Student Loan Forgiveness Update: Biden Administration Petitions Supreme Court To Allow Plan To Proceed

The Biden administration has formally asked the U.S. Supreme Court to intervene in an ongoing legal dispute surrounding the President’s one-time student loan cancellation program. The nation’s highest court may have the final say on whether the plan can move forward.

Here’s what borrowers need to know.

Biden’s Student Loan Forgiveness Blocked by Federal Courts

Biden student loan forgiveness plan would have provided $10,000 or more in one-time debt cancellation for borrowers who earn incomes under $125,000 (or $250,000 if they are married). But after 26 million borrowers applied for loan forgiveness (and 16 million were approved), federal courts blocked the initiative before a single borrower received any loan forgiveness.

In one legal challenge, a Texas federal judge struck down the program as unconstitutional after a conservative nonprofit organization argued that the Biden administration did not follow proper procedures under federal law. The court ruled that Biden’s loan forgiveness plan was “an unconstitutional exercise of Congress’s legislative power and must be vacated.”

In another legal challenge, the 8th Circuit Court of Appeals — in a 3-0 ruling — granted a preliminary injunction blocking implementation of the program after a coalition of Republican-led states appealed a dismissal of their own lawsuit, which had argued that Biden’s program deprives the states, via state-affiliated FFELP agencies, of revenue.

It is the 8th Circuit’s decision that the administration is currently appealing to the Supreme Court. The administration is also appealing the Texas case, but that must go before the 5th Circuit Court of Appeals, first (that case, however, could also ultimately end up before the Supreme Court).

Supreme Court’s Position on Biden’s Student Loan Forgiveness Program is Unclear

The Biden administration is asking the Supreme Court to vacate its preliminary injunction, arguing — as the district court had found — that the states lack standing to bring the suit in the first place (meaning they have not demonstrated a concrete harm sufficiently tied to the challenged policy). The application portal for the student loan forgiveness program has been suspended as a result of the court orders.

“On the merits, the [student loan forgiveness] plan falls squarely within the plain text of the Secretary’s statutory authority,” wrote Justice Department attorneys in its brief. “Indeed, the entire purpose of the HEROES Act is to authorize the Secretary [of Education] to grant student-loan-related relief to at-risk borrowers because of a national emergency — precisely what the Secretary did here. And the plan rested on the Secretary’s examination of the relevant economic data and the Department’s long experience with borrowers transitioning back into repayment. The Eighth Circuit did not address either the text of the statute or the data supporting the plan.”

It is unclear how the Supreme Court will view the administration’s arguments. The conservative majority on the court has previously expressed skepticism, and at times hostility, towards federal administrative agency discretion and authority. The court has asked the coalition of states to respond with their own written arguments by noon on Wednesday.

In the meantime, the Biden administration is considering extending the student loan payment pause beyond the December 31 deadline in response to the ongoing litigation.

Other Student Loan Forgiveness Initiatives Remain Active

While the legal battle over Biden’s one-time loan cancellation program has prevented borrowers from receiving relief, other student loan forgiveness initiatives are not impacted by these disputes and are proceeding. This incudes:

• Automatic student loan forgiveness through group discharges for over 800,000 borrowers who attended Corinthian Colleges, ITT Technical Institutes, and other predatory institutes.
• $6 billion in student loan cancellation for over 200,000 borrowers through a class action settlement finalized this week to resolve disputed Borrower Defense to Repayment claims.
• The Limited PSLF Waiver, which expands access to Public Service Loan Forgiveness (the waiver ended in October 31).
• The IDR Account Adjustment, which provides retroactive credit towards a borrower’s student loan forgiveness term.

Further Student Loan Forgiveness Reading

Did You Get A Student Loan Forgiveness Email? Education Department Sends Mass Notices To Borrowers

Court Approves $6 Billion In Student Loan Forgiveness For 200,000 Borrowers To Resolve Lawsuit

8 Signs Biden May Actually Extend The Student Loan Pause Again

Can You Apply For Multiple Student Loan Forgiveness Programs? Yes — With Some Caveats