A Supreme Showdown Over Debt Relief

Six months after President Biden announced his plan to forgive up to $20,000 in federal student loans for eligible Americans, the administration will defend that plan before the Supreme Court Tuesday.

The legal fight could doom the debt-relief plan and also curtail the authority of the executive branch, depending on the final opinion. At issue will be whether the administration has the authority to forgive the loans and whether the plaintiffs who challenged the plan have standing to sue.

Michael Brickman, who worked at the Education Department during the Trump administration and is now an adjunct fellow at American Enterprise Institute, a right-leaning think tank, expects the Supreme Court to strike down the program, but he said he’ll be looking to see if the justices weigh in more broadly on the rules proposed by the Education Department and other federal agencies that he and others think go beyond the department’s statutory authority.

“There’s no question that the department is pushing the envelope in terms of its congressional authority on a lot of different fronts, just within the category of student loan forgiveness,” Brickman said, adding that the administration could “certainly still get away with it.”

Meanwhile, borrowers who were promised loan forgiveness in August remain in limbo. About 26 million people applied and more than 16 million were approved for relief before the program was blocked by a federal judge in October. Individuals who earn less than $125,000 a year would see their student loan balances drop by $10,000 under the plan, while those who received Pell Grants in college would see an extra $10,000 in relief.

Debt relief would alleviate some stress for Kiara Palmer, who has $53,000 in outstanding student loans from a graduate school program. She and her mom, who has more than $150,000 in loans from attending college herself, would each be eligible for the full $20,000.

The nearly three-year payment pause has given Palmer a glimpse of a debt-free future, she said, and allowed her to buy a home and pay off her car. The promised relief could help her mom retire sooner and set their family up for future generational success.

“This right here is a big one, because it’s something that affects me and my generation for futures to come,” Palmer said of the debt-relief legal fight.

Six states—Arkansas, Iowa, Kansas, Missouri, Nebraska and South Carolina—allege in one lawsuit that the debt-relief plan will harm state revenues and agencies that hold student loans. In addition, two Texas residents challenged the debt-relief plan because they wouldn’t benefit from all the provisions and didn’t have the chance to comment on the proposal. The Supreme Court will hear both cases Tuesday.

The administration has argued in court filings that neither of the parties suing have standing, or the right to sue. If the justices agree, they could toss out the lawsuits without considering the merits of the arguments against student loan forgiveness.

Legal experts are generally skeptical that the plaintiffs can clear that standing threshold, but if they do, those experts don’t think the administration will win its argument on the merits with conservative justices in the majority.

The plaintiffs argue in the lawsuits that the Higher Education Relief Opportunities for Students Act of 2003 does not authorize the debt-relief plan—an argument that one federal judge has already agreed with. The law allows the Education Department to waive or modify parts of the student loan program so that borrowers affected by war, military operation or national emergency—such as the coronavirus pandemic—don’t end up in a worse position financially.

The Biden administration has said the law clearly authorizes the program and that relief is necessary to ensure those affected by the pandemic aren’t in a worse position financially once student loan payments resume. Payments are currently paused through the end of June, or 60 days after the lawsuits are resolved, whichever comes first.

The plaintiffs also want the justices to apply the major-questions doctrine to the case, which says in part that agencies need clear congressional authorization when carrying out policies that have economic and political significance. The court recently used the doctrine to strike down the Environmental Protection Agency’s Clean Power Plan last year.

Conservative legal experts and the plaintiffs say in filings that the lawsuits are ideal for the major-questions doctrine because of the scale of the debt-relief program and what it would mean for executive power.

“What we have to remember is that the court certainly knows its decision here is never just going to be confined to this one instance,” said Jack Fitzhenry, senior legal policy analyst at the conservative think tank the Heritage Foundation. “As large and important as the question of student loan cancellation is, the kind of law that they set for what future presidents can do and what future secretaries can do—that’s going to have enormous impacts on how policy preferences are pursued by this administration and future administration.”

The administration and its supporters have argued in court filings that the major-questions doctrine should not apply, pointing to the use of the HEROES Act to suspend student loan payments during the pandemic, which has not yet been challenged in court.

Jeffrey Dubner, deputy legal director for Democracy Forward, a legal nonprofit that submitted an amicus brief in support of the administration, said the debt-relief plan wouldn’t transform the department’s regulatory authority and is narrower than other forms of COVID-related relief measures.

“There’s nothing that is so unheralded that triggers the major-questions doctrine that’s reserved for extraordinary cases,” Dubner said. “It still should get the same kind of review as almost every other action. That’s certainly still a demanding review, but it shouldn’t get this extremely limited, extraordinary doctrine.”

During oral arguments Tuesday, Dubner will be listening to see how seriously the justices take the standing arguments and how they’ll apply the major-questions doctrine, if at all.

“This will be the first time when the Supreme Court might apply that now year-old doctrine and will be a crucial test—if they get past standing—for how the doctrine is applied going forward,” he said.

Karen Harned, chief legal officer for the Job Creators Network Foundation’s Legal Action Fund, which is backing the Texas lawsuit, said that a key issue in their lawsuit is that the plaintiffs didn’t have a chance to comment on the proposal. (The HEROES Act waives the requirement to take public comments on proposed changes, but the plaintiffs argue the law doesn’t authorize the program and the administration could use other laws to carry out student loan forgiveness.)

“The way this was done is so unique, and I’m hopeful that that will be noted by the justices,” she said. “I say ‘unique’ in a bad way, because it is, again, such a massive program, and to have it literally behind closed doors at the executive level is … I’m pretty sure it’s unprecedented.”

Kristin McGuire, executive of Young Invincibles, one of several advocacy organizations that are hosting a rally outside the Supreme Court Tuesday, said debt relief is an opportunity to give borrowers breathing room once payments eventually resume, and especially Black borrowers like her.

“As we start to get our country back on track after this pandemic, the best thing to do is to cancel the debt, along with the other provisions that are put in place so that we can get people ready to move forward,” she said.

McGuire, who borrowed $24,000 for college and now owes more than $55,000, said debt cancellation would mean being able to start planning for her child’s college education.

“We know student debt impacts Black women more than any other group and women more than men,” she said. “This allows the opportunity for these disadvantaged groups to have a shot at creating generational wealth.”