Exploring the Supreme Court's Upcoming Student Loan Forgiveness Cases

Two of the legal challenges to President Joe Biden's student loan forgiveness plan have reached the U.S. Supreme Court.

In August, Biden announced that tens of millions of Americans would be eligible for cancellation of their education debt. Those who received a Pell Grant in college would be eligible for up to $20,000 in debt relief, while those who didn't receive a Pell Grant would be eligible for up to $10,000 in relief. Individuals who earned more than $125,000, or families making more than $250,000, were excluded from the relief.

Since President Trump announced his intention to cancel student loan debt, Republicans and conservative groups have filed at least six lawsuits challenging the policy. They argue that the president does not have the authority to cancel consumer debt without Congressional approval, and that the policy would be harmful to borrowers and the economy.

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The Biden administration is adamant that its actions are within the law, citing that the Heroes Act of 2003 bestows the U.S. secretary of education the power to waive regulations concerning student loans during national emergencies. The nation has been functioning under an emergency declaration due to Covid since March 2020.

The battle has progressed through the courts, and now the nine justices of the U.S. Supreme Court have scheduled their high-profile legal arguments over the plan for the end of February.

The Supreme Court will hear two cases this week that could have major implications. The first case, Janus v. AFSCME, concerns whether public-sector employees can be required to pay union fees. The second case, Masterpiece Cakeshop v. Colorado Civil Rights Commission, revolves around a baker who refused to make a cake for a same-sex couple's wedding.

On September 29, six states led by Republicans filed a lawsuit against President Biden's student loan forgiveness plan. The states - Nebraska, Missouri, Arkansas, Iowa, Kansas and South Carolina - argue that the debt relief does not address the effects of the pandemic on federal student loan borrowers as required by the HEROES Act.

The Biden administration has said that the public health crisis has caused considerable financial harm to student loan borrowers and that its debt cancellation is necessary to stave off a historic rise in delinquencies and defaults. It is expected to emphasize this point to the justices.

The GOP states also argue that loan forgiveness will disrupt their entities that profit from the defunct Federal Family Education Loan (FFEL) program. Under that program, which was eliminated in 2010, the government guaranteed the loans by private banks and nonprofit lenders. Although the U.S. Department of Education has moved to a system in which it directly lends to students, millions of borrowers continue to owe on commercially held FFEL loans.

The states argue that a major loan servicer based in Missouri, the Missouri Higher Education Loan Authority (MOHELA), would lose revenue under the plan because the Biden administration had initially told borrowers they could transfer their loans from the FFEL program to the main federal loan program to qualify for forgiveness.

The administration issued guidance in September that commercial FFEL borrowers could no longer consolidate their debt to be eligible for its plan. This move was designed to get ahead of any arguments that might be made against the plan.

This development has weakened the states' argument, said higher education expert Mark Kantrowitz.

He said that the potential loss of state revenue is not an ongoing concern.

The second legal challenge the Supreme Court will consider in February was brought by the Job Creators Network Foundation, a conservative advocacy organization.

On October 10, two plaintiffs filed a lawsuit claiming they had been harmed by "this arbitrary executive overreach," according to a press release by the foundation.

One plaintiff, Myra Brown, says she is left out of the president’s relief because she has commercially held loans. The other plaintiff, Alexander Taylor, says he’s not entitled to the maximum forgiveness amount of $20,000 because he didn’t receive a Pell Grant when he was in college.

The lawsuit argues that the president’s policy violated the Administrative Procedure Act’s notice and comment procedure, preventing plaintiffs from having a say in the forgiveness process.

According to Kantrowitz, the Biden administration is likely to argue that the Heroes Act of 2003 gives the education secretary the authority to make changes to federal student loan programs during national emergencies without first taking input from the public.

He said that the Heroes Act "explicitly waives the APA requirement for a notice and comment period."

"The administration simply needed to publish the waivers in the Federal Register, which they did," he said.

The Biden administration has denied that its policy will cause harm to the plaintiffs in the lawsuit, arguing that its plan "will cost respondent Brown nothing and relieve respondent Taylor of $10,000 in debt."