The Supreme Court said Thursday that President Joe Biden’s student loan forgiveness plan would be blocked for now, but the justices agreed to hear oral arguments in the case in February, with a decision expected by June.
Biden’s plan would provide up to $20,000 in loan relief to millions of qualified borrowers, but has faced legal challenges since it was announced.
About two weeks ago, the Biden administration began notifying individuals approved for federal student loan relief. About 26 million people had already applied by the time the program was shut down. No loan has been canceled so far.
In a Supreme Court case, a district court rejected a challenge brought by a group of states, saying they could not demonstrate the statutory injury necessary to bring the challenge. In November, the 8th U.S. Circuit Court of Appeals reversed and blocked the plan.
The federal appeals court’s “misguided injunction,” Solicitor General Elizabeth Preloger told the Supreme Court, “left millions of economically vulnerable borrowers uncertain about the extent of their debt and unable to make financial decisions with an accurate understanding of their future repayment obligations.”
He said Biden acted to address the financial harm of the pandemic and “smooth the transition to repayment” by offering targeted loan relief to some federal student-loan borrowers affected by the pandemic.
This scheme is designed to help borrowers. The program can provide student loan debt relief of up to $10,000 to eligible borrowers who earn less than $125,000 ($250,000 for a family) when loan cancellation begins.
Additionally, borrowers who receive a Pell Grant can receive up to $20,000 in relief.
With the onset of the Covid-19 pandemic, the education department suspended student loan payments and interest accruals to help those struggling financially. Those payments were set to resume in January, but last week the Biden administration issued an extension due to the fact that his debt-forgiveness plan — announced in August — has come under multiple legal attacks.
Pending, the moratorium on payments will last 60 days after the resolution of the case on the loan forgiveness program. If the scheme is not implemented and the cases are not resolved by June 30, the payment will be made after 60 days, the government said.
The authority is under the Higher Education Relief Opportunities for Students Act of 2003, or the HEROES Act, the administration argued. It said the law exempts the government from applicable procedural requirements, including the creation of a notice and comment rule.
A group of states led by Nebraska challenged Biden’s policy, arguing that it violates the Separation of Powers and Administrative Procedure Act, a federal law that governs the process by which federal agencies issue regulations.
In court documents for the states, attorneys for Nebraska, Missouri, Arkansas, Iowa, Kansas and South Carolina told the justices that the program should be suspended, especially since the Biden administration has announced an extension of the fee freeze until 2023.
Nebraska Attorney General Douglas J. Peterson told the justices that Biden’s debt relief plan was “an illegal attempt to wipe out more than $400 billion of the $1.6 trillion in federal student loans and eliminate the outstanding balances of 20 million of the 43 million borrowers.”
In a separate challenge, the 5th US Circuit US Court of Appeals on Wednesday night refused to lift a stay blocking a district court judge’s plan.
That challenge is posed by two private borrowers, Myra Brown and Alexander Taylor. They were ineligible for full debt relief and were denied an opportunity to comment on the Secretary of Education’s decision to grant targeted student loan debt relief to some.
This story has been updated with additional details.