4 Student Loan Forgiveness Updates After Supreme Court Hearing

After the Supreme Court’s historic hearing that will determine the fate of President Joe Biden’s student loan forgiveness initiative, millions of borrowers are anxiously waiting for updates.

Biden’s plan, if it goes forward, would ultimately wipe out up to $20,000 in federal student loans for up to 40 million borrowers. But federal courts blocked the initiative last fall following multiple legal challenges. The administration appealed two of those challenges to the Supreme Court, which held an oral argument hearing last week. The Court is expected to issue a decision in June.

Here are some developments.

Biden Says He Is Not Confident Supreme Court Will Uphold His Student Loan Forgiveness Plan

In some of his first public comments since the Supreme Court’s hearing, Biden expressed doubts that the Supreme Court would uphold his student loan forgiveness plan.

“I’m confident we’re on the right side of the law,” Biden said to reporters last Wednesday. “I’m not confident about the outcome of the decision yet.”

A majority of the Supreme Court’s justices did express varying degrees of skepticism — and, at times even hostility — towards the initiative. Chief Justice John Roberts seemed particularly concerned about the scope and breadth of the program, and four other conservative justices questioned whether the HEROES Act of 2003, which the Biden administration said authorized the plan, contemplated such sweeping student loan forgiveness.

But an adverse decision by the court is not a foregone conclusion. Four justices on the court seemed to agree with the Biden administration’s arguments that the challengers lack standing — the ability to demonstrate that they would suffer a concrete injury as a direct result of the program. Several other justices were vague or silent on the issue of standing. If a majority of the Supreme Court concludes that the challengers lack standing, they may uphold Biden’s student loan forgiveness plan, even if they disagree that it should be implemented.

No Backup Plan If Supreme Court Strikes Down Student Loan Forgiveness

Biden administration officials have reiterated that there is no formal backup plan if the Supreme Court strikes down the student loan forgiveness initiative. “We have one plan, it’s the plan that we’ve announced,” said Bharat Ramamurti, the deputy director of the National Economic Council, in comments to MarketWatch following the hearing. His comments echo similar statements officials had made prior to the hearing.

Borrower advocates and some student loan legal scholars have suggested that if the Supreme Court rules that Biden’s program is illegal under the HEROES Act, the administration could essentially reissue the program in a different form under the Higher Education Act (HEA), a separate statute. The HEA has a provision that provides fairly broad authority to the Secretary of Education to “compromise, waive, or release any right, title, claim, lien, or demand” associated with federal student loans. The administration has relied on this so-called “compromise authority” to discharge federal student loans before, albeit on a smaller scale.

The HEA’s compromise authority was raised during last week’s Supreme Court hearing, and at one point, the challengers even seemed to say that the HEA would be a better authority for the Biden administration to use to enact wide-scale student loan forgiveness.

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However, the process to re-establish Biden’s student loan forgiveness program under the HEA’s compromise authority could be difficult and lengthy. While the HEROES Act allows the Education Department to bypass normal regulatory procedures and to issue new regulations quickly if they are sufficiently justified by a national emergency, new regulations under the HEA would require a time-consuming notice and comment period. The administration would also need to comply with several other procedural requirements, potentially pushing out relief by one or two years.

Education Department Sends Messages To Borrowers On Student Loan Forgiveness and Repayment

Following the Supreme Court hearing, the Education Department sent out a mass email trying to assure borrowers that Biden’s student loan forgiveness plan is legal, and that the administration would continue to try to provide relief.

“Our ministration is confident in our legal authority to adopt this plan, and today made clear that opponents of the program lack standing to even bring their case to court,” wrote Education Secretary Miguel Cardona in an email to over six million borrowers. “While opponents of this program would deny relief to tens of millions of working- and middle-class Americans, we are fighting to deliver relief to borrowers who need support as they get back on their feet after the economic crisis caused by the pandemic.”

“We will continue to provide you updates and will notify borrowers directly before payments restart,” continued Cardona, noting that, “Payments will resume 60 days after the Supreme Court announces its decision. If it has not made a decision or resolved the litigation by June 30, payments will resume 60 days after that.”

Another Federal Court Allows Separate Student Loan Forgiveness Initiative To Proceed

While all eyes were on the Supreme Court last week, a separate student loan forgiveness legal dispute was resolved in favor of hundreds of thousands of borrowers.

A federal district court in California last week rejected a challenge to an already-approved settlement agreement in Sweet vs. Cardona, a class action lawsuit where borrowers had alleged that the Education Department across two administrations had improperly delayed or denied relief under the Borrower Defense to Repayment program. The Borrower Defense program can provide student loan discharges to borrowers who were misled or defrauded by their schools.

Immediately following the ruling, the Education Department started notifying borrowers that they qualify for debt relief, which may include student loan forgiveness, payment refunds, and credit repair. Over 200,000 borrowers are expected to receive $6 billion in student debt discharges over the course of the next year. These discharges are distinct from Biden’s student loan forgiveness initiative that will be decided by the Supreme Court.

Further Student Loan Forgiveness Reading

Biden’s Student Loan Forgiveness Plan Might Be In Trouble Following Supreme Court Hearing

Borrowers Receive Student Loan Forgiveness Approval Emails After Court Green-Lights Settlement

What Happens If The Supreme Court Strikes Down Biden’s Student Loan Forgiveness Plan?

Republican Senators File Bill To End Student Loan Pause, Stop Loan Forgiveness