Borrowers have made one step towards a decision to cancel their student loans. However, it will likely take months for them to get a definitive answer.
The Supreme Court heard oral arguments Tuesday for two lawsuits that had frozen President Joe Biden’s federal student loan debt relief program. This plan could cancel up to $20,000 of debt per borrower. Now, the court must decide if cancellation is legal.
Six states filed the first case, Biden v. Nebraska, jointly in Missouri: Arkansas, Iowa Kansas, Missouri and South Carolina. The relief is claimed to harm the state’s tax revenue and certain state-based lending agencies.
The second case, Department of Education against Brown, was brought in Texas by the Job Creators Network Foundation Legal Action Fund. It argues that the relief violates an act of Congress that allows public comment on proposed rules. It also questions whether Biden had the power to cancel debt.
Both cases centered on two main subjects, standing and merit. Standing is the ability of a party bring a case to court. The legal merits of the plan were also a focus of the justices, as they used the 2003 HEROES Act to interpret. To evaluate the legality and validity of Biden’s plan, the court needs only to determine that one plaintiff is entitled to sue.
Hundreds of people crowded the courtroom to watch the arguments. They included legal professionals and former Secretary of Education Betsy DeVos who oversaw the federal student loan payment suspension in March 2020.
What has happened at the Supreme Court?
Biden v. Nebraska
Biden v. Nebraska centered on Missouri’s rights to sue as an injured party in a case that involves injury to Mohela (one of the largest federal student loans servicers). Mohela is not a party to the lawsuit. Missouri was required to file “sunshine laws” information requests in order to obtain its public records.
Justice Elena Kagan stated that it is not common for one person to claim that another person has suffered injury.
James Campbell, Nebraska’s Solicitor General, claimed that cancellation through Mohela had a direct impact on the state’s interests. The company, despite being an independent corporate entity, was established to provide financial aid to Missouri students. It is contractually required to contribute to scholarship funds. During arguments, it was noted that one of the funds, the Lewis and Clark Discovery Fund, has not received any payment from Mohela since 2010.
Justice Amy Coney Barrett questioned why Missouri didn’t “strong-arm Mohela” into following the lawsuit. Campbell replied, “That’s a matter of state politics span>
U.S. U.S. Mohela is, as all student loan servicers are, missing fees for loans it has serviced while payments were paused.
Use the HEROESAct
The HEROES Act, which was originally passed after the attacks on 9/11, empowers the secretary for education to “waive” or modify the federal student loan program in an immediate emergency. Liberal and conservative justices disagreed on whether cancellation can be considered a modification or waiver in their questions.
Campbell claimed that cancellation does not fall under the “waive and modify” category. It is instead the creation of a new program. Prelogar stated that the administration wasn’t claiming “just limitless authority for federal government” to cancel student debt in an emergency. This was because it was required by the HEROES Act.
Separation and use of powers
Arguments were dominated by the issue of executive overreach. Many justices asked Biden if his plan violated the “major Questions doctrine,” which states that an agency must have clear congressional authorization to act on an “important economic or political issue span>
Chief Justice John Roberts stated that he takes seriously the idea about the separation of powers.
Prelogar replied that if Congress was to be respected in this process, then reading the HEROES act in accordance with its plain language would be in favor of achieving that goal.
Conservative justices were particularly concerned about the cost of cancelling. Roberts was skeptical about the HEROES Act’s ability to wipe out debts exceeding $400 billion.
“Because there’s provision to allow waiver when your schools closes, it shouldn’t be surprising that half a trillion dollars was wiped from the books by Congress.” Roberts asked Prelogar.
Kagan stated that the HEROES act guidance was clear in regards to executive powers to cancel loans. It was meant to protect student borrowers, and ensure that they are not financially worse off as a result of a national emergency.
Kagan stated that executive power is something we worry about when Congress doesn’t authorize its use. “Here Congress authorized executive power in an urgent situation .”
Department of Education. v. Brown
If there is procedural injury, the case will be valid. This means that plaintiffs were not given the opportunity to comment during the notice-and-comment period.
Justice Brett Kavanaugh asked J. Michael Connolly, an attorney representing two Texas borrowers in the case, to speculate on why the Education Department did not want a notice and comment period. Connolly said that both the notice-and comment and negotiated rulemaking processes take time. “Most agencies would rather not have to do that .”
Kagan interjected: “And this emergency. Kagan then said, “And this is an emergency.
Connolly replied, “If they were authorized under the HEROES Act then they could have gone below it.” It’s not .”
