Student Loan Forgiveness Is Headed to the Supreme Court. Here’s What To Expect

Student loan forgiveness is about to have its day in court.

On Feb. 28, the Supreme Court will hear oral arguments in two cases that led to judges blocking President Joe Biden’s $400 billion student loan forgiveness program, which would cancel up to $20,000 of federally held student loan debt per borrower.

The case will affect the finances of an estimated 40 million borrowers eligible for relief, 26 million of whom applied for forgiveness this fall before federal judges ordered the program suspended in November.

No matter the outcome, federal student loan payments are set to resume two months after the court issues its ruling, which will likely come over the summer. If Biden loses, borrowers will have to adjust their budgets to fit in monthly payments they haven’t made for almost three years.

Lawyers for both sides have laid out the battle lines in legal briefs. Here’s what the Supreme Court will consider during the hearing, and how you can follow along:

Supreme Court to Consider Two Cases

After Biden announced the student loan forgiveness program in August, conservative opponents launched a flurry of lawsuits trying to stop it. Most were dismissed somewhere in the court system, but two were successful, resulting in federal judges blocking forgiveness. The cases have both been appealed all the way up to the Supreme Court.

In the first case, Nebraska and five other states sued the Biden administration in federal court, seeking to have the plan struck down. A federal judge dismissed the suit, and the states appealed. In November, a higher court temporarily blocked Biden’s student loan program while the states appealed the case of Biden vs. Nebraska to the Supreme Court.

In the second case, two college graduates with student loans, Myra Brown and Alexander Taylor, backed by a conservative activist group, sued the Department of Education arguing that the process for determining who got debt forgiveness and who didn’t was unfair and broke the law. A federal judge sided with the students in Department of Education vs. Brown. Biden’s lawyers appealed, setting the stage for the Supreme Court showdown.

A key to both cases is the legal concept of standing—that is, in order to have the court rule on the merits of a case, a plaintiff must prove that they have been harmed by the defendant breaking the law and that the court has the power to fix it.

The states contend that they were harmed in several ways by the loan forgiveness program. The coalition of states, crucially, includes Missouri, where student loan servicer the Higher Education Loan Authority of the State of Missouri (better known as MOHELA) is based. The states contend that Biden’s program will hurt MOHELA—a state agency—by reducing the amount of loan servicing fees it can collect.

They also argue that the forgiveness program will deprive the states of income tax revenue they would otherwise collect on student loan balances being discharged. That is, under Biden’s program, millions of loans would be forgiven before 2025, during a window when borrowers receiving student loan discharges would be exempt from paying income taxes on the amount forgiven, thanks to a provision of the American Rescue Plan pandemic relief bill.

The students say they’ve been harmed by the program because there was no public comment period when it was established. Brown’s student loans aren’t eligible for any forgiveness under the program because they are owed to commercial lenders rather than the government, while Taylor is eligible for $10,000 in forgiveness, but not the full $20,000 because he didn’t attend college on a Pell grant.

Biden’s Lawyers to Defend Loan Forgiveness on Two Fronts

The Biden administration is making a two-pronged argument to defend the program, people familiar with the administration’s legal strategy said. The government will argue that neither the states nor the students have standing and that even if they do, that the program is lawful.

Biden’s lawyers contend that MOHELA is a separate legal entity from the state and that if it wanted to kill the loan program, it could sue on its own behalf—but it didn’t. The administration has pointed to the fact that MOHELA’s leaders have said publicly that the servicer wasn’t involved with the decision to sue.

As for the students, the Biden team points to the fact that if they win, they won’t gain anything—striking down the entire student loan forgiveness program won’t help either one and in fact, would leave Taylor worse off than before.

Between the two cases, the state lawsuit is the more likely to be given standing, said Richard Painter, a law professor at the University of Minnesota and former chief ethics lawyer for President George W. Bush.

“The courts may be somewhat deferential to state attorneys general in terms of having standing,” Painter said.

The students have a harder sell, he said.

“To go into court say, ‘So and so got something I didn’t—there are lots of things that people get that other people don’t get,” he said. “Once you open that door, you’re going to have everybody go into court and say, ‘I’m entitled to this, and I’m entitled to that.’”

Case Centers on HEROES Act of 2003

The White House says the HEROES Act of 2003 gives the administration the power to cancel student loan debt. Originally passed by Congress in 2003 to benefit military servicemembers with student loans, it was made permanent in 2007 and gives the Secretary of Education broad powers in the event of a national emergency.

Specifically, the administration points to the text of the law saying the secretary may “waive or modify any statutory or regulatory provision” relating to student loan programs to ensure that borrowers are “not placed in a worse position financially in relation in relation to that financial assistance” because of a national emergency.”

In a legal brief filed with the court, Biden’s lawyers argue the student loan cancelation was a response that “reflects the unprecedented scale of the national emergency that the Secretary confronted: a multi-year global pandemic driven by an infectious disease that caused massive disruption to the economy, commerce, and employment.”

The opponents of student loan cancellation say the HEROES Act was never intended to empower such a sweeping program. They also point to the fact that Biden declared the pandemic over in an interview with 60 Minutes in September 2022.

“While President Biden publicly declares the pandemic over, the Secretary and Department of Education are using COVID-19 to justify the Mass Debt Cancellation—an unlawful attempt to erase over $400 billion of the $1.6 trillion in federal student-loan debt,” the states argued in their own legal brief.

The national emergency from the pandemic, first declared by Donald Trump in 2020 when COVID-19 first struck, is set to expire in May.

Painter said the states likely have a stronger argument here.

“It’s awfully hard to say there’s a real emergency for these debtors due to the pandemic,” Painter said.

Lawmakers involved with writing the HEROES Act have weighed in on both sides of the issue.

Controversial “Major Questions Doctrine” May Come Into Play

In June 2022, the court’s six-justice conservative majority signed an opinion in the case of West Virginia vs. EPA articulating the controversial “major questions doctrine,” which legal experts say could be a key issue in the student loan case. The doctrine holds that “administrative agencies must be able to point to ‘clear congressional authorization’ when they claim the power to make decisions of vast ‘economic and political significance.’

In a dissenting opinion, liberal Justice Elena Kagan criticized the doctrine for being newly invented and said it went against previous court decisions. Stetson law professor Jaclyn Lopez, in a commentary for the American Bar Association, said the new doctrine “inherently benefits the status quo” and that the court’s decision “has cast doubt on how agencies will be able to act on the major issues of our day.”

The states attempting to overturn student loan forgiveness have argued that the major questions doctrine applies to student loan forgiveness, while the Biden administration contends that it doesn’t.