Supreme Court considers fate of Biden's student loan relief plan

The Supreme Court oral arguments on President Joe Biden's student loan forgiveness program will kick off soon. First up at the podium before the nine justices will be US solicitor General Elizabeth Prelogar.

She is expected to argue that the administration had the clear legal authority to provide relief to borrowers in order to protect them from the financial harms brought on by the pandemic, such as the inability to buy food or make rent or mortgage payments.

She will stress that the Higher Education Relief Opportunities for Students Act of 2003—known as the HEROES ACT—provides the legal authority for the relief. She will also say that the states do not have the sufficient injury necessary to bring the claim in the first place.

Next up will be Nebraska’s Solicitor General James A. Campbell – representing the six states involved — who will offer several theories to explain why the states will be injured if the plan is allowed to go into effect. Most of his theories revolve around the potential of lost tax revenue. He's also expected to stress that the plan amounts to an unlawful attempt to erase an estimated $430 billion of federal student loan debt under the guise of the pandemic.

Once Campbell wraps up, Prelogar will likely return to make a few closing arguments. The case is slated to last an hour, but look for it to go at least two hours.

Next comes the second case: With no break, the justices will then tackle the second case initially brought by two student borrowers.

Prelogar will appear again and is expected to say that the students – Myra Brown and Alexander Taylor — like the states, don’t have the legal right to bring the case. She is likely to emphasize that the borrowers didn’t qualify for full relief in the first place, so they won’t be injured if the plan goes into effect.

J. Michael Connolly will then step up on behalf of Brown and Taylor. Connolly works for the boutique law firm Consovoy McCarthy, which also represented former President Donald Trump in some of his legal battles. The attorney is likely to repeat what he said in briefs. The HEROES ACT “does not authorize the Secretary to cancel nearly half-a-trillion dollars in debts held by tens of millions of individuals."

This case may not go as long as the first because so many of the issues are the same. Prelogar will then return to end the marathon session.

What happens next: Under normal circumstances, a case with such high political stakes would likely be resolved in late June or early July. But because the justices expedited the briefing, there is a possibility they may prioritize the opinion and release it before the end of the term.

The Supreme Court on Tuesday will take up two challenges to President Joe Biden’s student loan forgiveness program.

Under the plan, approximately 40 million working and middle-class borrowers would receive up to $20,000 in relief, but Republican-led states and conservatives challenged the program shortly after in was announced, saying it's an unlawful attempt to erase an estimated $430 billion of federal student loan debt under the guise of the pandemic

Advocates for student loan relief gathered outside the court ahead of the hearing on Monday night and Tuesday. See photos from the scene:

About 26 million people had already applied for President Joe Biden's federal student loan forgiveness program when a federal district court judge struck down the plan in early November. No debt has been canceled thus far.

The Supreme Court will hear arguments on Tuesday in two cases related to the program, with a decision expected by late June or early July.

Here's what to know about Biden's challenged plan:

Who is eligible? If the courts ultimately allow the program to move forward, not every student loan borrower is eligible for the debt relief. First, only federally held student loans qualify. Private student loans are excluded.

Second, high-income borrowers are generally excluded from receiving debt forgiveness. Individual borrowers who make less than $125,000 a year and married couples or heads of households who make less than $250,000 annually could see up to $10,000 of their federal student loan debt forgiven.

If a qualifying borrower also received a federal Pell grant while enrolled in college, the individual is eligible for up to $20,000 of debt forgiveness.

What about current students? Some current students would be eligible under Biden’s plan if it’s allowed to take effect. Eligibility for borrowers who filed the Free Application for Federal Student Aid, known as the FAFSA, as an independent will be based on the individual’s own household income.

What kinds of loans qualify? There are a variety of federal student loans and not all are eligible for relief if the program is allowed to proceed. Federal Direct Loans, including subsidized loans, unsubsidized loans, parent PLUS loans and graduate PLUS loans, are eligible.

But federal student loans that are guaranteed by the government but held by private lenders are not eligible unless the borrower applied to consolidate those loans into a Direct Loan by September 29, 2022.

