Written By Adam S. Minsky, JD
New information about legal challenges to President Joe Biden’s signature student loan forgiveness plan has raised some doubts about the challengers’ legal arguments. But with a Supreme Court decision expected to be released sometime next month, it’s unclear if the revelations will ultimately make a difference.
Here’s the latest.
Supreme Court to Rule on Biden's Student Loan Forgiveness Plan
President Biden first announced his unprecedented student loan forgiveness initiative last summer, promising that over 30 million borrowers who met the program’s income threshold requirements would receive $10,000 or $20,000 in student loan forgiveness. But before the administration could grant any relief, federal courts halted the program in response to several legal challenges.
Two of those lawsuits ended up at the Supreme Court. The suit that legal observers suggest is the stronger case involves a group of Republican-led states, which argued that they would be financially harmed by Biden’s student loan forgiveness plan. They suggested that a state-affiliated student loan agency called MOHELA, based in Missouri, would be deprived of revenue. That, in turn, would deprive the states of revenue because of a financial relationship between MOHELA and the state of Missouri.
Two Legal Issues in Student Loan Forgiveness Challenge
The Supreme Court must consider two main legal questions as it evaluates whether to uphold or strike down Biden’s student loan forgiveness plan.
The first is whether the HEROES Act of 2003 – the federal statute that the administration relied on to establish the program – authorizes such sweeping debt relief. This statute gives the Secretary of Education authority to “modify” or “waive” nearly any regulatory provision regarding federal student loan programs, including those that relate to loan forgiveness, in response to a national emergency. The administration has argued that Congress contemplated such broad relief when it passed the legislation two decades ago, and that the text of the law provides unambiguous authority to establish broad student loan forgiveness.
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Standing to sue the administration in question
But the second legal issue is whether the challengers have standing to sue the administration over the debt relief plan in the first place. To have standing, the challenging party must demonstrate that they would incur a concrete injury that directly stems from the challenged program. The injury must be both concrete enough so as to not be speculative, and direct enough so that there is more than just a tenuous link between the policy and the alleged harm.
Attorneys for the Biden administration argued before the Supreme Court at a February hearing that the coalition of Republican-led states do not have standing. They pointed out that MOHELA is an independent state agency that has its own finances, and can sue and be sued in its own name. But MOHELA did not file the suit challenging Biden’s program – the state of Missouri did (along with several others), calling into question whether MOHELA is actually harmed (if so, would it not have filed the suit itself?)
The administration also argued that the financial link between MOHELA and the states is tenuous at best. The states argued that MOHELA contributes to a Missouri state scholarship fund, but they conceded that there have been no meaningful contributions to that fund in years.
At least one conservative justice on the Supreme Court – Justice Amy Coney Barrett – joined all three liberal justices in expressing skepticism that the coalition of states has standing. If the Supreme Court determines that the challengers do not have standing to sue, they could ultimately uphold Biden’s student loan forgiveness program without reaching the question as to whether the program is allowable under the HEROES Act.
New Revelations may Further Bolster Biden Administration's Standing Argument
New information released earlier this month by the Debt Collective, a debtor’s union representing the interests of student loan borrowers, and the Roosevelt Institute (a left-leaning think tank) suggests that the argument that MOHELA would be financially harmed by Biden’s student loan forgiveness plan may be even weaker than initially thought.
Through the Freedom of Information Act requests, the organizations obtained internal documents suggesting that not only would MOHELA not lose revenue as a result of Biden’s student loan forgiveness initiative, but also, it may actually end up stronger financially under its ongoing contract with the Education Department to provide student loan servicing.
One internal document obtained through the group’s requests under the Freedom of Information Act showed that MOHELA projected a nine percent increase in total revenues if $20,000 in student loans for Pell grant recipients, and $10,000 in student loans for other borrowers, were forgiven under Biden’s plan. The Debt Collective and Roosevelt Institute argued that the figure may even understate MOHELA’s projected revenue increases. But regardless, this would undercut the central argument that MOHELA, and therefore, the coalition of states challenging Biden’s student loan debt relief initiative, would incur a concrete injury as a direct result of the plan.
“MOHELA’s direct loan revenue will actually be larger than at any prior point in the company’s existence, doubling from the previous year,” according to the analysis by the Debt Collective and the Roosevelt Institute. “Should the Supreme Court affirm the plaintiff's suit, they would not only be sanctioning a judicial process devoid of basic fact-checking; they would potentially be establishing a ‘no feet’ theory of standing—in which plaintiffs can file suit based on claims untethered to actual, factual harms.”
What This Means for Student Loan Borrowers
While the new information sheds more light on the challengers’ legal arguments, it may be too late for the Supreme Court to actively consider the new data. Legal briefs were submitted to the Court months ago, and the only hearing involving oral arguments concluded on February 28.
Still, four of the nine justices on the Court seemed to express skepticism at the hearing that the challengers had standing. If these justices ultimately conclude that there is a standing problem, it would only take one more to make a majority. Three of the justices seemed amenable to the arguments that the states have legal standing. But two conservative justices – Brett Kavanaugh and Neil Gorsuch – did not say much on that issue, making it difficult to know their leanings.
A Supreme Court decision is expected by the end of June.
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