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SCOTUS Agrees to Hear Biden Student Loan Debt Relief Case After Administration Points to ‘Economically Vulnerable Borrowers in Limbo’


Joe Biden Waves Goodbye

The U.S. Supreme Court on Thursday agreed to hear arguments on the merits in a case involving President Joe Biden’s plans to cancel student loan debt for millions of borrowers.

The states of Nebraska, Missouri, Arkansas, Iowa, Kansas, and South Carolina filed suit against Biden’s loan forgiveness program and won an injunction before the Eighth Circuit Court of Appeals.

A lower federal district court did not block Biden’s program from taking effect; the Eighth Circuit did.

U.S. Solicitor General Elizabeth B. Prelogar asked the Supreme Court to “vacate, or at minimum narrow, the injunction” entered by the court of appeals pending further appellate proceedings. (The Eighth Circuit hadn’t heard the case on its merits; that review remained outstanding.) Or, in the alternative, Prelogar asked the Supreme Court to construe the application to vacate the injunction as a petition for a writ of certiorari — a request to hear the case on its merits.  Here, Prelogar also asked the Supreme Court to bump the case further ahead in line:  fshe asked the SCOTUS to hear the matter before the Court of Appeals fully adjudicated it at the intermediate appellate level.

The Supreme Court on Thursday “deferred” the chance to vacate the Eighth Circuit’s injunction against the loan forgiveness program — a short-term loss for the Biden Administration — but agreed to hear the case on its merits.

“The application to vacate injunction is also treated as a petition for a writ of certiorari before judgment, and the petition is granted on the questions presented in the application,” the Supreme Court wrote in a brief order on Thursday. “The Clerk is directed to establish a briefing schedule that will allow the case to be argued in the February 2023 argument session.”

Prelogar’s application on behalf of the Biden Administration was submitted to Justice Brett Kavanaugh because he is the justice who hears incoming petitions from the Eighth Circuit, which is based in St. Louis. Kavanaugh referred the application to the full court for consideration.

The core of the dispute involves complaints from the aforementioned states about the way the Biden Administration is choosing to relieve millions or billions of dollars in federally backed student loan debt.  The states have alleged that the Biden plan “contravenes the separation of powers and violates the Administrative Procedure Act because it exceeds the Secretary’s authority and is arbitrary and capricious,” the Eighth Circuit noted while issuing its injunction on Nov. 14.

In other words, the states who are suing the Administration have argued the only way the debt relief can occur is for Congress to pass it into law.  That’s a virtually impossible task given the current makeup of the U.S. Senate (50 Republicans, 48 Democrats, and two Independents) and the procedural reality that it effectively takes 60 votes to override a filibuster (even though a simple majority is technically needed to pass legislation).

The states have standing to sue, the Eighth Circuit concluded, because they — and specifically Missouri — administer student loans through state agencies. Those state-owned student loan agencies have “financial obligations to the State treasury,” the circuit court wrote. Therefore, “the challenged student loan debt cancellation presents a threatened financial harm to the State of Missouri.”

In other words, Biden’s loan forgiveness program would likely cost the states money.

“This unanticipated financial downturn will prevent or delay Missouri from funding higher education at its public colleges and universities,” the Eighth Circuit indicated, citing the way Missouri uses loan revenues to pay for other education-related projects.

The solicitor general — the legal advocate for the Biden Administration before the U.S. Supreme Court — is arguing that Congress already delegated decisions about student loans to the Secretary of Education.  Therefore, the solicitor general asserts, the Biden Administration’s plan is legally sound.

“Congress charged the Secretary of Education with administering federal student-loan programs,” Prelogar’s SCOTUS application indicates. “Because borrowers who default on their student loans face severe financial consequences — including wage garnishment, long-term credit damage, and ineligibility for federal benefits — Congress specifically authorized the Secretary to waive or modify any applicable statutory or regulatory provision as he deems necessary to ensure that borrowers  affected by a national emergency are not worse off in relation to their student loans.”

“Confronted with the deadliest pandemic in the Nation’s history, which has wreaked global economic havoc, both the Trump and Biden Administrations invoked the HEROES Act to pause repayment obligations and suspend interest accrual on all federally held student loans since March 2020,” the solicitor general continued.  “That pause is estimated to have cost the government more than $100 billion.”

The application goes on at length:

In August 2022, the Secretary determined that the across-the-board pause on all payments for all borrowers should come to an end and directed the Department to restart loan payments at the end of the year. But the Secretary also found that when repayment obligations resume, lower-income borrowers will be at heightened risk of delinquency and default because of the continuing economic consequences of the COVID-19 pandemic. The Secretary thus directed the Department to issue up to $10,000 in student-loan relief to eligible borrowers with annual incomes under $125,000 ($250,000 for borrowers filing jointly). Qualifying Pell Grant recipients, who are at even greater risk of default, can receive up to $20,000 in relief. This relief, the Secretary found, is necessary to ensure that delinquency and default rates among these borrowers would not spike above pre-pandemic levels.

Prelogar argued that the Eighth Circuit’s decision to issue a “universal injunction” occurred without any analysis of the “merits” of the states’ claims “much less [a] determin[ation] they are likely to succeed.”

Rather, the Eighth Circuit simply said, the case involves “substantial questions of law which remain to be resolved.”

Prelogar said that scant analysis doesn’t cut it.

“This Court should vacate that injunction,” Prelogar wrote to the Supreme Court.  “Respondents lack standing to challenge the plan.”

She continued:

On the merits, the plan falls squarely within the plain text of the Secretary’s statutory authority. Indeed, the entire purpose of the HEROES Act is to authorize the Secretary to grant student-loan-related relief to at-risk borrowers because of a national emergency — precisely what the Secretary did here. And the plan rested on the Secretary’s examination of the relevant economic data and the Department’s long experience with borrowers transitioning back into repayment. The Eighth Circuit did not address either the text of the statute or the data supporting the plan. And the court compounded its errors by issuing sweeping nationwide relief, rather than limiting the injunction to loans serviced by the sole entity on which the court relied in finding that respondents had standing.

The Eighth Circuit’s erroneous injunction leaves millions of economically vulnerable borrowers in limbo, uncertain about the size of their debt and unable to make financial decisions with an accurate understanding of their future repayment obligations. If the Court declines to vacate the injunction, it may wish to construe this application as a petition for a writ of certiorari before judgment, grant the petition, and set the case for expedited briefing and argument this Term to avoid prolonging this uncertainty for the millions of affected borrowers.

The Supreme Court has now indicated that it is eager to settle the issues at play starting in February.

[Image via Drew Angerer/Getty Images]

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Aaron Keller holds a juris doctor degree from the University of New Hampshire School of Law and a broadcast journalism degree from Syracuse University. He is a former anchor and executive producer for the Law&Crime Network and is now deputy editor-in-chief for the Law&Crime website. DISCLAIMER:  This website is for general informational purposes only. You should not rely on it for legal advice. Reading this site or interacting with the author via this site does not create an attorney-client relationship. This website is not a substitute for the advice of an attorney. Speak to a competent lawyer in your jurisdiction for legal advice and representation relevant to your situation.