It’s been three years since millions of debt-burdened Americans made payments on their student loans and the outcome of two pending supreme court cases will have far-reaching consequences on this vulnerable group.
The payment pause on federal student loans began under Donald Trump in March 2020 at the beginning of the Covid-19 pandemic and continued under Joe Biden. The temporary hold brought financial and emotional relief to people at a time when other concerns regarding the health and safety of their families overshadowed the amount of debt owed from school.
Notably, the pause on payments and interest is still in effect and set to expire 60 days after the supreme court rules on two cases that will determine the constitutionality of Biden’s plan to forgive up to $20,000 per borrower. Supreme court rulings are typically handed down at the end of the session, around June. But as is the case with all supreme court cases, no one knows the exact day the rulings will come down, which has left borrowers on the edge of their seats.
Now, about 40 million student loan borrowers in the US are eagerly awaiting decisions from the nation’s highest court that will determine whether or not they will have thousands of dollars of debt wiped away.
Biden v Nebraska and the Department of Education v Brown will address whether or not Biden had the authority to forgive student debt without congressional approval and if the Heroes Act, which empowered the secretary of education to make changes to any provision of laws relating to student aid programs in the aftermath of the September 11 attacks, justified such a move.
In the event the conservative-majority court finds the student loan forgiveness plan unconstitutional, Biden might have to break his promise to borrowers to forgive a significant chunk of their debt or find another way to keep it.
The payment pause will also end and these borrowers will be forced to go back to start budgeting hundreds, if not thousands, of dollars every month in order to pay bills left over from their higher education.
Department of Education v Brown
In Department of Education v Brown, two plaintiffs – Myra Brown and Alexandra Taylor – argued they would be harmed by Biden’s plan since they would not benefit from it. Brown is not eligible for relief under the plan and Taylor is only eligible for $10,000 in student debt relief – not the full $20,000.
But being ineligible for a federal program hasn’t historically been a solid defense for shutting it down.
Michael Pierce, the director of the Student Borrower Protection Center, a non-profit advocacy organization dedicated to helping loan borrowers get debt relief, called the standing arguments in the Brown case “incredibly weak and poorly thought through”.
“In one case, it’s a pair of borrowers who are pissed that they didn’t get theirs. There’s a long history in the law about being grumpy about programs not benefiting you is not actually grounds to challenge them. There’s a whole line of cases around whether taxpayers can sue the government because they don’t like public policy. And the court is emphatic that no, in fact, you cannot.”
Pierce argues that not benefiting from a federal program is not the same thing as being harmed by it, and he is hopeful the court will agree.
Biden v Nebraska
This supreme court case involves six Republican-led states – Arkansas, Iowa, Kansas, Missouri, Nebraska and South Carolina – that argue Biden’s plan is an overreach of his authority and that their states will financially suffer as a result of it. As one of the nation’s largest holders of student loans, Mohela, or the Missouri Higher Education Loan Authority, would lose profits, and as a result, so would the states, they argue.
Internal documents released by Mohela to fellow borrower advocacy organization Debt Collective after it filed a freedom of information act request, revealed the opposite was true. In fact, Mohela would still see at least a 9% increase in revenue compared with earnings figures from 2022 if Biden’s loan forgiveness plan is enacted.
When oral arguments for the case were initially heard, the conservative supreme court justice Amy Coney Barrett was not convinced the plaintiffs even had standing to sue – a surprise to those in favor of Biden’s plan and a good sign for student loan borrowers.
In response to arguments presented by Nebraska’s solicitor general on behalf of the six states, Barrett said: “Why didn’t the state just make Mohela come then? If Mohela is really an arm of the state, why didn’t you just strong-arm Mohela and say you’ve got to pursue this suit?”
But even with the support of Barrett and all three liberal supreme court judges, Biden would still need the support of one more justice in order to get a favorable ruling.
For his part, Pierce is pleased by Barrett’s skepticism about the defendants’ standing.
“We’ve certainly heard Justice Barrett in oral arguments talk about her concerns that Missouri hadn’t met its burden to prove that it actually is Mohela and or that it hasn’t been injured by a loss of revenue to Mohela.”
But regardless of how well either side argued their case, the outcomes are limited.
It’s possible one or both cases against the loan forgiveness plan will be dismissed because harm cannot be proven, or rather, there is a lack of standing. Biden’s loan forgiveness plan could continue as it was intended.
It’s also possible that one or both cases will be found to have standing; with that, Biden’s plan would either continue or be struck down.
Pierce said it wouldn’t be a surprise “at all if the Brown case gets dismissed”.
“They [might] never reach the merits in that case. I think the more credible threat to student debt relief is the other case – the state attorney generals’ case.”
Pierce added: “There is a real fighting chance that student loan borrowers walk out of the supreme court with debt relief. I think that the obituary for the student debt relief program was written too soon, but there’s a path forward here even if this is a loss, and that’s what makes me hopeful at the end of the day. People are going to get the debt relief they were promised.”
