Smart Money: Student Debt Cancellation Debates The Supreme Court

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In this episode, we discuss the Supreme Court hearings regarding the Biden administration’s student debt cancellation program.

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Two cases challenging the Biden administration’s student debt cancellation program were heard by the Supreme Court this week. However, a decision will not be made for several months.

Six Republican-led states filed the first case, Biden V. Nebraska, jointly: Arkansas, Iowa Kansas, Missouri Missouri, Nebraska, South Carolina, and Kansas. The debt cancellation is claimed to have a negative impact on state tax revenue as well as the finances of student loan servicers. The Job Creators Network Foundation Legal Action Fund filed the second case, Department of Education against Brown, in Texas on behalf of two individual borrowers. Biden’s relief plan is alleged to be in violation of a federal procedural statute which allows for public comment on any rule. Both cases raise questions about whether Biden is authorized to cancel debt under 2003 HEROES Act.

The justices asked questions that focused on two main themes: merit and standing. Standing refers to the ability to file the cases. Merit is the determination of whether the Biden administration was legally competent under the HEROES act to cancel federal student loan debt up to $20,000 for eligible borrowers.

If the cases are not considered to be valid, the debt cancellation plan of the Biden administration would continue. If the cases have standing, the Justices will be focusing their attention on whether the administration is authorized to cancel the debt. An announcement will not be made until the end the Supreme Court term, which is expected to take place in June. The question of debt cancellation is still open to debate.

Learn more about student debt at NerdWallet:

Sean Pyles: Just today, the Supreme Court heard arguments in a case involving student debt cancellation. This is the final step before the court makes its decision. You’re likely to run out of patience if you are a borrower who is eligible for relief.

Anna Helhoski – No one could blame Sean for this. There was a lot of drama surrounding the cancellation announcement. It seemed like it would happen for a while. But now, borrowers are still in limbo.

Sean Pyles It’s not looking good for people who are seeking debt relief. But, the battle isn’t over.

Anna Helhoski – That’s right. It isn’t over. Let’s get into it.

Sean Pyles: This is the NerdWallet Smart Money Podcast. We welcome you to send us your money questions, and we will answer them with the help our brilliant Nerds. Sean Pyles is my name.

Anna Helhoski: And I’m Anna Helhoski. You can also text or call us at 901-730-6373 to ask us any questions about money. That’s 901-730-NERD. You can also email us at [email protected]

Today, we will return to the Supreme Court case that decided whether 40 million federal student loan borrowers (including Sean) will have their debt cancelled.

Sean Pyles: Anna, me and this topic were discussed a few weeks back. We wanted to provide some updates. Anna, let’s simplify the matter.

Anna Helhoski: Sure. Six Republican-led states filed the first case, Biden V. Nebraska, jointly in Missouri. The argument is that Biden’s proposed debt relief would hurt tax revenue in these states as well as the finances of a Missouri student loan servicer. The Job Creators Network Foundation Legal Action Fund filed the second case, Department of Education against Brown, in Texas on behalf of two individuals.

Sean Pyles Wow!

Anna Helhoski: Yeah, I’d say so. The suit claims that relief is in violation of a federal law that allows public comment on any rule. Both parties question the executive authority to cancel any debt.

Sean Pyles: On February 28, the Supreme Court heard oral argument for both cases. However, they are not expected to make a decision before the end of the term in June. Anna, you were listening as the oral arguments were being presented. Could you please tell us about what happened?

Anna Helhoski : Both arguments were quite long which meant that justices had many questions for both the plaintiffs as well as the Biden administration. Both sides of the political spectrum had Supreme Court justices who focused on two areas: merit and standing.

Sean Pyles: Sean, I’m pressing the invisible alert button for legalese over here. For those not familiar with this material, could you please explain the meaning of standing and merit?

Anna Helhoski: Sure. Standing refers to the right to bring a case to court. Merit is the legal merit. The question in both cases is whether the Biden administration has the legal authority under the 2003 Higher Education Relief Options for Students Act (HEROES) to cancel student loans.

Sean Pyles : Now, let’s look at the question of standing. What were the main concerns?

Anna Helhoski. When it came time to stand in Biden V. Nebraska, liberal justices harassed Nebraska Solicitor General James Campbell who represented Republican-led states about why they were bringing this case to court. Why was the Mohela student loan servicer not present in the room, since it is alleged that the cancellation of debt will cause the state’s primary injury? Campbell replied that cancellation directly affected the state’s financial interests. Justice Elena Kagan replied, “Usually, one person cannot step into the shoes of another.” Justice Amy Coney Barrett questioned why Missouri didn’t “strong-arm” the servicer to sue on their own. Campbell dodged the question, stating that it was a “question about state politics.” ”

Sean Pyles: Hmm. Okay, but what about standing on the second one?

Anna Helhoski. In the second case Department of Education. Brown, standing will depend on whether there has been procedural injury. J. Michael Connolly, the plaintiff in the case, argues that two of the individuals in the case were denied the opportunity to take part in what is known as a notice-and-comment period for the proposed program. The Biden camp and multiple justices questioned the logic of the suit. U.S. U.S. This led to a discussion about the legal merits and implications of the HEROES act, which I will get into later. Justice Sonia Sotomayor stated that plaintiffs would not get anything if they win. To describe the intent of the plaintiffs, Justice Sonia Sotomayor used the term illogical. They want more money or less money. If their case is unsuccessful, however, they get nothing.

