Student Loan Debt Relief Goes to the Supreme Court

The Supreme Court denied President Joe Biden’s massive student loan debt forgiveness plan on Thursday, December 22, 2022, presenting new legal challenges for the administration. As a result, the government is not accepting new applications for debt relief at this time. They are currently attempting to have these orders overturned, and the court stated that it will hear full arguments from both sides of the issue on an expedited basis in February 2023.

According to its official procedures, it will then issue a final ruling, most likely in June, at the end of the current term, which will be an important time to keep an eye out for an update, as borrowers have a lot riding on this.

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The Status of Student Loan Debt Relief as It Heads to the Supreme Court: Your Complete Guide

Student loans have been around in some form or another for college students since the 1800s when Harvard started accepting people with student aid through different lending options. As the Supreme Court has just decided to hear the Biden Administration and the two plaintiffs suing the administration to halt student loan relief, it can be helpful to have a full understanding of the issues at hand when it comes to student loans, student loan debt relief, and how it will all impact borrowers both current and future.

The History of Student Loan Debts

While students loans are almost as old as college in the United States, the real history of student loans and their impact on the everyday American began in the 1950s. At this time America, rather than offering more affordable tuition to all American students, began offering grants, scholarships, and loans, meaning students would have to qualify, usually for outstanding academics, sports, or other extracurriculars, come from extremely low income families, or take out loans at rather steep interest rates of 4%.

These opportunities, scholarships, grants, and loans, were originally offered because the US wanted to be competitive with other nations whose students were receiving superior educations and proving themselves to be more intelligent across subjects like math and science. Nowhere was this issue more obvious than in our competition with Russia as the Cold War set in.

Still, the average cost of tuition per year in the 1960s was only about $1500 per year, covering room, board, and tuition. This reality was mostly because the federal government was also sending money to states to keep tuition costs down.

The Pell Grant Offered Further Opportunity

The Pell Grant began to be offered in 1972, giving students still more opportunities to receive aid rather than take out loans.

All of this aid took a major shift in the 1990s when the federal government began to provide less aid and, at the same time, costs at public universities began to rise. Since 1980, university costs have risen 213 percent, and at a rate of 3 times that of inflation.

The solution has been to provide more student loans and allow those loans to be unsubsidized. As a result, millions of borrowers and Americans have graduated from college with a degree but thousands, if not hundreds of thousands, of dollars in loans with high interest rates and no hope of ever repaying them.

The 2008 economic crisis only made things worse, with the federal government and states alike investing even less and cutting funding to college, all while most corporate jobs and public service jobs insist on a college degree for even the most entry level of professions.

To make the matter worse, students are not able to discharge student loans through bankruptcy as a result of a law passed in 1979, so there is no getting out from under the debt.

Joe Biden Steps in on Loan Forgiveness

As a way of ameliorating this issue, Joe Biden ran on total student loan forgiveness. As he came into office, he was also taking on a global pandemic and, because the government was operating under a declared state of emergency, and still is, was able to halt all student loan repayments.

All Americans paying off student loans have had some relief from student loan repayments since.

Then, as he realized total loan forgiveness would be a non-starter with congress, who must pass the legislation, he has instead put together a package with his administration that would offer $20,000 in forgiveness to Pell Grant recipients, presumably those with the least means to pay off their loans, and $10,000 in loan forgiveness to anyone making less than $125,000 per year, or $250,000 as a married couple.

Challenges and The Debate on the Student Loan Forgiveness Plan

The debates over students loans have been going on for at least that long. The issues of student loans is directly tied to affordability of college for all students, to sharply rising tuition costs while much of the rest of the industrialized world offers either free or cheap higher education, and to overwhelming repayment plans that some students can never hope to pay off.

Today, the two plaintiffs suing the administration and attempting to stop the loan debt forgiveness program are arguing on two different bases.

The first, out of the 8^th Circuit Court of Appeals, is the one that has halted the program until arguments are heard at the Supreme Court. It is led by Republican-controlled states arguing that this program will negatively impact funding to their states. The reasoning goes that because the states have agreements with the Family Federal Education Loan Program, FFELP, an older federal loan program, and the Biden forgiveness program will shrink the loan portfolios of the FFELP, that less money will then be coming into the states.

The Biden administration challenges this argument, stating that the states cannot prove they would actually suffer concrete harm as a result of these cuts.

The second suit comes out of the 5^th Circuit of the Court of Appeals, led by a conservative organization, and it argues that the federal government does not have the power to enact this new legislation and that in doing so, it deprives borrowers from the right to a public comment process.

The Biden administration argues against this challenge saying that the forgiveness program is lawful under the 2003 HEROES Act, which allows the government to enact regulation under a state of emergency without offering public comment.

Current Status of Debt Relief for Students

On November 11, the Department of Education stopped accepting new applications for student debt relief.

The Supreme Court has decided to hear arguments from both circuits, and the justices have made this decision rather quickly in terms of how long it usually takes the court to call up a case.

The justices will begin hearing student loan debt relief arguments from both sides on February 28, 2023.

What’s Coming and What It Means for Student Loan Borrowers

As of right now, all federal student loan repayments are still on hold, and will continue to be so at least until June of 2023, unless the administration places another extension on the hold, which it has already done several times.

As of right now, several esteemed attorneys are predicting that the fact the case is being called up so quickly means the court will likely decide against the administration as it is easier to decide against an appeal than it is to decide in favor of.

The Court as of now could go one of three ways.

1. It could decide against the Biden appeals, which will send the administration back to the drawing board to figure out a new approach to helping students out of the overwhelming debt they face.
2. It could decide in favor of the Biden appeals, which will put the program back into action, allowing for applications from debt holders to continue being accepted.
3. Or, it could decide to take the middle ground, simply finding that the plaintiffs do not have legal grounds to sue the administration, but not actually addressing the issue of student loans at all.

Key Dates to Watch for Student Loan Debt Relief Updates

February 28, 2023 is the most important date as of right now to watch for borrowers hoping for student loan debt relief. After that the next key dates are as follows:

• Before that, the Biden Administration must file legal brief by January 4, 2023.
• The challengers must both file their legal briefs by January 27, 2023.
• The Biden Administration must then file any reply to the challengers’ briefs by February 15, 2023.
• The Court can offer a decision at any time after oral arguments are heard at the hearings beginning February 28, 2023, but it usually releases its decisions in June.

Until then, borrowers do not have to make any payments on student loans until 60 days after the court hands down its decision, or until 60 days after June 30, whichever comes first, which means it is most likely that if borrowers do have to resume payments, it will not be until August of 2023.

Unless, of course, the Administration offers another extension or pause.

Final Thoughts on the Student Loan Forgiveness Program

The debate will undoubtedly continue, with both sides making fair arguments in favor of what is best for America as a whole. One of the largest realities that has come from this decades long debate and this last decade of recession and recovery and then a pandemic has come to potential future borrowers.

This reality is that for many jobs, a college degree is simply not necessary when young people could get certifications, technical degrees, internships, and journeyman opportunities that will keep them out of a debt that could last their entire lives and hamper other financial opportunities.

And for those professions that do require higher education, Americans are progressively insistent that we find a better way to get our students educated than to strap them with hundreds of thousands of dollars in debt. This better way could come in the form of reevaluating public university costs, revisiting tuition, improving upon primary and secondary education, and much, much more.

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