One of the most hotly debated issues in politics today is student loan forgiveness. In August 2022, President Joe Biden announced a student loan forgiveness plan that would cancel $10,000 in federally backed student loan debt for individuals making less than $125,000 a year, or married couples making less than $250,000 a year (Federal Student Aid; Fact Sheet). Pell Grant recipients would receive $20,000 in debt cancellation. The plan, which could eliminate up to $400 billion of student loan debt, has faced legal challenges from several states and a few borrowers (Swagel). Currently, challenges to the plan are before the Supreme Court of the United States, which heard oral arguments on the matter on February 28, 2023.
At the forefront of the legal challenges to the plan is whether the Biden administration actually has the authority to adopt the plan. The Biden administration cited the Higher Education Relief Opportunities for Students Act of 2003, commonly referred to as the HEROES Act, as the legal authority to enact the plan. The HEROES Act was passed by Congress in response to the September 11th attacks, and gives the executive branch power to grant relief from student debt requirements during periods of war or national emergencies. With the COVID-19 pandemic being declared a national emergency, the HEROES Act was used by the Trump and Biden administrations to pause student loan payments.
During oral arguments, the Biden administration likened its authority to implement the plan to the authority of the Trump administration to pause student loan payments under the HEROES Act. However, the states challenging the plan maintained that due to the lack of any specific language concerning debt cancellation in the HEROES Act, Congress did not intend to give the executive branch the power to conduct a mass elimination of student debt, especially when such debt cancellation does not take into account how the COVID-19 pandemic may or may not have affected an individual covered under the plan.
Additionally, it was argued that the large economic impact of the debt cancellation made it further unlikely that Congress intended to give the executive branch such ability. In response, the Biden administration again pointed to the ongoing student loan payment pause, noting the lack of legal challenge to such pause despite the considerable expense the pause has caused. The lines of questioning during the oral argument certainly seemed to support the expectations going into this hearing; that the conservative wing of the Supreme Court did not believe the Biden administration has the authority to enact such an impactful policy without express authorization from Congress, which is not included in the HEROES Act.
Before the court can consider the merits of the two challenges, it must first decide whether any of the challengers have standing. In order to have standing, the challengers must have suffered some type of harm due to the plan. The Court seemed dismissive of the standing arguments of the borrower challengers and all states, with the exception of Missouri. Missouri claimed standing because Missouri Higher Education Loan Authority (MOHELA), an entity created by and with ties to the State of Missouri that services federal student loans, would suffer significantly reduced revenue due to a reduction of customers caused by the debt cancellation. However, several Supreme Court justices noted that MOHELA is an entity separate from the state of Missouri, and it could have filed a lawsuit challenging the plan itself but did not. MOHELA’s standing was conceded during the oral arguments. So, whether the justices are able to get to the merits of this challenge appears to hinge on the closeness of the relationship between MOHELA and the State of Missouri.
With the public health emergency associated with the COVID-19 pandemic set to expire on May 11th, the most recent pause to student loan repayments is expected to be the last. The most recent payment pause extends until 60 days after the implementation of the relief plan or resolution of the litigation. If neither of those occur prior to June 30, 2023, payments would start 60 days after that date.
The Supreme Court has yet to issue its decision on the Biden administration’s student loan forgiveness plan, but that decision is expected before June 30, 2023. That decision will have an enormous impact on current borrowers of federally backed student loans and will set an important precedent on student loan forgiveness going forward.
Federal Student Aid. (n.d.). Retrieved March 21, 2023, from https://studentaid.gov/manage-loans/forgiveness-cancellation/debt-relief-info
Fact sheet: President Biden announces student loan relief for borrowers who need it most. (2022, August 24). Retrieved March 21, 2023, from https://www.whitehouse.gov/briefing-room/statements-releases/2022/08/24/fact-sheet-president-biden-announces-student-loan-relief-for-borrowers-who-need-it-most/
Swagel, P. L. (n.d.). Re: Costs of Suspending Student Loan Payments and Canceling Debt. Congressional Budget Office. Retrieved March 21, 2023, from https://www.cbo.gov/system/files/2022-09/58494-Student-Loans.pdf