This is an important month for President Joe Biden’s one-time student loan forgiveness plan: On the 28th, oral arguments will begin in the US Supreme Court for two cases related to the cancellation, which could prevent millions of Americans from having thousands of debts dollars. .
The Supreme Court heard two cases related to pardons. The first, Nebraska v. Biden, brought by six conservative state attorneys general who say the Biden administration overstepped its authority. The second was brought by a conservative advocacy group for two individuals: one who did not qualify for the forgiveness plan, and one who did not qualify for $20,000 in forgiveness.
The Biden administration says it has the authority to implement the program under the HEROES Act of 2003, which allows the Secretary of Education – currently, Miguel Cardona – to make changes to the student loan program during a national emergency (in this case, the COVID-19 pandemic). Specifically, it allows them to “eliminate or modify” provisions related to student financial aid programs, such as repayment requirements.
The White House insists that canceling the debt will ensure that borrowers will not face a post-pandemic financial crisis when federal student loan payments, which have been on hiatus for nearly three years, resume.
“Ending the pause without providing additional relief to low-income borrowers would cause delinquency and default rates to rise above pre-pandemic levels,” the US Department of Justice wrote in a brief filed last month. Two dozen legal scholars filed an amicus brief with the Supreme Court last month supporting the legal standing of the Biden administration.
What the court will decide is whether the COVID-19 emergency qualifies as grounds for widespread relief, said Vaishali Rao, a partner at Hinshaw & Culbertson. Rao represents servicers, debt collectors, and creditors, and has also investigated student loan origination, servicing, and debt collection practices.
“The language of the HEROES Act is pretty clear that the government has the authority” to cancel the debt, Rao said. “Does it make sense for the situation, or is there something narrower that can be done?”
Many borrowers were already unable to pay off their student loan debt before the pandemic, a problem that will only continue, Rao said. This apology could set a precedent for future government action.
Biden’s plan, announced last year, would forgive up to $10,000 in federal loans for borrowers who earn $125,000 a year, and up to $20,000 for those who receive Pell Grants while in school. When applications for pardons first opened, about 26 million people applied before they closed.
What should borrowers do?
Now, all student loan borrowers can wait. And with the Supreme Court’s 6-3 conservative majority, it better be practical. If you can swing it, pay off the loan while the interest is not charged. Once the payment is resumed, the interest accrual will also be.
“It’s better to be conservative and think this can go away, then have the money to make payments,” says Rao. “And if the government wins, that’s an added bonus. I worry that people don’t have financial plans because they rely on forgiveness.
If you’re struggling and can’t make your payments when the federal break ends, it won’t be difficult to contact your student loan servicer — the company that bills you every month — and see if they can help you come up with a repayment plan. .
Rao also advised borrowers to “know” their debt. Do you have a federal, private, or mixed loan? Only federal loans are eligible for forgiveness.
Additionally, be sure to take advantage of Public Service Loan forgiveness, Borrower Defense for Payments, and other targeted assistance programs if you can. This is entirely separate from Biden’s initial plan and will remain in place even if the Supreme Court rules against Biden’s proposal.
Oral arguments are set for February 28, 2023. More than 26 million Americans have applied for student loan repayment at one time, according to the Biden administration.
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