Biden's student-loan forgiveness is about to have its day at the Supreme Court. Here's everything you need to know.
Photo by Larry French/Getty Images for We, The 45 Million
- The Supreme Court will hear two challenges to Biden's student-debt-relief plan on Tuesday.
- The court's decision will determine if millions of borrowers will get up to $20,000 in loan forgiveness.
- Here's everything you need to know about the cases and what's at stake for borrowers.
Alexandria Mavin believes student-loan forgiveness is long overdue.
Mavin, who had borrowed $117,000 in student loans by the time she graduated from college in 2013, has paid back $70,000, but she still owes $90,000 because of surging interest rates. It's an example of the crushing burden many borrowers face — and it's time for relief, Mavin previously told Insider.
"There needs to be an understanding between the generations on what the real issues are, and not just play the unfair game" when it comes to debt relief, Mavin, 33, said. "It's just something really good that needs to happen to help everybody, because everybody deserves a future."
Mavin is among the millions of Americans who would benefit from President Joe Biden's plan, released in August, to cancel up to $20,000 in student debt for federal borrowers making under $125,000 a year. Yet after the president's announcement last summer, his administration has faced a slew of GOP-backed lawsuits seeking to block the policy. Two of those legal challenges have succeeded in that federal judges have temporarily paused the implementation of the relief.
Now, the Supreme Court is set to review the pair of cases in oral arguments on Tuesday, and its decisions, to be released this summer, will determine the fate of millions of borrowers.
To Mavin, the student-loan industry is broken, and Biden's proposal would help mitigate the harm to borrowers.
"We need this fix," Mavin said.
The cases
The challengers have argued that Biden exceeded his constitutional power by enacting sweeping relief without congressional approval. But the Biden administration has defended its legal authority and expressed confidence that the Supreme Court will uphold the plan.
The central issue is Biden's use of the HEROES Act of 2003 to carry out his broad student-debt cancellation, a federal law that grants Education Secretary Miguel Cardona the authority to waive or modify student-loan balances in connection with a national emergency like COVID-19. Several legal experts have supported Biden's use of the law to enact the relief, as has one of the architects of the HEROES Act, former Democratic Rep. George Miller.
In both cases, the Supreme Court will review whether the administration overstepped its legal authority and whether each of the lawsuits have standing — which means the plaintiff would be injured by the policy, that the injury can be directly traced back to the defendant, and that the relief they're seeking would address those injuries.
There are multiple possible outcomes — the Supreme Court could strike down the relief completely as unconstitutional, or issue a more narrow ruling that would allow the relief to proceed if it finds one of the cases lack standing.
In Biden v. Nebraska, six Republican-led states — Arkansas, South Carolina, Iowa, Kansas, Nebraska, and Missouri — insist Biden's plan is an overreach. The states argue the relief would hurt their tax revenues, along with the revenue of the Missouri-based student-loan company MOHELA.
The Missouri student-loan company's involvement in the case has left some legal experts confounded. While the states claim that "MOHELA will lose the revenue from servicing" loans because of the relief, the company itself denied having anything to do with the legal challenge, and the DOJ argued that the company can sue and be sued on its own.
"On one hand, when the state created MOHELA over 40 years ago, it made clear that MOHELA is separate," David Nahmias, a staff attorney with the UC Berkeley Center, previously told Insider.
"But now with this lawsuit, Missouri is trying to argue that the state will lose income by virtue of the fact that student-debt cancellation possibly could cause MOHELA to lose some loan-servicing revenue that possibly could be passed along to the state of Missouri," Nahmias said.
In a separate challenge to be heard by the Supreme Court on Tuesday, two student-loan borrowers — Alexander Taylor and Myra Brown — sued the Biden administration because they did not quality for the full debt forgiveness. The case, Department of Education v. Brown, is backed by the conservative Job Creators Network Foundation Legal Action Fund.
Taylor claims he did not qualify for the full $20,000 in debt relief since he was not a Pell Grant recipient, and Brown holds commercially held loans, which don't qualify for any relief.
The borrowers argue that Biden's plan violates the Administrative Procedure Act's notice-and-comment procedure, a federal statute that requires agencies to justify rulemaking to the public and give them an opportunity to comment.
The Biden administration has consistently stood by its legal reasoning.
"The lower courts' orders have erroneously deprived the Secretary of his statutory authority to provide targeted student-loan debt relief to borrowers affected by national emergencies, leaving millions of economically vulnerable borrowers in limbo," Biden's Justice Department wrote in a brief to the Supreme Court.
The stakes
The hotly contested issue of student-debt cancellation has attracted widespread attention from the left and right in recent years. Prominent figures in the legal and political worlds have weighed in on the two high-profile Supreme Court cases in dozens of briefs filed to the Supreme Court.
More than 170 Republican members of Congress have argued against Biden's relief, along with 17 Republican-led states, the US Chamber of Commerce, and over a dozen conservative-leaning advocacy groups.
Proponents of the relief include two top labor unions, the National Education Association and the American Federation of Teachers; a coalition of city and county governments nationwide; 21 Democratic-led states and Washington, DC; and liberal-leaning advocacy groups such as the Student Borrower Protection Center and NAACP.
Millions of student-loan borrowers' financial futures hang in the balance. The total student-debt load in the US currently stands at $1.7 trillion, and the White House estimates that of the 43 million Americans with federal loans, 20 million of them would have their balances completely wiped out under Biden's plan.
What's next
Following oral arguments on Tuesday, the Supreme Court is expected to hand down rulings in the two cases before the end of its term, which typically wraps up in late June or early July.
For now, payments on student loans are still paused. Biden in December extended the pause that was first enacted nearly three years ago by the Trump administration at the onset of the COVID-19 pandemic. Payments are expected to resume 60 days after June 30, or 60 days after the ongoing legal challenges are resolved, whichever happens first — meaning there's a chance borrowers could start payments again without any debt relief.
Still, Biden's Education Department is preparing to ease borrowers back into repayment by implementing a new income-driven repayment plan, which would cut monthly payments for undergraduates with federal loans in half and limit the amount of interest that can build on their principal balances, among other provisions. An exact implementation date for those reforms is unclear.
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