What to know about the legal challenges over student loan forgiveness

Two of the legal challenges brought against President Joe Biden’s student loan forgiveness plan have reached the U.S. Supreme Court.

In August, Biden announced that tens of millions of Americans would be eligible for cancellation of their education debt: up to $20,000 if they received a Pell Grant in college, a type of aid available to low-income families, and up to $10,000 if they didn’t. Individuals who earned more than $125,000, or families making more than $250,000, were excluded from the relief.

Since then, Republicans and conservative groups have filed at least six lawsuits to try to kill the policy, arguing that the president doesn’t have the power to cancel consumer debt without Congress and that the policy is harmful.

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The Biden administration insists that it’s acting within the law, pointing out that the Heroes Act of 2003 grants the U.S. secretary of education the authority to waive regulations related to student loans during national emergencies. The country has been operating under an emergency declaration since March 2020.

The battle has made its way through the courts, and now the nine justices of the U.S. Supreme Court have scheduled their high-profile legal arguments over the plan for the end of February.

Here’s what you need to know about the two cases that will be heard.

On Sept. 29, six GOP-led states filed a lawsuit against the president’s student loan forgiveness plan, arguing that Biden was vastly overstepping his authority. The states — Nebraska, Missouri, Arkansas, Iowa, Kansas and South Carolina — allege that the debt relief “is not remotely tailored to address the effects of the pandemic on federal student loan borrowers, as required by the HEROES Act.”

However, the Biden administration insists that the public health crisis has caused considerable financial harm to student loan borrowers and that its debt cancellation is necessary to stave off a historic rise in delinquencies and defaults. It will likely stress this concern to the justices.

The Republican states also argue that loan forgiveness will disrupt their entities that profit from the defunct Federal Family Education Loan (FFEL) program. Under that program, which was eliminated in 2010, the government guaranteed the loans by private banks and nonprofit lenders. Although the U.S. Department of Education has moved to a system in which it directly lends to students, millions of borrowers continue to hold commercially-held FFEL loans.

The states point out that a major loan servicer headquartered in Missouri, the Missouri Higher Education Loan Authority, or MOHELA, would lose revenue under the plan because the Biden administration had initially told borrowers that they could transfer their loans from the FFEL program to the main federal loan program to qualify for its forgiveness.

But the administration moved quickly to get ahead of this argument, issuing guidance in September that commercial FFEL borrowers could no longer consolidate their debt to be eligible for its plan.

That development has weakened the states’ argument, said higher education expert Mark Kantrowitz.

“The potential loss of state revenue is not an ongoing concern,” he said.

In that lawsuit, filed on Oct. 10, two plaintiffs say they’ve been harmed by “this arbitrary executive overreach,” according to a press release by the foundation.

One plaintiff, Myra Brown, says she is left out of the president’s relief because she has commercially-held loans. The other plaintiff, Alexander Taylor, says he’s not entitled to the maximum forgiveness amount of $20,000 because he didn’t receive a Pell Grant when he was in college.

The lawsuit says the president’s policy violated the Administrative Procedure Act’s notice-and-comment procedure, not allowing plaintiffs to weigh in on the shape of forgiveness.

In response, the Biden administration is likely to argue that the Heroes Act of 2003 grants the education secretary the authority to make changes to federal student loan programs during national emergencies without first taking input from the public, Kantrowitz said.

The Heroes Act, he said, “explicitly waives the APA requirement for a notice and comment period.”

“All the administration needed to do is publish the waivers in the Federal Register, which they did,” he said.

The Biden administration has already denied that its policy will cause harm to the plaintiffs in the lawsuit, arguing that, to the contrary, its plan “will cost respondent Brown nothing and relieve respondent Taylor of $10,000 in debt.”