Will borrowers have to pay taxes on forgiven loans? Borrowers will not have to pay federal income tax on the student loan debt forgiven, thanks to a provision in the American Rescue Plan Act that Congress passed in 2021.

But it’s possible that some borrowers may have to pay state income tax on the amount of debt forgiven. There are a handful of states that may tax discharged debt if state legislative or administrative changes are not made beforehand, according to the Tax Policy Center. The tax liability could be hundreds of dollars, depending on the state.

Find answers to other questions about the program here.

There are some who are surprised that the Biden administration is coming to this conservative court and risking bad precedent.

That’s because several of the justices have made clear in recent years that they believe federal agencies— that are unaccountable to the public —have become too powerful, upsetting the delicate separation of powers.

In 2021, for instance, the court invalidated the Biden administration’s Covid-related eviction moratorium issued by the Centers for Disease Control holding that such a program needs to be specifically authorized by Congress. 

In 2022, the court blocked a nationwide vaccine or testing mandate for large businesses, sending a clear message that the Occupational Safety and Health Administration had overstepped its authority. 

And last term the court cited the so called “major questions doctrine” in a 6-3 decision that curbed the Environmental Protection Agency’s ability to broadly regulate carbon emissions from existing power plants.

Under the theory, if an agency acts in a way that could have major political or economic implications, it must have the authority of Congress. In one of today's cases, the red states invoke the major questions doctrine — urging the justices to rule against the Biden administration’s student loan plan.

Look for the conservatives on the court to repeatedly press the government on whether it exceeded its authority in pushing through its student loan forgiveness plan. Keep in mind that former President Donald Trump nominated Justices Neil Gorsuch and Brett Kavanaugh in part because they are often skeptical of government power.

The US Supreme Court will soon hear oral arguments in two cases challenging President Joe Biden's student loan forgiveness program.

The Biden administration faced several lawsuits over the plan. The plaintiffs argue that the Department of Education is overstepping its authority.

The plan would cancel up to $10,000 for some borrowers, and up to $20,000 to borrowers who received Pell Grants.

Last fall, the Biden administration began notifying people who are approved for federal student loan relief. About 26 million people had already applied to the program by the time it was frozen prompting the government to stop taking applications. No debt has been canceled thus far.

About the cases: One of the lawsuits was brought by six Republican-led states, headed by Nebraska, that argue that the student loan forgiveness program violates the separation of powers and the Administrative Procedure Act, a federal law that governs the process by which federal agencies issue regulations.

They argue that it violates the separation of powers and that Biden is using the pandemic as a pretext to mask his true goal of fulfilling a campaign promise to erase student loan debt.

A lower court judge dismissed this lawsuit on October 20, ruling that the plaintiffs did not have the legal standing to bring the challenge. In November, the 8th US Circuit Court of Appeals reversed and blocked the program.

The other challenge that the Supreme Court will hear was brought by two individual borrowers – Myra Brown and Alexander Taylor – who are not qualified for full debt relief forgiveness and who say they were denied an opportunity to comment on the secretary of education’s decision to provided targeted student loan debt relief to some.

The lawsuit was filed with the backing of a conservative group called the Job Creators Network Foundation. A federal judge in Texas ruled in favor of the plaintiffs, striking down the program on November 10.

Lawyers for the government say that Congress gave the secretary of education “expansive authority to alleviate the hardship that federal student loan recipients may suffer as a result of national emergencies,” like the Covid-19 pandemic, according to a memo from the Department of Justice.

It’s been nearly three years since the US government decided to allow borrowers to pause payments on student loans. Since then, the debate on whether to forgive student loans has reached the Supreme Court, which will hear the case later this month.

Whether you paid off a car loan, put down a payment on a new home or made a big purchase that had a significant impact on your life, CNN wants to know if those extra dollars helped you make any financial strides.

We know the issue of student loans disproportionately affects those from low-income backgrounds and minority groups, and we’d like to hear from you.

Click here and share your stories with us, and we may follow up for a CNN story.

President Joe Biden’s student loan forgiveness program is at the mercy of the Supreme Court, and student loan borrowers could be waiting weeks, if not months, to hear whether the program is allowed to go into effect.

