Challenges to President Biden’s Student Debt Handout Heard by Supreme Court

Last month, the Supreme Court heard two challenges to President Biden’s plan to wipe away up to $20,000 in student-loan debt for certain borrowers. The plan faces serious constitutional concerns over the President’s purported authority to cancel such a large amount of debt by himself, but it also faces fairness concerns since not all borrowers will qualify for a handout and those who repaid their loans receive nothing.

The President’s plan proposes the following:

• $10,000 of handouts for student loan borrowers making less than $125,000 per year ($250,000 per year for married couples) who did not receive a Pell Grant
• $20,000 of handouts for student loan borrowers making less than $125,000 per year ($250,000 per year for married couples) who received a Pell Grant
• Reduces the required monthly debt payment under income-driven repayment plans to 5% of discretionary income and allows these types of loans to be forgiven after 10 years if the remaining balance is under $12,000. The government would also forgive a borrower’s unpaid monthly interest on income-driven repayment plans and categorize more income categories as “non-discretionary,” thereby decreasing a borrower’s monthly payment further.

The first challenge, Department of Education v. Brown, was filed by two borrowers named Myra Brown and Alexander Taylor. Brown’s student loan debt is held by commercial lenders, which means she is ineligible for any debt forgiveness under the President’s plan. Taylor is eligible for $10,000 of debt forgiveness, but not the full $20,000. Both argue that the administration bypassed the public review requirements of the Administrative Procedure Act (APA) and therefore denied them the ability to advocate for changes. The other case, Biden v. Nebraska, was filed by the Attorneys General of Nebraska, Missouri, Arkansas, Iowa, Kansas, and South Carolina, who argue that the President’s plan exceeds the authority granted to him by Congress.

The court appeared to be skeptical about the President’s authority to forgive the debt – which most recently is estimated to exceed $400 billion. The administration, for its part, argues that the Health and Economic Recovery Omnibus Emergency Solutions (HEROES) Act grants the President broad authority to cancel student loan debt during a declared national emergency. Since the COVID-19 pandemic emergency remains in effect, the administration argues it is able to cancel student loan debt under the HEROES Act, pointing to language giving the Secretary of Education the authority to “waive or modify any statutory or regulatory provision applicable to the student financial assistance programs” when “necessary in connection with a war or other military operation or national emergency.”

Chief Justice Roberts, however, noted that the plan seemed to be much more significant than a “modification” due to its size and scope. Justice Thomas also called the plan a “grant of $400 billion…[that] runs head long into Congress’s appropriations authority.”

Ultimately, 8 out of 10 Americans do not hold any student loan debt – whether because they successfully paid off their loans, chose instead to attend a lower-cost career, technical, or vocational school, or otherwise chose not to attend college due to its cost. These Americans are ultimately left footing the bill to wipe away the debt of a small minority – many of whom are capable of repaying that debt themselves.

While the Supreme Court considers the arguments in each case, an injunction remains in place that prevents the debt forgiveness program from going into effect. The Court is expected to issue a final ruling prior to the current term’s expiration in June.