan forgiveness for federal borrowers earning less than $125,000 a year, providing up to $10,000 in debt relief, and up to $20,000 for students who received a Pell Grant.
There would be 43 million borrowers that qualify for partial debt forgiveness, and 20 million borrowers would see their loans completely removed. The Congressional Budget Office determined the program expense will be about $400 billion over the next 30 years, according to CNBC.
Similar arguments on standing and the HEROES Act surfaced in the argument in Department of Education v. Brown, which was ongoing at press time.
In the Brown case, Cardona issued a statement on the court’s ruling in a news release: “We believe strongly that the Biden-Harris Student Debt Relief Plan is lawful and necessary to give borrowers and working families breathing room as they recover from the pandemic and to ensure they succeed when repayment restarts. We are disappointed in the decision of the Texas court to block loan relief moving forward. Amidst efforts to block our debt relief program, we are not standing down. The Department of Justice has appealed today’s decision on our behalf, and we will continue to keep borrowers informed about our efforts to deliver targeted relief.”
The borrowers filing suit in the Brown case did not quality for the complete amount of $20,000 in relief and argued the Biden administration acted outside of its authority with the student loan forgiveness plan, according to The Hill.
The borrowers also say the Department of Education (DOE) needed to collect public comments on student loan forgiveness before implementing the plan, according to the article.
ACA continues to follow these cases and will provide additional updates on the oral arguments. In some cases, oral arguments can help determine how the Supreme Court will rule.
Currently, the DOE has extended the pause on student loan repayment, interest, and collections through June 30, 2023, while the Supreme Court’s review of the case proceeds, ACA previously reported.
The DOE reports that borrowers can use the continued payment pause to make sure their contact information is correct with student loan servicers and consider signing up for electronic debit and income-driven repayment plans.
A decision on the case could come at any time after the oral arguments, but a majority of the Supreme Court’s opinions from its current term are expected in June.
ACA members in student loan servicing have successfully helped consumers develop income-driven repayment programs that work. They also explain the options for consumers who truly cannot afford to pay. In many cases, discussions with servicers can also rectify past financial decisions that were not a consumer’s best option.
“These cases also mirror issues at other regulators, such as the Consumer Financial Protection Bureau, that they are acting outside of legislative mandates. This hurts consumers by taking away from the congressional process to provide relief and from limiting public input,” said ACA CEO Scott Purcell. “If the debt relief were passed by Congress, innovation, consumer choice and program costs would have been reviewed. Involving Congress would ensure important checks and balances and accountability would be part of the process. Actions for broad student loan forgiveness ignore structural changes that could be made to the price of college, to the education system in general, and other reforms that would actually address the heart of the problem.”
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