Justice Sonia Sotomayor asked Connolly questions about the suit’s logic. The suit claims procedural violations for two individuals. One would not receive any money because her loan was not qualified, and the other would only receive $10,000 in cancellation. This is in addition to the $20,000 Pell Grant recipients in college.
“I don’t know how to help you because there is no procedure or notice required by the HEROES Act. You can only win if you end this program. That means you won’t have an opportunity to hear your case, but everyone else does,” Sotomayor stated. He also said that anyone who would otherwise get $10,000 would receive nothing, while the person who wants something would also receive nothing. This is so absurd to me that I will not allow you to come to court and say “I want more, I’m going for a lawsuit to get more,” .'”
Prelogar argued that there was no evidence for procedural injury. The HEROESAct exempts the education secretary from the procedure cited by the claim — the notice and comment procedure — when it issues modifications or waivers under the HEROESAct.
Justice Ketanji Brown Jackson inquired if plaintiffs could show that if cancellation was ruled invalid under the HEROES Act the education secretary would pursue cancellation under Higher Education Act (which would have a notice and comment period) instead.
Connolly stated that the program benefits 95% of all borrowers and not just those who are suffering from the pandemic. He also said that the Education Department would explore other avenues. “When this program becomes illegal and they go back on the drawing board, they don’t seem to be going to close down, I think they will say “How about the [Higher Education Act span]
Justice Samuel Alito stated that, while the education secretary had his reasons to cancel student debt — adding “some are on the record; others may not be”, — it came down to fairness. Prelogar was asked by Alito to explain why Prelogar’s actions were fair .”
Prelogar claimed the plan was fair due to the possibility of delinquency or default for millions student loan borrowers. They cited evidence that Secretary Miguel Cardona included with the cancellation announcement. She claimed it was fair because the HEROES act specifically authorizes the secretary to provide emergency relief to student borrowers.
Roberts was also conscious of fairness. Prelogar asked Roberts how fair the program was if someone who borrowed money to start a business could not have their student debt cancelled. Roberts suggested an analogy: “I don’t see any evidence they took the person trying to start the lawn-service, because he cannot afford college. I don’t see any evidence they took him into consideration .”
Liberal justices pointed out the inequity of many benefits programs. Sotomayor stated that society is not made up of infinite resources and therefore there is inherent unfairness.
Jackson stated, “I wonder if the same fairness problem would arise with regard to federal benefit programs.” I was thinking about the fact COVID resulted in massive infusions to many companies and organizations. I wonder if that would be unfair to those who didn’t own a company, or someone who didn’t have a nonprofit, and weren’t receiving that span>
How did we get to this point?
The White House announced a broad, one time student debt cancellation program : $10,000 for each borrower who earns less than $125,000 per annum and $20,000 for students who were eligible for a need-based Pell Grant.
This program is designed to “protect borrowers most at-risk of default or delinquency as a consequence of hardships caused by the COVID-19 epidemic,” according to the White House in a January factsheet.
“Default can have devastating consequences. “The consequences of default are devastating. We’re talking people having their wages garnished, and their Social Security offset,” states Alpha Taylor, a National Consumer Law Center staff lawyer who specializes in student loans.
Nearly 26 million borrowers had already applied for relief or were automatically eligible. 16 million were approved by Education Department, and sent to loan servicers. The White House stopped accepting applications in November because of multiple legal challenges.
The Supreme Court accepted two cases in December.
The Biden administration has been relentless in its determination to deliver relief, despite the delays in implementing the program.
Cardona stated in a January news release that she is confident in her legal authority to approve the program.
Borrowers might have to wait for months before they get a decision
Borrowers should not expect a decision any time soon. Oral arguments were the Supreme Court’s final visible step in its decision-making before it issues a final opinion.
The nine justices will hold a conference at the end of each week in which they’ll discuss the oral arguments from the previous week and vote. The justices will then work on student debt relief cases. The final decision must be reached by at least five justices, which is a majority of court members.
Due to the complexity of the case, it is unlikely that the court will issue a ruling before the end of its term. Frederick M. Lawrence, a prominent lecturer at Georgetown University Law Center, Washington, D.C.
The Supreme Court, the highest-ranking legal body in the U.S. is considered to be the final authority. If the Supreme Court decides against Biden’s plan it is possible that the White House or Congress might try to pass debt cancellation via another avenue. However, with the White House’s legal authority under question and a divided Congress it is unclear when, how, or where.
Borrowers need to be prepared for the federal student loan payment suspension, also known as forbearance, which will end this summer. The current plan is for payments to resume 60 days following June 30, 2023 or 60 days after the Supreme Court issues its final decision, whichever comes first.
(Top Photo by Eliza Haverstock