Student debt relief is at the Supreme Court. What will that mean for loan forgiveness?
The Supreme Court began hearing arguments on Tuesday brought by six Republican-led states — Missouri, Nebraska, Iowa, Arkansas, Kansas and South Carolina — challenging President Joe Biden’s student debt relief plan. The plan would impact millions of borrowers and either decrease or eliminate their loans completely.
But it won’t be a quick decision by the court. Here’s what we know about the arguments and the potential outcome.
How does the plan work?
The plan, according to the Department of Education’s office of Federal Student Aid, would provide up to $20,000 in debt relief to Pell Grant recipients and up to $10,000 for those without a Pell Grant. This only applies to federal loans. You’re eligible if you make less than $125,000 as an individual, or less than $250,000 as a household.
It could impact more than 40 million borrowers — 20 million people could see their balances wiped out entirely — who hold $1.6 trillion in outstanding student debt. The Department of Education said 44% of borrowers are between 26 to 39 years old. A third are 40 or older.
What’s the history behind the plan? How did it get to the Supreme Court?
To enact this plan, President Biden introduced it under the HEROES Act, which was passed by Congress in 2003 after the 9/11 attacks, to ensure that federal student loan borrowers will not be economically disadvantaged during a national emergency, war or disaster. This law says that when a president declares an emergency of that nature, that the secretary of education has the power to “waive or modify any statutory or regulatory provision” governing student loan programs.
That is how, during the pandemic, both the Trump and Biden administrations were able to pause student loans payments without penalties.
The states in the Biden v. Nebraska case say the president overstepped his authority and that forgiveness threatens the revenue of state entities profiting from student loans.
In the U.S. Department of Education v. Brown case, the justices will hear from two borrowers, one of whom is ineligible and another who doesn’t qualify for $20,000 of forgiveness.
Biden said the relief is “critical” to borrowers recovering “from the economic crisis caused by the pandemic.”
“We’re confident it’s legal,” he tweeted Tuesday morning. “And we’re fighting for it in court.”
When will we know what the outcome will be?
The Supreme Court began hearing arguments Feb. 28 but there’s not a firm date for a decision yet.
The White House extended the pause on student loan repayments, but that will end either 60 days after the court’s decision or 60 days after June 30 if no decision has been made.
Is it possible that loan forgiveness won’t happen at all?
Yes. The Biden administration isn’t commenting on this possibility yet or if it’s exploring other debt relief options but advocates say there could be other methods if this fails, including through the Higher Education Act.
This story was originally published February 28, 2023 at 12:13 PM with the headline "Student debt relief is at the Supreme Court. What will that mean for loan forgiveness?."
