SCOTUS Approves Joe Biden’s Student Loan Debt Plan

The US Supreme Court on Thursday agreed to hear arguments on the merits in one session case include President Joe Bidens plans to cancel student loan debt for millions of borrowers.

The states of Nebraska, Missouri, Arkansas, Iowa, Kansas and South Carolina filed suits against Biden’s credit relief program and won an injunction in the Eighth Circuit Court of Appeals.

A lower federal district court did not prevent Biden’s program from going into effect; the Eighth Circle did.

US Attorney General Elizabeth B Prelogar asked the Supreme Court to “repeal or at least limit” the temporary injunction issued by the court of appeal pending further appeals. (The Eighth Circuit had not heard the case on its merits; that review was pending.) Or, alternatively, Prelogar asked the Supreme Court to construe the motion to vacate the injunction as a motion for a writ of statute—a motion to keep the case in its thing to hear. Here Prelogar also urged the Supreme Court to take the case further: fshe urged SCOTUS to hear the matter before the Mid-Appellate Court of Appeals fully rules on it.

The Supreme Court on Thursday “adjourned” the ability to lift the Eighth District’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 motion to vacate the injunction will also be treated as a motion for a writ of pre-judgment and the motion will be granted with respect to the issues raised in the motion,” the Supreme Court wrote in a Short order on Thursday. “The case officer is instructed to establish a briefing schedule that will allow the case to be discussed at the February 2023 argumentation session.”

prelogars application submitted to the judiciary on behalf of the Biden administration Brett Kavanaugh because he is the judge who hears incoming petitions from the Eighth Circuit, which is based in St. Louis. Kavanaugh referred the motion to the full court for consideration.

At the heart of the dispute are complaints from the aforementioned states about the way the Biden administration chooses to forgive millions or billions of dollars in state-backed student loan debt. States have claimed that the Biden plan “violates the separation of powers and violates the Administrative Procedures Act because it exceeds the powers of the minister and is arbitrary and capricious,” according to the Eighth Circuit written down while he issued his restraining order on November 14.

In other words, the states suing the government have argued that debt relief can only come through legislation passed by Congress. That’s a virtually impossible task given the current composition of the US Senate (50 Republicans, 48 ​​Democrats and two independents) and the procedural reality effectively requires 60 votes to override a filibuster (although technically a simple majority is required to pass legislation).

The states have legal standing, the Eighth Circuit concluded, because they — and Missouri in particular — administer student loans through state agencies. These state student loan agencies have “financial obligations to the Treasury,” the District Court wrote. Therefore, “the contested student loan debt relief represents impending financial damage to the state of Missouri.”

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

“This unexpected financial downturn will prevent or delay Missouri from funding higher education at its public colleges and universities,” the Eighth Circuit said, citing the way Missouri is using loan proceeds to pay for other education-related projects.

The attorney general — the Biden administration’s legal counsel in the US Supreme Court — argues that Congress has already delegated decisions about student loans to the Secretary of Education. Therefore, according to the attorney general, the plan of the Biden administration is legally sound.

“Congress gave the Secretary of Education responsibility for administering federal student loan programs,” Prelogar’s SCOTUS said application shows. “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 has specifically authorized the Secretary to waive or modify any applicable statute or regulatory provision, if it deems it necessary, ensure that borrowers affected by a national emergency are not worse off in terms of their student loans.”

“Faced with the deadliest pandemic in the nation’s history that has wreaked economic havoc worldwide, both the Trump and Biden administrations have invoked the HEROES Act to suspend repayment obligations and accrual of interest on all federally held student loans suspended since March 2020,” the Attorney General continued. “This pause is estimated to have cost the government more than $100 billion.”

The application goes on in detail:

In August 2022, the minister determined that the blanket suspension of all payments for all borrowers should end and directed the ministry to resume loan payments at the end of the year. However, the minister also noted that if repayment obligations resume, lower-income borrowers will face an increased risk of delinquency and default due to the ongoing economic fallout from the COVID-19 pandemic. The secretary therefore directed the department to provide up to $10,000 in student loan relief to eligible borrowers with annual incomes of less than $125,000 ($250,000 for jointly applied borrowers). Eligible Pell Grant recipients who are at even greater risk of default may receive up to $20,000 in relief. That relief, the minister said, is necessary to ensure delinquency and default rates from these borrowers do not spike above pre-pandemic levels.

Prelogar argued that the Eighth Circuit’s decision to issue a “general injunction” was made “much less” without any analysis of the “merit” of the states’ claims [a] determine[ation] they will probably be successful.”

Rather, the Eighth Circuit simply said the case raised “significant legal issues that remain to be resolved.”

Prelogar said that a sparse analysis is not enough.

“This court should lift this injunction,” Prelogar wrote to the Supreme Court. “Respondents lack the credibility to contest the plan.”

She continued:

In substance, the plan falls squarely within the plain text of the minister’s statutory powers. In fact, the entire purpose of the HEROES Act is to authorize the Minister to provide student loan-related relief to vulnerable borrowers due to a national emergency – which is exactly what the Minister has done here. And the plan was based on the minister’s study of relevant economic data and the ministry’s longstanding experience with borrowers going back into repayment. The Eighth Circuit did not address the text of the law or the data supporting the plan. And the court compounded its errors by granting a full statewide remedy, rather than limiting the injunction to loans serviced by the only facility the court relied on to determine the defendants’ standing.

The Eighth Circuit’s flawed injunction leaves millions of economically vulnerable borrowers in limbo, unsure of the amount of their debt and unable to make financial decisions with an accurate understanding of their future repayment obligations. If the court denies overturning the injunction, it may wish to construe that motion as a motion for pre-judgment writ, grant the motion, and set the case for expedited notice and argument during that term to avoid creating that uncertainty will be extended for millions of affected borrowers.

The Supreme Court has now indicated that it is looking to settle the issues from February.

[Image via Drew Angerer/Getty Images]

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