Supreme Court Student Debt Relief Case Updates

• President Biden promised to forgive up to $20,000 per borrower in federal student loan debt.
• His plan, however, has hit multiple legal roadblocks over the past six months.
• In December, the U.S. Supreme Court agreed to hear the case for and against Biden’s plan.

Last Updated: March 1, 2023 at 3:01 P.M. EST

The U.S. Supreme Court heard arguments in two cases that will ultimately decide the future of President Joe Biden’s student loan forgiveness plan.

Several conservative justices appeared skeptical about the Biden administration's pandemic-centered justifications for discharging hundreds of millions of dollars in federally-held student loans. The court's conservative block currently holds a 6 - 3 majority.

Attorneys hoping to block debt cancellation argued that the federal government does not have the power to cancel hundreds of millions worth of debt with the wave of a wand. U.S. Solicitor General Elizabeth Prelogar maintained that the Department of Education (ED) does have the authority to make this move and that those suing the department don’t have legal standing to mount a challenge to begin with.

SCOTUS combined two lawsuits seeking to stop Biden’s plan from going into effect. At stake is up to $20,000 in canceled loans for 43 million borrowers with outstanding federal student loan debt.

The Biden administration has stood by its assertion that debt cancellation is lawful thanks to the Higher Education Relief Opportunities for Students (HEROES) Act, which allows the secretary of education to "waive or modify" student financial assistance programs for those who have "suffered direct economic hardship as a direct result of a war or other military operation or national emergency."

Plaintiffs, however, maintain that the HEROES Act does not give the Department of Education the authority to cancel large swaths of debt.

One plaintiff, a coalition of six Republican-led states, adds that debt cancellation would harm the states due to a loss of revenue from loans Missouri services through the Higher Education Loan Authority of the State of Missouri (MOHELA).

The six states in that lawsuit are Arkansas, Iowa, Kansas, Missouri, Nebraska, and South Carolina.

The other case involves two borrowers tied to the Job Creators Network Foundation (JCNF) who claim ED deprived them of their right to input on debt forgiveness because the department didn’t go through a formal rulemaking process in establishing its plan.

Biden extended the pause on federal student loan payments to July 1. The extension is meant to give SCOTUS time to issue its final decision.

Summary of Oral Arguments

Questions Over the States' Standing in "Nebraska v. Biden"

In this case involving the coalition of six Republican-led states, Solicitor General Prelogar argued that Missouri cannot sue to stop debt relief on MOHELA’s behalf.

MOHELA is an independent organization, she argued, and although the state created the entity, it does not control its assets.

Interestingly, Prelogar admitted during Tuesday's hearing that MOHELA would have standing to sue on its own behalf.

Nebraska Solicitor General James Campbell, representing all six states, agreed that MOHELA has the power to sue independently. However, he contended that Missouri also has the right to protect its interests in the case because MOHELA's revenue goes toward scholarship programs for the state's college students.

Canceling debt under Biden's plan would cut MOHELA's revenue an estimated 40%, Campbell told Justice Clarence Thomas.

Liberal-leaning justices, meanwhile, questioned the states' ability to prove injury as a result of the debt forgiveness plan. The state cannot confirm MOHELA won't make required contributions to Missouri's scholarship funds if cancellation were to go through, they contended.

Conservative Justices Unsure of ED's Authority

The court's conservative justices hammered Prelogar to explain how the HEROES Act gives ED the authority to cancel student loan debt.

Several of them acknowledged that the law grants ED Secretary Miguel Cardona the power to "waive or modify" student financial assistance programs. However, they asked the solicitor general to explain how that language justifies creating a new debt forgiveness program.

Prelogar responded that Cardona's actions "waive" some of the requirements for existing discharge programs and add new qualifications to fit the forgiveness plan.

Nebraska Solicitor General Campbell said Cardona's changes are so extreme that it goes beyond the definition of "waive or modify" and instead creates a program out of whole cloth.

Liberal-leaning justices pressed Campbell to explain what would be authorized under the HEROES Act, which allows ED to respond in national emergencies. Campbell argued that the act does not grant the department authority to discharge any loans without explicit approval from Congress.

Conservative justices, meanwhile, took issue with ED's use of the HEROES Act, which gives ED the power to ensure borrowers aren't "in a worse off" situation than before the applicable emergency.

When Justice Neil Gorsuch questioned ED's application of the HEROES Act, Campbell responded that the department doesn't have an understanding of macroeconomics that would allow the department to institute a plan of this size.

Liberal Justices Question Tactics in "Brown v. Department of Education"

The second case heard by the court involves two student loan borrowers who claim ED deprived them of their right to input on debt forgiveness because the department didn't go through a formal rulemaking process in establishing its plan.

Their argument is that ED might be able to cancel debt through the Higher Education Act (HEA), but not the HEROES Act. Therefore, the borrowers are seeking to block debt forgiveness in this case and force ED to reevaluate its plan and potentially include more borrowers.

Liberal-leaning justices met this argument with confusion.

Justice Ketanji Brown Jackson asked Michael Connolly, the attorney representing the borrowers, to provide evidence that striking down Biden's plan would lead the administration to pursue debt forgiveness through other means.

Connolly pointed to Biden's campaign promises before taking office and the fact that 95% of borrowers would benefit from Biden's plan.

Still, Justice Sonia Sotomayor took issue with the idea that being left out of a benefits program gives standing to sue the federal government.

Solicitor General Prelogar emphasized that the HEROES Act does not require ED to provide notice and comment to the public. Thus, she argued, this case truly comes down to whether the department appropriately applied the HEROES Act.

Advocacy Groups, Lawmakers Rally During Hearing

While lawyers and judges debated inside, borrowers and lawmakers rallied outside the court’s front door.

The People’s Rally for Student Debt Cancellation attracted high-profile guest speakers during the Feb. 28 hearing, including:

"We are not going to stop. We are not going to rest until every single person who has student debt is free from that and able to have [an] opportunity in this country,” Rep. Omar said.

The People’s Rally was the product of teamwork between some of the most active borrower advocacy groups in higher education. That included the Student Borrower Protection Center, Young Invincibles, the Student Debt Crisis Center, Rise, and the Debt Collective.

The National Association for the Advancement of Colored People (NAACP) also helped organize the rally.

“The rally showcased the expansive — and growing — support for debt relief, bringing together working people from across party lines, industries, faith communities, socioeconomic statuses, and cities and states around the country,” the Student Borrower Protection Center said in a post-rally statement.

This story is developing and will be updated