Supreme Court Justices Skeptical of Debt Relief

Several Supreme Court justices appeared skeptical of the Biden administration’s plan to forgive up to $20,000 in federal student loans during a nearly four-hour hearing Tuesday.

As expected, the hearing focused on whether federal statute allows the Biden administration to forgive student loans, whether the plaintiffs have standing to challenge the plan and whether the justices should apply a stricter standard in their review of the two lawsuits before the court.

The court’s six conservative justices homed in on questions of fairness and what Congress intended when it authorized the education secretary in 2003 to “waive” or “modify” provisions of student loan programs to ensure that those affected by a national emergency aren’t worse off financially.

The conservative justices seemed to think the Biden plan was too large to say it was a modification. “We’re talking about half a trillion dollars and 43 million Americans,” Chief Justice John Roberts Jr. said. “How does that fit under the normal understanding of modifying?”

Six states—Arkansas, Iowa, Kansas, Missouri, Nebraska and South Carolina—and two Texas residents filed separate lawsuits in the fall to block the debt-relief plan before it began. The states allege that the plan would harm state revenues and agencies that hold student loans, while the Texas individuals take issue with the fact that they didn’t have a chance to comment on the proposal.

Both sets of plaintiffs argue that the Higher Education Relief Opportunities for Students Act of 2003, which the Biden administration says justifies its debt-relief plan, does not authorize that plan.

The high-stakes legal fight has implications for the president’s authority during emergencies and the separation of powers doctrine, among other legal questions. The lawsuits are also colliding with a national movement to raise awareness about student loan debt.

Hundreds of representatives, including students, borrowers and advocacy organizations, of that movement gathered outside the Supreme Court in support of debt relief.

“All of us collectively have been sounding the alarm for almost a decade about student debt and the crisis that was to come, and today, this is our Super Bowl,” said Kristin McGuire, executive director of Young Invincibles, one of the organizations that hosted the rally. “Canceling student debt is not only equitable and legal, it’s the only appropriate response to the decades of government mismanagement and widespread industry abuses.”

During the hearing, Roberts repeatedly asked Solicitor General Elizabeth Prelogar, who represented the Biden administration, about the fairness of the program and whether the secretary should’ve considered those without student loans in designing the debt-relief plan.

He added that the cases reminded him of the challenge to the Trump administration’s attempt to end the Deferred Action for Childhood Arrivals program. The court ended up blocking the Trump administration from ending the program.

Roberts and others seemed to imply that the cases fit within the court’s major-questions doctrine, 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.

“There are going to be winners and losers,” Justice Brett Kavanaugh said, adding that the cases raise similar concerns about individual rights and liberties as in other major-questions cases.

Kavanaugh asked Prelogar about how the debt-relief lawsuits are different from other cases in which the court applied the major-questions doctrine. He said those cases typically involve an old statute, general language as well as a lack of a congressional action despite considering the issue repeatedly.

“I don’t think that’s a fair characterization of the HEROES Act,” Prelogar said. “It’s not the same mismatch here … The HEROES Act is a perfect fit with the problem the secretary confronted.”

Roberts and others repeatedly mentioned the plan’s estimated price tag—$400 billion—and said it seemed like sidestepping Congress’ appropriating authority. Roberts questioned whether given the amount of money at stake, the executive branch should move forward on a plan that Congress hasn’t expressly authorized.

Justice Clarence Thomas was more critical.

“This is a grant of $400 billion and runs headlong into Congress’s appropriation authority,” he said.

Prelogar acknowledged the vast size of the program but said it’s not surprising, given that the plan is in response to a “once-in-a-century pandemic.”

“Without critical relief, we’re going to have a wave of defaults,” she said.

Prelogar said the text of the HEROES Act clearly empowers the education secretary to act during an emergency. On the question of fairness, she said Congress already made the judgment call about who would receive relief under certain conditions.

“It’s hard to see what Congress could’ve done differently,” she said.

The court’s liberal justices tended to agree with Prelogar.

“Congress couldn’t have made this much clearer,” Justice Elena Kagan said of the HEROES Act.

The legality of the HEROES Act in this instance shouldn’t be an issue for the justices, Prelogar argued, because the two groups challenging the plan lack standing to do so.

The states’ standing argument focused on how the Missouri Higher Education Loan Authority (MOHELA), a state-created entity and federal loan servicer, would be affected by the debt-relief program. MOHELA is not a part of the lawsuit, and Prelogar said the agency would have standing if it sued.

Representing the states, Nebraska solicitor general James Campbell said the debt-relief plan threatened half of the direct loans in MOHELA’s portfolio, which would hurt the agency’s bottom line and hinder its ability to contribute to state funds.

The court’s liberal justices appear deeply skeptical that the states could sue because of purported harms to MOHELA and questioned why the agency wasn’t a part of the lawsuit.

“MOHELA doesn’t need to be here because the state is asserting its interest,” Campbell said.

Justice Amy Coney Barrett, a conservative, picked up that line of questioning with Campbell.

“If they are an arm of the state, why didn’t you tell them to bring the suit?” she asked.

Campbell responded that it was a matter of state politics.

Justice Ketanji Brown Jackson said the court needs to be “concerned about jumping into the political fray” unless the lawsuit is brought by someone with stronger standing claims.

Outside the chamber, the political fight over student loan forgiveness continued, with lawmakers on either side of the debate weighing in.

“As we heard from today’s SCOTUS oral arguments, President Biden’s student loan policy is not only deeply unfair to Americans who did not go to college or worked to pay off their loans, but violates the constitutional authority of the executive branch,” Republicans on the Senate Health, Education, Labor and Pensions committee said on social media.

Justin Draeger, president of the National Association of Student Financial Aid Administrators, said borrowers remain stuck in limbo.

“It’s difficult to see where we go from here, because we’ve reached a political precipice,” he said. “Even if this one-time forgiveness happens, it’s going to be a one-time victory that doesn’t do anything for students and next year’s entering students … The conversation on debt forgiveness has pushed the left and the right even further apart on long-term solutions.”

U.S. Secretary of Education Miguel Cardona said in a statement that Prelogar and the Justice Department “mounted a powerful defense” of the administration’s debt-relief plan.

“In addition to this one-time debt relief plan focused on the effects of the pandemic, we will continue to put the needs of students and borrowers ahead of special interests, hold colleges accountable for runaway costs and unaffordable debts, and pursue historic changes to student loan repayment that will cut costs and reduce the crushing burden of student debt for millions of working families,” he said.