President Joe Biden’s signature student loan forgiveness plan has been blocked by federal courts since last fall. The fate of the program is now in the hands of the Supreme Court, with a formal ruling expected this summer.
If the Supreme Court winds up striking down Biden’s student debt relief initiative, advocates have pointed to a potential backup option that could allow the administration to essentially reissue the program under a different legal authority. But a new legal development could scramble that plan.
Here’s the latest.
Supreme Court To Determine Fate Of Biden’s Student Loan Forgiveness Plan
Biden’s student loan forgiveness plan announced last year would allow millions of federal student loan borrowers to receive up to $20,000 in debt cancellation. Eligible borrowers must have earned under $125,000 if single or married-filing-separately, or $250,000 if married-filing-jointly, in either 2020 or 2021. The administration has said that the vast majority of the debt relief would go to borrowers earning less than $75,000 per year.
Borrowers rushed to submit student loan forgiveness applications after the program was announced over the summer. The Education Department approved millions of those applications before federal courts blocked the initiative in response to legal challenges brought by Republican-led states and conservative-leaning legal organizations. The Biden administration appealed to the United States Supreme Court, which took up the challenges and considered oral arguments in February.
It is not clear how the court will ultimately rule. A clear majority of justices expressed skepticism of the administration’s legal arguments that the HEROES Act of 2003 — a federal statute that allows the Education Department to “modify” or “waive” normal federal student loan program rules in response to a national emergency — can authorize such sweeping debt relief. But the case could ultimately be decided on the issue of “standing” — whether the challengers can show that they would incur a direct, concrete injury as a result of the program. Several justices suggested that the challengers have a standing problem.
Alternative Legal Theory If Supreme Court Strikes Down Biden’s Student Loan Forgiveness Plan
If the Supreme Court winds up ruling against the administration and holding that the HEROES Act does not authorize mass student loan forgiveness, advocates for student loan borrowers have suggested an alternative.
The Education Department could try to reissue the program under a provision of the Higher Education Act (HEA), which is a separate federal statute underlying much of the federal student loan system. The HEA confers authority to the Secretary of Education to “compromise, waive, or release any right, title, claim, lien, or demand” associated with federal student loans.
Administration officials have publicly denied that any student loan forgiveness backup plan is under consideration. But leading congressional Democrats and student loan borrower advocacy groups have suggested that the Biden administration could reissue the program under the HEA’s compromise authority and enact wide-scale student loan forgiveness. In a 2020 legal memorandum, attorneys with the Project on Predatory Student Lending said that the HEA confers “broad” authority for such action.
But this provision of the HEA, much like the HEROES Act, has never before been used to establish such sweeping student loan forgiveness. So the legal theory remains largely untested in federal courts.
New Appeal To Supreme Court Over Separate Student Loan Forgiveness Initiative
A new appeal to the Supreme Court could test the theory that the HEA authorizes mass student loan forgiveness, before the Biden administration even has a chance to utilize it.
Earlier this week, three schools announced that they would be appealing a lower federal court ruling to the Supreme Court, challenging a settlement agreement to resolve a class action lawsuit. The case, Sweet v. Cardona, involves claims that the Education Department improperly stalled or denied relief for thousands of borrowers under the Borrower Defense to Repayment program, which can provide student loan discharges for borrowers who were defrauded or misled by their school.
The settlement agreement will provide $6 billion in student loan forgiveness and other debt relief to hundreds of thousands of borrowers who attended a long list of schools, most of which are for-profit institutions. In agreeing to provide student loan cancellation under the settlement, the Education Department relied on the HEA’s compromise authority — one of the highest-profile uses of this authority to date.
The three appealing schools — American National University, Everglades College, Inc., and Lincoln Educational Services — are urging the Supreme Court to halt the $6 billion in student loan forgiveness under the agreement. The schools argue that the Biden administration exceeded allowable authority under the HEA by agreeing to enter into the Sweet v. Cardona settlement and cancel billions of dollars in student loan debt.
The HEA “in no way grants the limitless and unilateral power the Secretary now claims,” the three schools wrote in court filings. “The secretary’s claimed authority amounts to nothing less than the power to cancel, en masse, every student loan in the country.”
Yesterday, over a dozen Republican-led states filed an amicus curiae brief, arguing that the Secretary of Education “seized immense power that Congress had never given him. This ill-gotten power enabled the Secretary to pursue the mass forgiveness of student loans, a policy that his principal had long promised but not yet convinced Congress to authorize.” The brief goes on to say, “The Secretary has also argued that the Higher Education Act permits him to forgive and issue refunds with respect to all the student debt at issue here, and thus permits him to do what the settlement requires. That is incorrect, and egregiously so.”
If the Supreme Court agrees to take up the appeal on the merits, or grants the schools’ request for a temporary stay of settlement relief, the scope of authority under the HEA to enact broad student loan forgiveness may be put to the test before the court even issues a ruling on the earlier challenges involving the HEROES Act. This could put the Biden administration in a bind if the student loan forgiveness program in its current form is struck down. While the HEA’s compromise authority was discussed during February’s oral arguments, it is not the central legal issue of those challenges.
One potential piece of good news for borrowers, however, is that the schools’ request for a stay was submitted to Justice Elena Kagan, one of the Supreme Court’s liberal justices who seemed most sympathetic to the Biden administration’s legal arguments on student loan forgiveness. Kagan will have to decide whether to grant the schools’ request, or allow the Biden administration to continue implementing the student loan forgiveness mandated by the settlement agreement.
Further Student Loan Forgiveness Reading
What Happens If The Supreme Court Strikes Down Biden’s Student Loan Forgiveness Plan?
Another Student Loan Forgiveness Challenge Heads To Supreme Court — Key Updates
453,000 Borrowers Approved For Student Loan Forgiveness Under Waiver As Processing Continues
Republican Effort To Repeal Biden’s Student Loan Forgiveness Plan Gains Steam
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