When President Biden authorized a sweeping 400 billion dollar Student Loan Forgiveness Program, mayhem erupted around the nation. Not only did millions of eligible recipients quickly apply for relief but swaths of (mostly Republican) lawmakers raced to halt the action. Those efforts proved successful. Since October, the program has been blocked by The 8th Circuit Court of Appeals, pending its day in the Court.
That day has arrived. On February 28th, a Courtroom Drama kicks off in which two cases will be jointly presented to the (mostly Conservative) Supreme Court Justices: Biden V. Nebraska & Dep. Of Education V. Brown (Not to be confused with Brown V. Board of Education). The fate of Biden’s (and perhaps all) student loan forgiveness initiatives, now rests on the Court’s interpretation of this program. If the stakes didn’t seem high enough, understand that the student loan repayment pauses, which have been in effect since the pandemic, have been pushed to one final deadline — 6o days after the Court’s verdict. Millions now wait in suspense to find out if they should celebrate or sell their computers to pay the coming bills. (Here, you can listen to the case live.)
PART I — BIDEN’S PROGRAM
Let’s recap what this is about. Biden’s Student Loan Relief Program aims to cancel $10,000 of Student Loan payments for those making less than $125,000 and double that for joint-filing households. Pell Grant Recipients of lower income brackets would be eligible for an additional $10,000 of relief.
After years of talk, how is this now happening? Simply put, The Biden administration deemed the economic devastation brought by the pandemic as justification to tie the program with the Higher Education Relief Opportunities for Students Act (HEROES Act). The 2003 law states that the government can provide relief to recipients of student loans when there is a “national emergency.”
But despite the Program’s many projected benefits, including relieving 20 million borrowers’ debts entirely, the program is seen by challengers as not just too expensive but unconstitutional and financially devastating.
PART II — WHO IS MAD ABOUT THIS?
The Biden Administration will face two cases, where the challengers will attempt to prove “Standing.” Article III Standing is the idea that a party has proven to a judge that they have been injured by another party and a court ruling would fix that injury. In Biden v. Nebraska, six republican states will argue that Biden’s program will destroy tax revenue and damage the state’s interests. The secret weapon on this front is Missouri. More specifically, MOHELA, The Higher Education Loan Authority of The State Of Missouri — which has grown into one of the largest owners of Student Debt in the country.
In Dep. of Education v. Brown, two student loan buyers, Myra Brown and Alexandra Taylor, will argue that they have been harmed by the program because their privately held student loans are not eligible for forgiveness. They will try to prove the Secretary of Education failed to follow proper procedures enacting this program, which made them lose an opportunity to obtain debt forgiveness and thus have standing to remedy these injuries.
PART III — WHAT IS THE STATE’S ARGUMENT?
While all six states argue their revenue streams will be affected, Missouri makes the strongest case. Missouri’s Lawyers argue that MOHELA is an arm of the state and thus, impending financial losses from discontinuing federal loan servicing would burden the state. They claim in their briefing, “The States have standing to challenge the Program. First, the Program will inflict substantial financial losses on MOHELA, and those losses injure Missouri. MOHELA is a state-created and state-controlled public entity that performs essential public functions for the State.”
Additionally, because many private loans (which States like Nebraska and Arkansas invest in) have started to become consolidated — “refinanced” by public loans — the states would lose revenue. Why? For some, Biden’s program would pay off student loan debt entirely. No more debt means no more interest payments, which ultimately means loss of profit and what the State’s lawyers classify as “an actual financial injury.”
PART IV — THE COUNTER-ARGUMENT
On the other end of the argument, defendants of the Relief plan advocate that none of the states can argue there is a clear causal link between loss of tax revenue and student loan forgiveness, stating “[the states] lack standing because their supposed threatened economic injuries are speculative and unsubstantiated.” Basically, they’re saying there are a lot of false assumptions being made about impending damages from this program.
Defendants also argue that MOHELA and Missouri are not as connected as led to believe, stating, “an injury to MOHELA does not confer an injury on the State of Missouri because MOHELA is independent from Missouri. The two entities are separate.” In a letter between MOHELA and Missouri Rep. Cori Bush, MOHELA admits “MOHELA has not had, and does not have, a contractual relationship or agreement with the Missouri Attorney General’s Office on any topic including as to student debt relief.”
It turns out the two have been acting quite separately in the wake of this program. In that same letter, it’s revealed that it was the state of Missouri, not MOHELA executives that pushed for the lawsuit, and according to the defendant’s briefing “Publicly available evidence shows that MOHELA has been cooperating with the U.S. Department of Education on its debt discharge plan, a position inconsistent with that of the State of Missouri.”
Skeptics point out that MOHELA has transformed into something far larger than anticipated in its original mandate. There are some who claim its become a “financial behemoth” owning one of every ten dollars of outstanding student loan debt.
PART V — BROWN & TAYLOR
Backed by the financing of Job’s Network, a conservative advocacy group, Brown and Taylor’s lawsuit seeks to prove that improper procedures were taken by the Secretary of Education in enacting this program and then caused financial harm. In the case of Taylor, challengers mention, ” [Taylor’s] level of debt forgiveness could easily increase if the Secretary based eligibility on a more relevant metric, such as current income. In fact, Taylor makes less than $25,000 a year, but individuals making exponentially more than that ($250,000 for joint filers or $125,000 for individuals) will receive $20,000 in debt forgiveness if they received a Pell Grant.” Brown is apparently also being unfairly denied $17,000 of debt forgiveness, however, she came under scrutiny when it was found out her sign-making company received a $48,000 loan from the Paycheck Protection Program, of which $47,996 was forgiven.
Regardless, the two are arguing debt forgiveness is being handed out by an unfair, unclear system, brought forth unjustly — the one final point of attack the challengers are using.
PART V — A MAJOR QUESTION
Another topic that will be debated is whether or not the implementation of the HEROES Act is appropriate in justifying Biden’s program. The HEROES Act was birthed in the wake of 9/11 to protect individuals from being put in a “worse position” financially by providing relief to recipients of student loans in response to a national emergency.
Challengers argue that this is inappropriate because:
- “Keeping borrowers from a “worse position” does not permit the mass discharge of loans, because that puts those borrowers in a better position.” In addition, “the Secretary’s unpublished, self-reported data show that most borrowers do not “expect to experience difficulty repaying loans.”
- While Biden’s program outlines the negative economic conditions brought by the Pandemic as justification for a National Emergency, there are many other factors that have caused current economic hardships such as the war in Ukraine.
- Biden’s debt forgiveness program was more of a pre-textual “campaign promise” than a connection to a National Emergency.
- The program overstretched its authority because it circumvented congressional approval and disregarded the Major Question Doctrine.
The Major Question Doctrine is the idea that federal agencies (in this case, The Secretary of Education) cannot initiate sweeping new policies that have a significant economic impact without authorization from Congress. Because half a trillion dollars is indeed significant, challengers believe Biden and The Secretary of Education are far out of their expertise to go forward with this without the okay from Congress.
THE BOTTOM LINE:
Despite the points laid out in reference to the Major Question Doctrine, The Biden Administration’s most important point of defense for the program will be in the case of “standing.” In an NBC article published on Feb. 27th, Ilya Somin, a law professor, mentioned “it seems as if the government has put most of its eggs in the standing basket.”
Regardless of the strong technical cases being made against standing, the concept of Student Loan Forgiveness has for years been a very ideologically divisive topic. For this reason, one can expect the Conservative Court to make an effort to disprove the constitutionality of Biden’s program and attempt to derail it. Who knows what will happen, but one thing’s for certain: The ramifications of this case will affect millions of Americans for years to come.