In Student Loan Case, Supreme Court to Weigh Pandemic’s ‘Profound’ Effect on Borrowers

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Even as it plans to end the COVID public health emergency, the Biden administration will make its case before the U.S. Supreme Court Tuesday that the ongoing financial hardship caused by the pandemic continues to necessitate a one-time student loan forgiveness plan. 

The court will hear two cases that say the administration exceeded its authority when it offered borrowers up to $20,000 in debt relief last August. One is from six GOP-led states; the second is from a conservative organization that sued on behalf of two borrowers who argue the administration’s plan leaves them out. 

Given the 6-3 conservative majority on the court, experts say it will be tough for Biden to win. Just last year, the court ruled that the administration’s plan to set limits on carbon emissions crossed “constitutional lines” and exemplified government overreach.

The states — Nebraska, Arkansas, Iowa, Kansas, Missouri and South Carolina — and the plaintiffs who filed the second lawsuit will first have to convince the court that Biden’s plan would cause them financial harm and that they had legal “standing” to sue in the first place. 

“It seems likely that if there is standing, that the loan forgiveness will be overturned,” said Michelle Dimino, deputy director of education at Third Way, a center-left think tank. “Can the department do something with that level of political and economic significance without an act of Congress?”

After the administration paused repayment multiple times, Biden’s decision to go forward with the loan forgiveness plan was viewed as a politically popular move ahead of the recent midterm elections. Supporters hailed it as compassionate toward borrowers, including the 45% of educators who took out loans to afford college. American Federation of Teachers President Randi Weingarten said many were “eagerly awaiting the breathing room … student debt relief would bring.” But Republicans argue it’s not only illegal, but favors one group of borrowers at the expense of others. 

“Where is the forgiveness for the guy who didn’t go to college but is working to pay off the loan on his work truck?” Louisiana Sen. Bill Cassidy, ranking member of the education committee, asked earlier this month during the first meeting of the new Congress.

Others say the plan increases inflation and could leave today’s K-12 students with the impression their college debt might be slashed as well. 

“If [politicians] have the authority to give away money if they declare an emergency, there’s a lot of incentive to declare emergencies — or give it away after they’ve declared one,” said Rick Hess, a senior fellow and the director of education policy studies at the conservative American Enterprise Institute.

But Kim Cook, CEO of the National College Attainment Network, said Biden presented the plan as “one-time debt relief” and that “future students shouldn’t depend on it.” Her organization, and many others, advocate for doubling the Pell Grant to $13,000 so low-income students won’t have to borrow so much to go to college.

‘Continued recovery’

During this month’s State of the Union address, Biden briefly mentioned efforts to reduce student debt, but didn’t directly reference the cases before the court. 

The administration’s argument rests on a 2003 law called the HEROES Act — for Higher Education Relief Opportunities for Students. The law gives the education secretary the flexibility to make temporary changes to the federal student loan system in the case of a national emergency, including war.

“Student loan borrowers from all walks of life suffered profound financial harms during the pandemic,” U.S. Secretary of Education Miguel Cardona said last month when multiple organizations filed briefs in support of the plan. “Their continued recovery and successful repayment hinges on the Biden administration’s student debt relief plan.”

One “wild card issue,” Dimino added, is that Biden plans to end the public health emergency on May 11, which could make it harder for the administration to prove its case before the court.

In addition, former Republican education secretaries wrote in a brief to the court that the link between HEROES and Biden’s plan is weak.

“Such a pause only ensured that affected individuals were not placed in a worse position financially,” they wrote. “It did not authorize the executive branch to cancel $400 billion in student debt and leave borrowers in a better position than they would have been in if the COVID-19 pandemic had never occurred.”

In Biden v. Nebraska, the states argue that their tax revenues would drop if students don’t pay back their loans. The Missouri Higher Education Loan Authority, for example, is a nonprofit that services student loans and contributes to the state’s higher education system. Biden’s plan, the states say, could cost the Missouri organization nearly $44 million a year and reduce what it pays the state.

Job Creators Network Foundation, an advocacy group, filed the second case, U.S. Department of Education v. Brown, on behalf of Myra Brown and Alexander Taylor of Texas. Brown, a business owner from the Dallas-Fort Worth area, received loans from commercial lenders, making her ineligible for the Biden program. 

Taylor, a graduate of the University of Dallas, argues that limiting the maximum amount of relief — $20,000 — to Pell Grant recipients is unfair because borrowers earning far more than him will have more debt erased. He earns less than $25,000 a year, but qualified for $10,000 in loan forgiveness because he was not a Pell Grant recipient. Brown and Taylor argue that the administration didn’t give the public a chance to comment on the plan.

In the meantime, borrowers who took advantage of the Biden plan remain in limbo. 

In October, 26 million people were automatically eligible or applied for the relief. The department approved over 16 million applications before the U.S. Court of Appeals for the 8th Circuit blocked the plan.

If the program is overruled, it’s unclear how soon borrowers would have to begin repayment, Dimino said.

“Borrowers are still totally in the dark,” she said. “These are really difficult circumstances for those making immediate financial decisions.”

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