The Supreme Court is expected to issue a ruling on the constitutionality of President Joe Biden’s controversial COVID-19 Student Loan Forgiveness Bill in the coming weeks before the court goes on recess.
The Biden Administration put forth their student loan forgiveness plan in late August 2022. The plan aims to forgive debt owed to the Department of Education, specifically $20,000 of debt held by Pell Grant recipients and $10,000 of debt held by non Pell Grant recipients who make less than $125,000 per year ( $250,000 per household). The aim of this plan was to ease the transition back into education loan payments after the lengthy payment pause due to the COVID-19 pandemic. By November 2022, nearly 26 million Americans had applied for debt relief. However, the funds have yet to be dispersed due to the legal challenges.
The debt relief plan was promptly blocked in October 2022 by a group of Republican-led states, including South Carolina, Iowa, Missouri, Arkansas, Nebraska, and Kansas. Each of these states filed a case against the plan, arguing that the executive order was outside of Presidential purview. States like Missouri filed on behalf of loan providers headquartered in their state, claiming that should the debt relief pass, the providers would face severe drops in revenue, thus failing to fulfill their fiduciary responsibility to the state.
Missouri is at the center of this case, filing on behalf of Mohela, or the Missouri Higher Education Loan Authority. Supporters of the debt relief bill questioned why these loan providers did not bring forth a case themselves, and it appears that the loan providers are wondering the same thing. Internal emails show Mohela employees questioning, “Are we the bad guys?”, while others have highlighted the partisan nature of the lawsuit, since loan providers (including Mohela) would actually gain revenue under Biden’s plan. This argument has been reinforced by a resolution passed in the Senate on June 2, with Republicans blocking the debt relief bill in Congress using the Congressional Review Act. This act allows Congress to reverse the executive order with a simple majority in the House and Senate. This decision was largely symbolic, as President Biden can veto the resolution, and it would take a ⅔ majority to overturn the veto–numbers that Republicans lack in both chambers.
Most members of the Democratic party support the student loan forgiveness bill, with the exception of more conservative-leaning members such as Senator Joe Manchin (D-WV). Some proponents of the debt relief bill argue that the bill could go further, including Senate Minority Leader Chuck Schumer (D-NY) and Senator Elizabeth Warren (D-MA), who supported a student debt relief plan that would cancel up to $50,000 in education loans back in July 2021. This plan would make it more challenging to garner Republican support, which is why the majority of Democrats have supported President Biden’s current plan. Additionally, 73% of Americans support the current debt forgiveness plan, including 53% of Americans who have never had loans.
This question of legal standing has led those in support of the debt relief program to hope that the justices will reject the lawsuit. This is largely due to the fact that the plaintiffs (the six Republican-led states) have failed to demonstrate how they would be harmed by the plan. Biden’s administration argues that they are able to carry out their debt relief program due to the Heroes Act of 2003, which allows the Secretary of Education to alleviate student debt in times of national emergency to avoid compounding financial hardship. The Biden administration points to the COVID-19 pandemic as a national emergency which caused significant financial hardship. However, opponents argue that this is a much broader interpretation of the Heroes Act, considering that the act was originally intended to alleviate debt from those affected by 9/11, which is a significantly smaller subset of the population.
There is another possible route for student loan forgiveness that the Biden administration can take, should the current bill be struck down by the Supreme Court. The Biden administration has the opportunity to invoke the ‘compromise and settlement’ authority under the 1965 Higher Education Act. Legal scholars have argued that this act gives the Secretary of Education the authority to ‘compromise, waive, or release’ federal student debt. This plan could be enacted either as a regulation or an order. A regulation would require a negotiation process and a 30-60 day public comment and congressional review period. An order would lead to a faster cancellation of loans, but would be unconventional and require more legal justification, thus presenting challenges from more moderate Democrats. Should the Supreme Court side against the Biden administration (which is highly likely due to the court’s 6-3 conservative majority), and should Biden fail to enact a backup plan, borrowers would not receive the $10,000-20,000 in relief as interest begins accruing again in September.
The implications of this court decision are far-reaching, affecting not only 15% of Americans who would have their debt completely forgiven or greatly reduced by this plan, but also influencing the next presidential election. Public opinion polls consistently demonstrate that each aspect of the Biden plan has majority support. An August 2022 Quinnipiac poll found that among swing voters the plan had majority support. Without a win for debt relief under his belt, Biden risks losing these voters in the upcoming 2024 election.
Ultimately, the debt relief plan is a band-aid on the larger issue of the rising cost of college. While it would alleviate financial hardship among past generations of borrowers, it does nothing to prevent universities from raising their prices each year or loan providers from raising their interest rates. 82% of Americans support government intervention to make college more affordable. It is in the Biden administration’s best interest to put an end to the outrageous cost of a college degree and ensure that more Americans have access to higher education.