Topline
The Biden Administration asked the Supreme Court Friday to reinstate its student loan forgiveness program after it was blocked in a lower court—one of two legal challenges that will ultimately determine the fate of the program as millions of borrowers’ debt hangs in the balance.
President Joe Biden announces student loan relief with Education Secretary Miguel Cardona (R) on ... [+]
Key Facts
The Biden Administration asked the Supreme Court to either throw out an injunction from the 8th Circuit Court of Appeals, putting the program back into effect while the court challenges play out, or else to take up the case for oral arguments and issue a final ruling on the program’s legality.
The White House argued Republican-led states don’t have standing to challenge the policy and the 8th Circuit wasn’t justified in blocking it, arguing its injunction “leaves millions of economically vulnerable borrowers in limbo.”
The White House asked the court to issue a quick ruling that would allow debt relief to be reinstated while the appeals process plays out, and failing that, asked the high court to hear oral arguments this term and issue a final ruling to resolve the matter.
The Biden Administration needs to win two cases to move forward with loan forgiveness: the case in question Friday, and a second legal challenge in Texas.
If both the Supreme Court and the 5th Circuit Court of Appeals, which covers Texas, rule in Biden’s favor quickly, the program could be reinstated within weeks as litigation moves forward; otherwise, the cases could take months to play out before borrowers could see relief.
What To Watch For
The Biden Administration has also asked the 5th Circuit to rule in the Texas case, which was brought by the conservative Job Creators Network Foundation on two student loan borrowers’ behalf. The White House has asked the 5th Circuit to block a ruling in that case that struck down the student loan forgiveness as unlawful while the case is appealed, and requested that the court rule by December 1. If the 5th Circuit—known to be one of the most conservative courts in the country—rules against the Biden Administration, the White House has already said it will take the case to the Supreme Court as well.
Big Number
43 million. That’s the number of federal student loan borrowers who are eligible for the student debt relief program now at issue. Of those, Education Secretary Miguel Cardona said 26 million had applied for debt relief before applications were suspended on November 11, following the Texas court ruling, and 16 million applications had been approved so far.
What We Don’t Know
What will happen to borrowers if debt relief isn’t reinstated. The Biden Administration still hasn’t made up its mind on whether the moratorium on student loan repayments will be extended again or if they’ll resume in January as scheduled, telling the 5th Circuit Thursday it now faces an “unnecessarily perilous choice” with student loan forgiveness on hold. Resuming payments could be harmful for borrowers, particularly as the Administration warned Wednesday in a court filing it believes the number of borrowers who default on their loans will increase by a “historically large” margin without student loan forgiveness. That’s in part because of confusion over whether or not the program is in place, as some borrowers likely won’t make payments because they believe they don’t have to. Keeping the payments on hold, however, “would cost the government several billion dollars per month in foregone payments,” the White House told the 5th Circuit.
Tangent
There has been some good news for borrowers in recent days when it comes to debt relief for individual borrowers in more narrow circumstances. The Justice and Education Departments announced Thursday they’re changing their process for when people who declare bankruptcy want to discharge their student loan debt. The Associated Press notes the previous system rarely resulted in borrowers having their debt relieved, as there was a higher threshold for student loan debt to be relieved versus other debt, but it could now be easier in the future under the new guidelines. A $6 billion settlement was also approved on Thursday between the federal government and student loan borrowers who alleged they were defrauded by their universities, such as those who attended for-profit colleges.
Key Background
The Biden Administration announced in August that it would forgive $10,000 in federal student debt for borrowers earning less than $125,000 ($20,000 for Pell Grant recipients), and while applications for the program opened in October, no funds had yet been disbursed before it was blocked in court. The White House justified the program under the federal HEROES Act, which allows the secretary of education to “waive or modify” any student financial assistance programs during national emergencies, as the Biden Administration argued the Covid-19 pandemic is. Republicans had heavily decried the forgiveness policy, arguing it exceeded the Biden Administration’s authority, and filed a slew of lawsuits aiming to block it.
Surprising Fact
Justice Amy Coney Barrett has already upheld the student loan forgiveness in response to two other lawsuits that have come before the Supreme Court, but those cases had different circumstances and were considered weaker legal challenges than the two now at issue. Barrett, the justice overseeing cases that come from that particular federal appeals court, also ruled on the cases herself without referring them to the Supreme Court, so it’s still unknown where the other justices stand and how the 6-3 conservative court will rule.
Further Reading
Biden Administration Will Ask Supreme Court To Resume Student Loan Forgiveness Program (Forbes)
Biden’s Student Loan Forgiveness Plan Kept On Hold As Court Sides With GOP States (Forbes)
Biden’s Student Loan Relief Program Blocked By Texas Federal Judge (Forbes)