But there are several other ways many of the 43 million federal student loan borrowers may qualify for student debt relief. Here's a look at some other programs:

Public Service Loan Forgiveness: The Public Service Loan Forgiveness program allows certain government and nonprofit employees to seek federal student loan forgiveness after making 10 years of qualifying payments. A qualifying borrower’s full remaining balance is canceled, regardless of the amount.

Teachers, social workers, some nurses and doctors as well as government lawyers are some of the types of borrowers who may be eligible.

Teacher Loan Forgiveness Program: The Teacher Loan Forgiveness Program cancels up to $17,500 in federal student loan debt for certain full-time teachers who have worked in a qualifying low-income elementary or secondary school for at least five consecutive years.

Math and science teachers who are considered to be highly qualified at the secondary school level, as well as special education teachers at both the elementary and secondary levels, are eligible for the full $17,500 of federal student loan forgiveness. Those who are considered highly qualified and teach other subject areas may receive up to $5,000 in loan forgiveness.

Borrower defense to repayment: The borrower defense to repayment program delivers student debt relief to people who were defrauded by their college.

Generally, students who attended big, for-profit colleges like Corinthian Colleges and ITT Tech that have been found to have misled students with inflated job-placement numbers will qualify for forgiveness under the federal program.

There are some groups of students that the Department of Education has already determined are automatically eligible for borrower defense to repayment, but other students may have to apply for debt relief, demonstrating how the schools misled them or engaged in other misconduct.

Read about more of the programs here.

If the Supreme Court strikes down President Biden’s student loan forgiveness program, it could be possible for the administration to make some modifications to the policy and try again – though that process could take months.

“The administration could implement some other version of this installation under a different legal authority, but that may well generate its own litigation and we end up in the same place,” Herrine added.

The Biden administration is also working on changes to existing federal student loan repayment plans that aim to make it easier for borrowers to pay for college. These changes are not facing legal challenges.

The Department of Education is currently finalizing a new income-driven repayment plan to lower monthly payments as well as the total amount borrowers pay back over time. In contrast to the one-time student loan cancellation program, the new repayment plan could help both current and future borrowers.

Additionally, in July, changes will be made the Public Service Loan Forgiveness program, which allows certain government and nonprofit employees to seek federal student loan forgiveness after making 10 years of qualifying payments. The changes will make it easier for some borrowers to receive debt forgiveness.

Millions of Americans have student loan debt, amassing to more than $1.6 trillion by the end of last year, according to the Federal Reserve Bank of New York.

The Federal Reserve data shows people under the age of 30 are more likely to have student loan debt compared with older adults — underscoring the crippling burden on another generation of Americans.

But the impact is multigenerational. Nearly a quarter of the outstanding student loan debt is owed by Americans who are 50 and older.

Student debt has not always been a crisis. The modern federal education borrowing system came from a series of legislative moves aimed at helping more people have access to college — but it came with some unintended consequences.

Here are some of the key moments:

1958: The first federal initiative 

The National Student Loan program, aimed at expanding access to higher education, was launched in 1958. Created from the National Defense Education Act, it was the first federal student loan initiative for those studying certain subjects to improve science, mathematics and engineering skills during the Cold War.

1965: The Higher Education Act

The Higher Education Act of 1965 opened the possibility of college to even more people, regardless of area of study — but it also created a new type of relationship between the federal government, banks and college campuses through the Guaranteed Student Loan program.

It solved for the government the challenge of how to get lenders involved with such a risky financial investment: The loan did not come from the federal government, but instead, the government assured repayment to bankers willing to give loans, Shermer said.

1970: Sallie Mae and a boom in borrowing and private loans

The Student Loan Marketing Association, known as Sallie Mae, was created through the reauthorization of the Higher Education Act in 1972. Sallie Mae offered private student loans along with other financial products.

The availability of financial aid products to both for-profit and nonprofit companies allowed for the rise of private student loans, she said.

That coupled with the rising cost of tuition in the 1970s meant that students needed more money to continue their education. Since there was a limit to how much students could borrow in federal loans, private loans were needed as a supplement.

Another reason why private loans became more critical was pressure in Washington for Congress to cut taxes and cut spending, she said.

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