US apex court hears student loan waiver cases: Biden’s Debt Forgiveness Plan, and legal challenges to it

However, a majority of the judges in the currently conservative bent Supreme Court, including Chief Justice John Roberts, were “deeply skeptical” of Biden’s decision, implying that this was “one of the most ambitious and expensive executive actions in the nation’s history, violating separation-of-powers principles”, carried out without congressional authority. The current challenge to the legality of Biden’s move leaves the future of millions of debt-ridden individuals shrouded in uncertainty.

What is Biden’s Debt Forgiveness Plan?

According to the Associated Press, the “Debt Forgiveness” plan was announced by Biden on August 24, 2022, and vowed to cancel 10,000 dollars of student loan debt for individuals “making less than $125,000” or for households earning less than $250,000 per year. Moreover, Pell Grant recipients, who typically demonstrate greater financial need, would get an additional $10,000 in debt forgiven. Federal Pell Grants are mostly awarded to undergraduate students with exceptional financial needs who have not earned a bachelor’s, graduate, or professional degree.

All eligible college students whose loans were disbursed before July 1, 2022, could qualify under this plan, which made some 43 million borrowers eligible for a relaxation of loans. Out of this, 20 million “could have their debt erased entirely” according to the Biden administration.

The official figures given by the White House say that 26 million people have already applied for debt relief, out of which 16 million people have had their relief approved. Meanwhile, the Congressional Budget Office has estimated the program cost at $400 billion over the following three decades.

Under what law were the loans forgiven?

Owing to the economic crisis brought on by the COVID-19 pandemic, the Biden administration set out to provide financial respite to millions of struggling Americans by announcing the debt forgiveness plan that placed reliance on the Higher Education Relief Opportunities for Students Act of 2003, or the HEROES Act, which empowers the secretary of education to “waive or modify any statutory or regulatory provision” that will protect borrowers affected by “a war or other military operation or national emergency.”

How did the two cases arrive at the Supreme Court?

On September 29, 2022, six Republican states including Nebraska, Missouri, Arkansas, Iowa, Kansas, and South Caroline sued the Biden administration in an attempt to stop the loan forgiveness initiative in ‘Biden vs Nebraska’. This was followed by another challenge on October 10, 2022, by two individuals, Myra Brown, and Alexander Brown, on account of their ineligibility to get adequate loan waivers under Biden’s plan in the case of “Department of Education vs Brown”.

While a lower court dismissed the first plea filed by the six Republican states, reasoning that the states could not challenge Biden’s program owing to a lack of harm caused to them, the US Court of Appeals for the 8th Circuit in St. Louis put it on hold temporarily during the ongoing appeal. Here, the Missouri Higher Education Loan Authority (MOHELA) argued that it would suffer financially due to no longer receiving millions of dollars in fees that will now be forgiven by the administration. On December 1, 2022, the SCOTUS decided to resolve this impasse by intervening.

The second case involves two students, Myra and Alexander who alleged that the Biden administration did not provide them the waiver or did so inadequately. While Myra was ineligible for a relaxation of her loans on account of them being “commercially held”, Alexander was eligible for just 10,000 dollars, as opposed to the full 20,000 dollars, since he was not a recipient of the Pell grant.

Siding with the students, the trial court held that they had been deprived “of the opportunity to urge the administration to expand the plan to provide greater debt relief” and hence, had “standing to sue”, the New York Times reported. Thereafter, a federal appeals court upheld the lower court’s order, following which the Supreme Court decided to take it up along with the suit filed by the six states.

Is this the first time student debt is being waived off?

No, according to arguments put forth by Solicitor General Elizabeth B in Tuesday’s proceedings, the Trump administration in the wake of declaring COVID-19 as a “national emergency” in 2020, had also relied on the 2003 HEROES Act to temporarily halt “loan repayment requirements and suspend the accrual of interest”. Thereafter, the Biden administration also utilized the law similarly, when it came to power.