Supreme Court readies to hear Biden’s student loan forgiveness case

The Supreme Court will hear oral arguments Tuesday on President Joe Biden’s student loan forgiveness plan, beginning a decision-making process that will affect the balance sheets of tens of millions of Americans.

Nine justices will consider two legal challenges to Biden’s plan to cancel student loans up to $20,000 for borrowers: One from six states led by the GOP (Arkansas, Iowa, Kansas, Missouri, Nebraska and South Carolina) and another supported by Job Creators. Network Foundation, a conservative advocacy organization.

Before the president acted, Republicans had criticized the loan forgiveness as a handout to wealthy college graduates. He also said the president does not have the power to forgive consumer debt on his own without authorization from Congress.

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Biden’s policy has faced at least six lawsuits since it was launched in August. Dozens of Republican members of Congress have also filed briefs with the US Supreme Court, arguing that the Biden administration’s student loan forgiveness plan should be ruled invalid.

There is no precedent in US history for the type of debt relief the White House has promised, although consumer advocates point out that large corporations and banks have been bailed out by governments during their own crises. And they say massive education debt cancellations are needed to relieve many struggling borrowers from the broken lending system.

“The court should see these lawsuits as truly partisan and protect the Biden administration’s historic relief plan,” said Ben Kaufman, director of research and investigations at the Student Borrower Protection Center. “Borrowers deserve better than to be treated like political pawns – their lives and livelihoods are at stake.”

Here are three things to know.

Although the Biden administration had to remove the loan forgiveness application portal shortly after launching the plan due to legal challenges, the US Department of Education has been able to “approve” more than 16 million people for relief and even send documents to loan servicers.

If the Supreme Court decides the administration can implement the plan, those borrowers could see their debt reduced or wiped out quickly, said higher education expert Mark Kantrowitz.

“It should take one to two weeks to implement the service,” Kantrowitz said.

More than 10 million borrowers may be eligible for the aid, and those who haven’t applied should have another chance if the policy remains.

At an estimated cost of $400 billion, Biden’s plan to forgive student loans is one of the costliest executive actions in history.

The judges will examine whether the president has the power to enact sweeping policies.

The Biden administration has insisted that the action is legal, pointing out that the 2003 Heroes Act authorizes the US Secretary of Education to make changes related to student loans during a national emergency. The country has been operating under a declaration of emergency due to Covid since March 2020.

Student loan borrowers had trouble paying off their loans before Covid. Only about half of borrowers will repay by 2019, Kantrowitz estimates. A quarter – or more than 10 million people – are in delinquency or default, and others have applied for temporary relief measures for struggling borrowers, such as deferment or forbearance.

These grim numbers have drawn comparisons to the 2008 mortgage crisis, and put pressure on Biden to provide relief.

Gregory Caldeira, a political science professor at Ohio State University, said he would not be surprised if the high court ruled against Biden.

“Court conservatives have been very aggressive in overturning the decisions of Congress and the president,” Caldeira said.

For some reason, Dan Urman, a law professor at Northeastern University, also predicted that student loan forgiveness would not survive the Supreme Court.

He said conservative judges believe government agencies have too much authority and “violate the separation of powers.” In addition, he said, the concept of debt forgiveness seems to be in contrast with the understanding of individual responsibility.

Such a politically motivated decision, however, may tarnish the public’s perception of the judicial branch, Urman said.

“Striking down pardons will add to the growing skepticism that conservative judges vote for conservatives, and liberal judges vote for liberals,” Urman said.

Only 25% of Americans have confidence in the supreme court, a Gallup poll found this summer.