Supreme Court conservatives could spike Biden’s plan to cancel student loan debt

The conservative supermajority on the US Supreme Court appears sceptical that President Joe Biden’s administration can implement a student loan debt cancellation plan that would provide relief to millions of Americans, a programme that several justices suggested was unfair to other borrowers who are not covered within the scope of the plan.

But justices on the nation’s high court also weren’t necessarily buying arguments that plaintiffs have the proper legal footing to strike down the plan, targeted in a pair of challenges from Republican officials and conservative activist groups that have accused the administration of overstepping its authority.

Nebraska’s solicitor general James Campbell argued on 28 February that the state of Missouri, one of six states with Republican attorneys general challenging the Biden plan, is directly and negatively impacted by sweeping debt relief because a quasi-state agency that services federal loans would lose revenue. The Missouri Higher Education Loan Authority (MOHELA), however, is not a party in the case.

“Usually we don’t allow one person to step into another’s shoes and say, ‘I think that that person suffered a harm,’ even if the harm is very great,” said Justice Elena Kagan, one of three liberal justices on the nine-judge panel.

Conservative Justice Amy Coney Barrett also pressed Mr Campbell on the case’s standing, asking him “why didn’t you just strong-arm MOHELA and say you’ve got to pursue this suit?”

Justice Sonia Sotomayor said she is “at a loss” how another challenge brought forward from a pair of borrowers who want to strike down the plan completely has any standing: “Totally illogical to me.”

Debt relief advocates and members of Congress – including Senators Bernie Sanders and Elizabeth Warren – rallied outside the court on Tuesday, pressing for “immediate action” to prevent an unsustainable cycle of repayments against growing student loan debt balances.

“In America, you shouldn’t have to face financial ruin because you want a damn education,” Senator Sanders said.

The student debt crisis

More than 40 million federal student loan borrowers are eligible for up to $10,000 in canceled higher education debts, or up to $20,000 for borrowers who relied on Pell grants, under the administration’s plan. Roughly 20 million people are eligible to have their debts canceled completely, according to the White House.

Roughly one in five Americans hold a piece of the $1.7 trillion in federal student debt balances, a figure that has exploded over the last decade alongside growing higher education costs. Millions of Americans also continue to tackle accrued interest without chipping away at their principal balances years after graduating, or have been forced to leave their colleges or universities without obtaining a degree at all while still facing loan repayments.

More than half of those 45 million people have $20,000 or less to pay off, while roughly one-third of all borrowers owe less than $10,000, according to the Federal Reserve. Seven percent of people with federal debt owe more than $100,000.

Those eligible for relief under Mr Biden’s plan include borrowers who earn up to $125,000, or $250,000 for married couples.

Roughly 26 million people have already applied for relief through the plan, and more than 16 million were approved, according to the White House.

“This relief is critical to over 40 million Americans as they recover from the economic crisis caused by the pandemic,” the president’s Twitter account stated on 28 February. “We’re confident it’s legal. And we’re fighting for it in court.”

The plan, which was set to take effect last fall, has been blocked for months as Republican officials and right-wing legal groups mount a wave of litigation to slow the Biden administration’s efforts.

Meanwhile, a pandemic-era freeze on payments and interest rates that has repeatedly been extended is set to expire 60 days after litigation is resolved. If the plan is blocked or the case has not been resolved by 30 June, payments will resume 60 days after that.

Conservative justices suggested that they could also decide the case on questions around the so-called “major questions doctrine,” a theory that effectively shuts down policies that do not have the express or specific authorisation of Congress.

“We are talking about half a trillion dollars and 43 million Americans,” Chief Justice John Roberts said. “I think most casual observers would say if you’re going to give up that much money, if you’re going to affect the obligations of that many Americans on a subject that is of great controversy, they would think that’s something for Congress to act on.”

Do the plaintiffs have ‘standing’?

To successfully challenge the Biden administration’s plans to cancel those balances, plaintiffs must show they have suffered a specific injury that can be remedied by relief from a federal court. It will not be enough to merely object to the size and scope of the programme or allege that the president exceeded his authority.

“Missouri hasn’t come forward with any allegations that MOHELA will actually ... suffer financial injury under this plan,” US solicitor general Elizabeth Prolegar told the court. “Any financial effects downstream on the state here are attenuated and speculative, so we don’t know really what the ultimate loss would be to MOHELA, even if we believe that MOHELA is part of the state.”

Ms Prolegar said that Missouri’s claims of financial injury are undermined by the fact that the administration’s debt cancellation programme will effectively pay the agency that services those loans to discharge them.

Bernie Sanders rallies outside the US Supreme Court on 28 February to support student loan debt cancellation plans. (Getty Images)
Bernie Sanders rallies outside the US Supreme Court on 28 February to support student loan debt cancellation plans. (Getty Images)

The law in question is 2003’s Higher Education Relief Opportunities for Students Act, or HEROES Act, which the Biden administration has invoked to grant relief to borrowers under the Covid-19 emergency to ensure eligible Americans are not financially harmed as a result of the pandemic’s economic fallout.

Ms Prolegar argued that the Biden administration has acted within the purview of the law as directed by Congress.

“It could not have surprised Congress one bit that in response to the hardship posed by a national emergency, [Secretary of Education Miguel Cardona] might consider providing discharge if that’s what it takes to make sure borrowers don’t default,” she said.

Justice Kagan posed a hypothetical emergency, in the aftermath of an earthquake, to determine whether Congress would be allowed to issue similar relief.

Mr Campbell said that such relief “sounds to me like creating a new programme,” arguing that Congress would still need to have a “voice in emergencies.”

But “Congress used its voice,” Justice Kagan replied, noting that such emergencies are the exact scenarios that Congress has authorised for the administration to exercise executive authority.

Conservative justices ask if Biden’s plan is ‘fair’

Conservative justices also repeatedly raised questions about “fairness” and whether they should come into consideration, a claim repeatedly raised by right-wing opponents of the Biden plan; Justice Neil Gorsuch suggested that many Americans “planned their lives around not seeking loans” and that the programme would benefit “one group of favoured persons over others”.

Chief Justice John Roberts posed a hypothetical question to ask whether the programme is fair to a person who took out a loan to start a lawn business because they couldn’t afford college. “Nobody is telling the person who was trying to set up the lawn service business that he doesn’t have to pay his loan,” Justice Roberts said.

“Why is it fair?” Justice Samuel Alito added. “Why was it fair to the people who didn’t get arguably comparable relief?”

Congress granted executive authority to deliver relief to affected borrowers, Ms Prolegar answered.

“Everybody suffered under the pandemic, but different people got different benefits because they qualified under different programmes,” Justice Sotomayor added.

Biden administration warns against ‘severe negative consequences’

A second case on behalf of two borrowers argues that the plan is unlawful because the administration did not follow proper rulemaking procedures.

One borrower is not eligible under the Biden plan because their loan is held by a private company, not a federal loan programme, while the other is eligible for $10,000 in relief Without a public notice and comment process, borrowers argue that they were deprived of any ability for greater relief. But their challenge would strike down the entire programme.

That challenge is supported by the conservative advocacy group Job Creators Network.

In 2021, that group unsuccessfully sued Major League Baseball for moving its All-Star game from Georgia after as part of the organisation’s protest of a state law that opponents argued undermines voting rights.

For millions of Americans, the plan acts as a “critical lifeline to ensure that they are not subject to the severe negative consequences of delinquency and default on student loan debt,” according to Ms Prelogar.

“And the relief for these Americans has been held up by two student loan borrowers who don’t even have standing and whose claims fail on the merits,” she said. “So we’d urge you to reject their claims.”