Student Loan Forgiveness: Supreme Court Decision Could Come This WeekHeres What To Know - Forbes

Topline

The Supreme Court will rule in the coming days on the legality of the Biden Administration’s student debt relief policy, deciding the fate of millions of federal student loan borrowers before loan payments are set to resume this fall.

Key Facts

The Supreme Court heard arguments in two cases challenging the Biden loan forgiveness program, one brought by six GOP-led states and another brought by two individual borrowers, backed by the conservative Job Creators Network, who didn’t qualify for the full amount of student loan forgiveness.

The lawsuits argued the Biden Administration overstepped its authority through the loan forgiveness program, which would forgive $10,000 in federal student debt for borrowers earning less than $125,000, or $20,000 in forgiveness for Pell Grant recipients.

The Biden Administration has argued it does have authority to implement the loan forgiveness, and claims the challengers don’t have standing to bring the lawsuits in the first place and they should be thrown out.

It’s still unclear how the court will rule, but the 6-3 conservative court signaled during its oral arguments the justices may be wary of the program, with Chief Justice John Roberts questioning the administration’s authority to cancel loans using the HEROES Act of 2003, which allows the secretary of education to “waive or modify” any student financial assistance programs during national emergencies.

It’s still unknown when the court will rule on the case, but it could come as soon as Tuesday—the next day opinions will be issued—and will likely come at some point this week, though there’s a chance the court could extend its term into next week.

What We Don’t Know

If the Supreme Court does uphold the student loan forgiveness policy, it’s still unclear when it would formally resume and when borrowers’ loans will be wiped away.

What To Watch For

Regardless of the court’s ruling, student loan payments are set to resume later this year after being paused throughout the Covid-19 pandemic. The Department of Education has said borrowers will need to start making payments on federal student debt in October and interest will start accruing again September 1, after a deal reached between the White House and Congress on raising the debt ceiling formally abolished the ongoing payment pause.

Big Number

26 million. That’s how many people applied for student debt forgiveness before the program was suspended in November, according to the Education Department, which is more than half of the 43 million borrowers eligible. Of those applications, 16 million borrowers have been approved so far to have their debt forgiven, but no funds were disbursed before the program was halted.

Key Background

The Biden Administration announced its student loan forgiveness program in August following heavy pressure from Democrats, immediately sparking Republicans’ ire and prompting a wave of litigation. The two successful cases that ended up before the Supreme Court both resulted in lower court judges blocking funds from being disbursed, and the Biden Administration paused the program in November in response. Since the Supreme Court took up the case, Congress passed legislation that would repeal the student debt relief program, but President Joe Biden vetoed the bill and House lawmakers were unable to secure the votes needed in order to override it.

Surprising Fact

The White House justified student loan relief through the Covid-19 pandemic, arguing that it was a national emergency that gave the administration the authority to cancel debt under the HEROES Act. Though the White House formally ended the national emergency for the Covid pandemic in May, the administration has argued student debt relief is still justified because of the pandemic and it’s separate from the end of the national emergency. “There was a national emergency that impacted millions of student borrowers,” an administration official told Insider. “Many of those borrowers still face risk of default on their student loans due to that emergency.”

Tangent

In addition to the more sweeping debt relief plan, the Biden Administration has also imposed a number of other measures regarding student loans that are separate from the Supreme Court cases and won’t be impacted by its decision. The administration has announced changes to debt repayment plans that are based on a percentage of borrowers’ discretionary income, which are designed to reduce borrowers’ monthly payments, and has also expanded debt relief for public servants.