Responding to pressure from Democrats ahead of the midterm elections, the Administration in October had made available an on-line program for canceling up to $20,000 in student loan debt for borrowers who make less than $400,000 per year.
In doing so, the Biden Administration had bypassed Congress to rely on a 2003 law, the HEROES Act, that allows the Education Secretary to grant relief in times of national emergency—such as the Covid-19 pandemic.
The White House was quickly met with legal challenges.
The Administration asked the Court in November to take up the issue a few days after the program was blocked by a federal judge in North Texas, who calls the policy “unlawful.” U.S. District Judge Mark Pittman said in court files that Biden had not followed federal procedures to allow for public comment prior to the student loan forgiveness policy’s announcement.
The Department of Education put the program on pause a few days later while the White House went on legal defense.
That was a month after a Bush-appointed judge in Wisconsin had tossed out a lawsuit challenging the student loan forgiveness program. The Wisconsin Institute of Law & Liberty (WILL) had argued the program was illegal executive overreach that put an undue burden on taxpayers.
Court of Appeals Judge William C. Griesbach asserted that WILL did not have the grounds to sue, writing in his decision, “The Supreme Court has repeatedly held, however, that the payment of taxes is generally not enough to establish standing to challenge an action taken by the Federal Government.”
Those scheduled to challenge the student debt forgiveness plan on Tuesday before the Supreme Court include six Republican-led states, who call the policy an abuse of executive authority that seeks “breathtaking and transformative power” by relying on “a tenuous and pretextual connection to a national emergency,” according to their Court filing.
On the other side of the argument, more than two dozen advocacy groups plan to bus hundreds of student loan borrowers to rally outside the Court. They include representatives from labor unions, civil rights organizations and youth activist groups.
It’s unclear exactly when the Supreme Court will issue its decision, but typically rulings are released by the end of the current term—late June or early July.
In the meantime, the White House has proposed a “student loan safety net.” Announced in January, it would cap payments for undergraduate loans at 5% of borrowers’ pay—down from a 10% cap under existing plans, thus cutting their bills in half. It would also require payments only for those who earn more than about $30,000 a year. That’s up from a cap on borrowers who earn less than $20,400 a year.
However, it remained unclear whether the Office of Federal Student Aid (FSA) would have the money to fund such a plan. According to reports, when Congress approved the $1.7 trillion omnibus government spending bill in December, it did not deliver enough money to the FSA to cover all of its priorities for 2023.
According to the non-partisan Congressional Budget Office, the Administration’s potential forgiveness of student debt from some 26 million borrowers would amount to roughly $400 billion over 30 years.