Student loan debt is a trillion-dollar problem for millions of Americans, and in August 2022, President Joe Biden announced a plan to help many people who owe money on student loans. The Biden plan would cancel federal student loans of up to $10,000 for those under set income limits, and those who received Pell Grants could potentially have up to $20,000 in debt canceled.
The plan was controversial, though, as opponents noted that the Biden administration took unilateral action without getting Congressional approval. That prompted multiple lawsuits, both from state governments and from student loan borrowers not fully covered by the plan. After lower courts ruled in favor of the plaintiffs, the Supreme Court granted expedited review, hearing arguments in late February 2023.
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Based on the arguments and the questioning from the nine justices, many expect that the Supreme Court will strike down the Biden student loan forgiveness plan. Yet, although the high court is supposed to be outside the political process and thereby immune to popular sentiment, the 40 million student loan borrowers who might benefit from the Biden plan arguably give the Supreme Court 40 million reasons to rule in favor of it, especially if the justices decide that the plan would go through anyway. Here's why.
What the Supreme Court is deciding
With any legal decision, it's important to know exactly what the plaintiffs asserted. The Supreme Court heard arguments on two separate lawsuits brought by different groups.
One lawsuit came from the Nebraska state government, which joined five other states in arguing that the plan went beyond the power extended to the U.S. Department of Education. It asserted that allowing the plan to go forward would cause the states financial harm.
A lawsuit from a pair of Texas students took a slightly different tack. One of those plaintiffs wasn't eligible for the Biden plan because the plan covers only federal student loans, not loans issued by private financial institutions. The other was eligible for $10,000 in relief but didn't qualify for the larger $20,000 in forgiveness for Pell Grant recipients. Both argued that the Department of Education unfairly excluded them from all or part of the potential debt cancellation.
In both cases, the U.S. solicitor general argued that the Supreme Court shouldn't make a decision on the merits of the arguments because the parties bringing the lawsuits lacked standing to do so. For the states, the potential for state government agencies to lose proceeds of servicing fees for loans that are forgiven arguably is too indirect a harm to allow proper filing of a lawsuit. Similarly, invalidating the program wouldn't benefit the individual students. Indeed, one of them would potentially lose $10,000 in loan cancellation.
A long shot
To be clear, many justices gave short shrift to the arguments on standing. Indeed, the very magnitude of the relief program bolstered their resolve, with Chief Justice John Roberts and others pointing to the hundreds of billions of dollars in debt cancellation that would result from the plan. With so much at stake, the questions from several justices suggested that the larger the potential amount at stake, the more important it was for Congress to weigh in specifically.
One possibility, though, is that the Supreme Court could conclude that there's no point in forcing the Department of Education to go through the anticipated workaround of claiming statutory authority under a different law. Some lawmakers criticized Biden for using a statute that's tied to emergency authority rather than a broader law that has been used in more limited situations in the past. In fact, the Supreme Court earlier this year denied a request for a stay in Sweet v. Cardona, a case involving the forgiveness of $6 billion in student loan debt tied to for-profit educational institutions that were accused of predatory lending practices. If a majority of the Supreme Court would accept that the Department of Education would have power under that statute, the court could simply acknowledge that in its ruling, rather than going through the lengthy process of forcing the Biden administration to do so.
Don't count on a win
Even though the Supreme Court has reasons to approve the Biden plan, student loan borrowers shouldn't count on it. With the pause on repaying student loans expiring in less than three months, it's important to prepare to make payments again. If you're ready to deal with the worst, then a favorable ruling from the Supreme Court will just come as a pleasant surprise.
