Author: Mikey Cross
President Joe Biden’s Administration implored the United States Supreme Court to uphold his highly-disputed student-debt relief proposal. Biden is defending a comprehensive program that could reach up to 40 million debtors and come with a $400 billion price tag.
Recently, the administration went to court to argue that the Secretary of Education holds the authority to reduce student debt for millions of Americans who are yet to recover from the COVID-19 financial impact.
Why is the Plan not Supported?
“The secretary responded to the devastating economic consequences of the Covid-19 pandemic by granting targeted relief to borrowers at higher risk of delinquency and default due to the pandemic,” claimed US Solicitor General Elizabeth Prelogar, the administration’s top courtroom lawyer. “That relief falls squarely within the secretary’s express statutory authority.”
Come February 28th, the case will be heard in court – the lower court decisions barring the plan, and the Supreme Court’s refusal to rescind those decisions last month, stand as is. Consequently, according to the White House, student loan payment obligations shall remain suspended until the case has been settled.
Biden Needs to Enact the Plan
Biden is feeling the heat to come up with a solution to make the plan he requested Congress to pass into law a reality – even though it was evidently out of reach with the preceding Congress. With the Republican House majority and the chaos around appointing a speaker, it is evident that the only way this plan will move forward is if Biden can figure out a way to make it happen by executive power alone.
Six Republican-led states are protesting Congress’ lack of authorization for the President to make a move of immense economic and political effect. The states are accusing President Biden of improperly using the Heroes Act, a law allowing the Education Department to give debt relief during national emergencies.
Forgiveness Loan Conditions
Under the proposed plan, federal loan forgiveness of up to $20,000 could be obtained by individual borrowers making less than $125,000 a year or households making less than $250,000. Astonishingly, up to 26 million people had requested loan forgiveness before the Education Department ceased applications. The government estimates that around 40 million citizens could qualify.
According to the Congressional Budget Office, the price tag for cancellation over the next three decades is estimated to be around $400 billion!
Difficulty With the Court Case
Opponents of the policy have struggled with the most important legal matter: demonstrating that it inflicts direct damage upon them. The 8th US Circuit Court of Appeals determined that the states had a valid basis for taking action due to the effect on the Missouri Higher Education Loan Authority, which has financial links to the state treasury.
Established as a non-profit, state-created entity, MOHELA is legally obliged to contribute to a fund that the state of Missouri uses to finance projects in public colleges. Regrettably, there is a risk that MOHELA could lose up to half of its direct loan accounts if left unchecked.
The Biden administration argues that Missouri has established MOHELA as an independent legal entity, and its ties with the state’s treasury need to be narrower to uphold a legal case.
President Joe Biden is urging the Supreme Court to allow the stalled student loan forgiveness program to take effect, setting up a battle over whether the government can forgive billions of dollars in education debt.
The case will test whether the Biden administration can use executive authority to relieve borrowers of their student loans, which could free them from years of crippling debt.