Supreme Court to Determine Legality of Biden’s Student Debt Relief Plan

After two years of waiting, Americans will finally learn if President Biden has the authority to cancel student loan debt once the Supreme Court gives its final verdict. The question has been hotly debated since Biden floated the idea while still on the campaign trail for the 2020 presidential election.

Following the announcement last August that the Department of Education would be canceling up to $20,000 in federal student loans for most borrowers, conservative state governments filed lawsuits almost immediately ensuring a showdown in the Supreme Court. 

What to Expect in the Supreme Court Challenge to Student Debt Relief?

There are two facets to the Supreme Court cases around the Biden-Harris student debt relief. The first is typical of most court cases, the plaintiffs must establish “standing”: what legal basis do they have to bring this challenge in the first place? The argument the states are using is that broad student debt cancellation will cause “concrete particularized harm” to their state economies, especially their arms that service federal student loans, such as Missouri’s MOHELA, which the Dept. of Ed. just granted tens of millions of dollars in contracts for servicing loans in the PSLF program.

The second element is whether the President had the authority to cancel the student loans in question, which has been the central debate for years now. 

Where the Arguments on Student Debt Relief Stand Now in Court

Both facets of the lawsuits against Biden’s student debt relief plan seem to stand on shaky ground, but there’s no knowing exactly how the court will swing. Several justices seem skeptical about the standing of these cases, and MOHELA has especially been brought into the spotlight, given that it declined to be part of the lawsuit, but rather Missouri is suing on its behalf. Further, there are significant questions as to whether the plaintiffs can demonstrate that there has been “concrete particularized harm,” or if they’re just speculating about generalized harm. 

The question of presidential authority to enact broad student debt relief seems to be equally unsure footing. Biden’s plan acts upon the HEROES (Higher Education Relief Opportunities For Students) Act of 2003, which is confusing, given the more recent HEROES (Health and Economic Recovery Omnibus Emergency Solutions) Act of 2020, which provided relief to Americans suffering from the outbreak of the Covid-19 pandemic.

The earlier HEROES Act of 2003 was written in response to the terrorist attacks on September 11, 2001, was passed with unanimous congressional support, and made permanent in 2007. It gave the Secretary of Education broad authority to “waive or modify any statutory or regulatory provision applicable to the student financial assistance programs under title IV of the Act as the Secretary deems necessary in connection with a war or other military operation or national emergency.”

This authority was used under the Trump Administration to place all federal student loan payments on hold following the declaration of a national emergency in March of 2020. Since the national emergency is still in effect, and the President has the power to declare one in the event of a natural disaster such as an earthquake or pandemic, it seems unlikely that the justices will rule that he doesn’t have the authority, especially after one of the Act’s architects filed a brief in support.

What Comes Next in the Student Debt Relief Saga?

Cases before the Supreme Court are rarely decided quickly, and the student debt relief question may not be decided until sometime this summer. The Biden Administration has extended the federal loan payment moratorium until two months after the verdict is delivered or September 1, 2023, whichever comes first. There’s no knowing how the Court will rule, or if it even will; it could simply kick the decision back down to a lower court ruling.

If broad student debt relief is struck down, the White House has no current plans to pursue other means to cancel federal student loans outright. Regardless of the outcome, it seems unlikely that the Administration will slow down its pace of ongoing student loan reforms, which have been a consistent effort over the last two years. 

If you have questions about the case before the Supreme Court and how you could be affected, are curious about changes to federal student loan policy, or just need help with your particular repayment situation, give your student loan professionals a call. We’re just a click or call away from providing you with the information you’re looking for and the comfort and confidence you need.