Sean Pyles: Yes. The two people in the second case are unhappy because they didn’t receive a comment about the debt cancellation plan or weren’t eligible for $20,000 of cancellation. They want the whole thing to be thrown out.

Anna Helhoski: Exactly. Connolly stated that he was certain that after debt cancellation is completed, the Education Department would go back to the drawing boards and try to introduce a new relief program under the Higher Education Act. This would require a notice-and-comment period. This was speculation.

Sean Pyles: Yes. Let’s now look at the merits. Was there anything to be concerned about?

Anna Helhoski. When it came down to legal merits the justices were questioning how the 2003 HEROESAct was interpreted by the justices. This Act gives the secretary for education the power to “waive” or modify aspects of student loans, including payments, in case of a national emergency. This phrase, waiver and modification, was up for discussion. Conservative judges were skeptical that waiver or modification also meant cancellation.

Chief Justice John Roberts seemed particularly skeptical that the HEROES Bill would allow more than $400 billion of debt to be erased. However, liberal justices found it less opaque. Justice Kagan stated that the language of the HEROES act was clear. It allows the executive to take whatever action is necessary to ensure that borrowers are not made worse by a national emergency. Some justices were conscious of executive overreach. Many asked whether Biden’s plan would be in violation of the major questions doctrine. This says that an agency must have clear congressional authorization to act on an issue with great economic or political importance. Chief Justice Roberts found this a difficult point. Prelogar stated that if the court wishes to respect Congress’ role in the process, then the court should read the text of HEROES as plain language.

Sean Pyles The HEROES Act was passed by Congress to start with.

Anna Helhoski, That’s correct. In 2003, Congress approved that the secretary of education could make decisions in future wars and national emergencies.

Sean Pyles: Anna, fairness was also mentioned a lot during the hearings. Could you please explain the concerns on each side?

Anna Helhoski: Right. The question of fairness was a constant concern for conservative justices. Justice Samuel Alito appeared to hint at the education secretary’s motives for cancelling student debt. He then pressed Solicitor General Prelogar for explanations. He kept asking “Why is that fair?” He kept asking, “Why is it fair?” and then adding an aside that Prelogar might not want to explain. She argued that cancelling was fair, as the HEROES Act specifically entitles the secretary of education to assist student loan borrowers in emergency situations. Of course, he doesn’t have the obligation to do so, but it is possible. She stated that the secretary had clearly outlined the possible negative consequences for borrowers who re-enter student loans payments, including mass delinquency or default.

Sean Pyles: Yes. To be clear, neither case raised the fairness issue. This was a sticking point for conservative justices.

Anna Helhoski: Yes. Chief Justice Roberts also asked Prelogar questions about fairness using the analogy of someone who cannot get their debt cancelled. A person who uses a small-business loan for a lawn service to start, I believe, is because he cannot afford college. He claimed that there is no evidence that the secretary of education considered students who aren’t eligible for student loan debt cancellation.

Sean Pyles: This fairness argument sounds very familiar. It was something we saw a lot on Twitter, especially in the first days of the debt cancellation plan. This is the “If I don’t get it then no one can” perspective that someone who has already paid off student loans had.

Anna Helhoski. Liberal justices responded that not all benefits programs were fair because of limited resources. This is due to the fact that the HEROES Act’s provision was designed specifically to aid student loan borrowers, and only student loan borrowers in an emergency.

Justice Ketanji Brown Jackson specifically referred to the cash infusions given to small businesses due to the pandemic. These were authorized by Congress. She asked if it would be unfair to those who did not own a business or someone who didn’t have a nonprofit, and wasn’t getting the money. ”

Sean Pyles : Yes.

Anna Helhoski. The bottom line is that if the court does not find that the parties to the cases have standing, it will likely throw out the cases and Biden’s plan for debt relief would continue. If the court decides that the cases have legal merit and standing, then debt cancellation will likely be ruled out.

Sean Pyles: Mm, hmm. What now for borrowers? What can we do while we wait to make a difference?

Anna Helhoski – There isn’t much that borrowers can do at the moment, as you stated. We are waiting to see what happens next. The pandemic has meant that most federal student loan borrowers aren’t required to make any payments since March 2020. This summer, the pause will end.

Sean Pyles: We have not had to pay any student loans or federal student loans in a very long time. It is possible that many people’s financial and living circumstances could have drastically changed in that time.

Anna Helhoski: Definitely, Sean. We recommend that they take a few actions now, before it becomes too late. Contact your student loan servicer for the latest information. Learn what you owe, and how much your monthly payments will be. You can log in to studentaid.gov to find out who your student loan servicer really is. Once you know how much you owe on student loans, you can look at your budget to see how your payments fit into it. Talk to your servicer if you are concerned about your ability to meet your monthly payments.

Sean Pyles: It’s all right. Anna, we are grateful for the update.

Anna Helhoski: Yeah, you got it.

Sean Pyles: This episode was created by Anna Helhoski and myself, with the help of Tess Vigeland. Our audio was mixed by me. I want to thank everyone at the NerdWallet copy counter for their assistance.

Anna Helhoski: This is our disclaimer. We are not investment or financial advisors. This information is for entertainment and general education purposes only and may not be applicable to your particular circumstances.