Supreme Court Poised to Review Student Loan Debt Handout Plan

Tuesday, the Supreme Court heard arguments in two cases pertaining to President Joe Biden’s student loan debt handout plan. If determined to be legal, the program will have financial implications for millions of American taxpayers and people with student loan debt.

The Justices will hear the challenges to the loan debt handout, which determine questions about whether or not the Department of Education could advance the rule that implements Biden’s plan and if it follows correct regulatory procedures, or if the move requires approval by Congress.

Besides the regulatory and statutory aspects of the cases, Biden v. Nebraska will consider whether the six states who have filed lawsuits have the constitutional standing to challenge the rule. Department of Education v. Brown will examine whether two individual student loan borrowers can bring the challenge.

President Biden’s student loan handout plan would cancel $10,000 of each borrower’s federal student loan for individuals earning less than $125,000 per year and for those households making less than $250,000 per year as of 2020 or 2021.

Recipients of Pell Grants would receive another $10,000 in debt cancellation. Pell Grants are usually awarded to applicants who demonstrate greater financial need. Loans must have been disbursed before July 1, 2022, to be eligible for debt cancellation.

Around 43 million student loan borrowers are eligible for the loan handout, and almost half would have a complete cancellation of their debt. The Biden administration says that 26 million have already applied for debt relief so far, with 16 million applicants already being approved pending the court case results. According to the nonpartisan Congressional Budget Office, the debt relief will cost taxpayers around $400 billion over the next three years if fully implemented.

President of the Job Creators Network, Elaine Parker, filed a lawsuit on behalf of two student loan borrowers in Department of Education v. Brown and said that if the Supreme Court sides with President Biden, it will give “not only this president but every future president a blank check to create programs this size without any input from Congress or the American people.”

Parker added it will “signal to colleges that they can continue increasing tuition on these students higher than the rate of inflation.”

President maintains he has the authority to wipe out student debt under HEROES Act

The president has maintained he has the authority to wipe out student loan debt under the Higher Education Relief Opportunities for Students (HEROES) Act, which was initially enacted following the September 11, 2001, terrorist attacks. The law was first intended to benefit service members deployed to Iraq and Afghanistan by providing other relief or waiving their student loan debt. The HEROES act was enacted in January 2002, revised and extended in 2003 and 2005, and made permanent in 2007.

Both the Biden and Trump administrations have cited the legal authority granted by the HEROES Act to pause student loan repayments because of the impact of the Covid-19 pandemic. However, the Trump administration did not pursue a plan for student debt cancellation under the authority of the act as the Biden administration has.

Student loan repayments will remain paused until either 60 days after the release of the Supreme Court ruling or 60 days following June 30, whichever happens first.

It is possible that President Biden could issue another extension of the repayment pause depending on the case’s outcome.

Justices of the Supreme Court are expected to issue rulings in the loan handouts cases later this year. Decisions are expected in late June or early July, before the end of the current term.