Student Loan Debt Relief Supreme Court 2023
Over the past few years, millions of student loan borrowers in the United States have been given some financial relief, thanks to a policy enacted during the Covid-19 pandemic that paused federal loan payments. However, the Biden Administration has announced that the loan payment pause is set to end this year, although the exact date remains uncertain. Another point of uncertainty is whether the Supreme Court will rule in favor of widespread student loan debt relief.
In August 2021, President Joe Biden proposed a plan for student debt relief that would benefit over 43 million borrowers. The plan calls for individuals who earned under $125,000 ($250,000 for households) to have $10,000 of their student debt wiped out. Pell Grant recipients, who typically demonstrate greater financial need when starting college, would be eligible for an additional $10,000. Supporters of the plan argue that it would provide much-needed relief for low- to moderate-income households that have been hit hard by the pandemic.
However, there have been legal challenges to the student loan forgiveness plan, with some arguing that it exceeds the Biden Administration's authority. Several conservative-backed lawsuits have been filed around the country, and two of them have resulted in nationwide pauses to the Department of Education's application process. These lawsuits are now headed to the Supreme Court for a ruling.
The legal challenges to the student loan forgiveness plan are rooted in the Higher Education Relief Opportunities for Students (HEROES) Act of 2003, which grants the Secretary of Education sweeping authority to adjust the federal student loan framework during national emergencies. The Biden Administration is hoping that the Supreme Court will rule in favor of the debt relief plan, but the outcome remains uncertain. In the meantime, millions of student loan borrowers in the United States are waiting to see what happens next and how their financial situations will be affected.
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.
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