Biden asks Supreme Court to reinstate student loan forgiveness — here’s where the program now stands

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Topline

The Biden administration asked the Supreme Court on Friday to reinstate the student loan forgiveness program after it was blocked by a lower court — one of two legal challenges that will ultimately determine the fate of the program as the debts of millions of borrowers hang in the balance .

Key Facts

The Biden administration asked the Supreme Court to either withdraw an order from the 8th Circuit Court of Appeals, allow the program to go back into effect while the court contestations play out, or take the case for oral arguments and make a final rule on the legality of the program.

The White House argued that Republican-led states have no authority to challenge the policy and that the 8th Circuit was not justified in blocking it, arguing that the order “leaves millions of economically vulnerable borrowers in limbo.”

The White House asked the court for a prompt ruling that would allow debt relief to be reinstated while the appeals process was pending, and failing that, asked the Supreme Court to hear oral arguments this term and issue a final ruling to allow the to resolve the matter.

The Biden administration must win two cases to move forward with loan forgiveness: the case in question Friday and a second legal challenge in Texas.

If both the Supreme Court and the 5th Circuit Court of Appeals, which includes Texas, rule quickly in Biden’s favor, the program could be reinstated within weeks as the lawsuit progresses; otherwise, it may take months of things to settle before borrowers can see relief.

What to watch out for

The Biden administration has also asked the 5th Circuit to rule on the Texas case, brought by the conservative Job Creators Network Foundation on behalf of two student loan borrowers. The White House has asked the 5th Circuit to block a ruling in that case that ruled the student loan forgiveness illegal while the case is under appeal, and asked the court to rule no later than December 1. If the 5th Circuit — known as one of the most conservative courts in the country — rules against the Biden administration, the White House has already said it will take the case to the Supreme Court as well.

Large number

43 million. That’s the number of federal student loan borrowers eligible for the student debt relief program now under discussion. Of those, Education Secretary Miguel Cardona said 26 million applied for debt relief before applications were suspended on Nov. 11, following the Texas court ruling, and that 16 million applications had been approved so far.

What we don’t know

What happens to borrowers if debt relief is not restored? The Biden administration has still not made a decision on whether the moratorium on student loan repayments will be extended again or whether they will resume as planned in January, telling the 5th Circuit on Thursday that it is now for an “unnecessary dangerous choice” stands with student loan forgiveness on hold. Resuming payments could hurt borrowers, especially as the administration warned Wednesday in a court that it believes the number of borrowers defaulting on their loans will increase by an “historically large” margin without student loan forgiveness. That’s partly because of confusion over whether or not to run the program, as some borrowers probably won’t pay because they don’t think they have to. However, suspending payments “would cost the government several billion dollars a month in lost payments,” the White House told the 5th Circuit.

tangent

There has been good news for borrowers in recent days in terms of debt relief for individual borrowers in more limited circumstances. The ministries of Justice and Education announced on Thursday that they are changing their process for when people who go bankrupt want to cancel their student debt. The The US Express News notes that the previous system rarely led borrowers to get out of debt, as there was a higher threshold for canceling student loan debt compared to other debt, but it could be easier now in the future under the new guidelines. A $6 billion settlement was also approved on Thursday between the federal government and student loan borrowers who claimed to have been defrauded by their universities, such as those who attended for-profit colleges.

Key background

The Biden administration announced in August that it would forgive $10,000 in federal student debt for borrowers earning less than $125,000 ($20,000 for Pell Grant recipients), and while applications for the program opened in October, no money paid out before it was blocked in court in October. The White House justified the program under the federal HEROES Act, which allows the secretary of education to “waive or modify” student financial assistance programs during national emergencies, as the Biden administration claimed the Covid-19 pandemic is. Republicans had heavily criticized the forgiveness policy, arguing that it exceeded the Biden administration’s authority, and filed a slew of lawsuits to block it.

Surprising fact

Justice Amy Coney Barrett has already affirmed student loan forgiveness in response to two other lawsuits filed in the Supreme Court, but those cases had different circumstances and were considered weaker legal challenges than the two now at issue. Barrett, the judge who oversees cases coming from that particular federal appeals court, also ruled on the cases himself without referring them to the Supreme Court, so it’s still unknown where the other justices stand and how the 6-3 conservative court will decide.

Read further

Biden administration will ask Supreme Court to resume student loan forgiveness program (TUSEN)

Biden’s student loan forgiveness plan on hold as court sides with GOP states (TUSEN)

Biden’s Student Loan Relief Program Blocked by Texas Federal Judge (TUSEN)

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