Challenges to Biden’s Student Loan Forgiveness Plan

In August of 2022, the Biden administration announced their plan for Student Loan Forgiveness. The forgiveness program is only applicable for those who received government-held federal student loans. Eligible individuals include student borrowers who earned less than $125,000 in either 2020 or 2021. For married couples or heads of households, the cutoff was raised to $250,000 in earnings. These individuals—totalling over 40 million people—will be entitled to the cancellation of up to $10,000 in debt. If borrowers also received a Pell Grant (which is granted to students “who display exceptional financial need” and, unlike loans, do not need to be repaid) could potentially see up to $20,000 of their student debt canceled. Applications, submitted through the studentaid.gov website, went live on October 17th, 2022. Only four days later, nearly 22 million people—over half of the qualifying individuals—had applied for debt cancellation. 

At that point, on October 21st, 2022, the 8th US Circuit Court of Appeals put a “temporary, administrative hold” on the debt cancellation, as they continue to consider the legal challenge filed by six Republican led states. The plaintiffs include the states of Arkansas, Missouri, Nebraska, Iowa, Kansas and South Carolina. 

The states’ legal claim rests on two separate arguments. The first being that the broad student debt cancellation falls under the jurisdiction of Congress, not the executive branch. Second, the states contend that the loan forgiveness plan would hurt them because they were partners in the FFEL Program. Through this program, private companies and states could loan money to students, with the guarantee that the government would pay them if a borrower defaulted. If the government cancels these debts, state lenders would receive no compensation for their losses. On the other side, lawyers for the Biden administration say that the HEROES Act of 2003 gives the Secretary of Education the power to cancel student loan debt. According to the Department of Justice, the HEROES Act “vests the Secretary of Education with the expansive authority to alleviate the hardship that federal student loan recipients may suffer as a result of national emergencies,” such as the recent coronavirus pandemic. 

While the ongoing case does not bar individuals from continuing to apply for debt forgiveness, it does prevent the administration from granting debt cancellation—which they had planned to begin on October 23rd. The Biden administration was clear when the temporary block was announced, saying the order does not “[have] merit…It merely prevents debt from being discharged until the court makes a decision.” Despite the fact that the plaintiffs were required to submit their response to the Biden administration’s rebuttal by Tuesday the 25th, there has been no reported update on the temporary hold. 

This case is the latest of several other legal challenges the Biden administration has faced from both private and public actors, including Arizona Attorney General Mark Brnovich, the Job Creators Network Foundation, and the Cato Institute. The administration has already had three notable legal victories in their fight to put their loan forgiveness plan in action. First, before it was brought to the Court of Appeals, a U.S. District judge in Missouri dismissed the aforementioned case on the grounds that the plaintiffs did not demonstrate sufficient evidence that the loan forgiveness policy was causing them direct harm. Second, in Indiana, a federal judge dismissed a suit brought by a lawyer at the Pacific Legal Foundation, a nonprofit conservative law firm in California, who argued that the plan was an abuse of executive power.  

Most notably, however, was the Supreme Court’s refusal to block the rollout. The emergency application was filed by the Brown County Taxpayers Association, an organization of around 100 individuals based in Wisconsin.  The association, which has been known to lobby for conservative economic policy, claimed that the HEROES Act gives the Department of Education “the power to manage various loan programs” but not to “forgive loans unilaterally.” The application was specifically received and rejected by Republican-appointed, conservative justice Amy Coney Barrett. Considering the current perceptions of the Court as becoming more politicized, Coney Barrett’s decision to reject the application leaves the Biden administration hopeful for the future of the plan. Even if the Court of Appeals were to side with the states, the Biden administration could be more confident that the Supreme Court would not uphold such a decision.    

Margaret Nesi is a junior at Brown University, concentrating in International and Public Affairs and Hispanic Studies. She is a staff writer for the Brown University Undergraduate Law Review and can be contacted at margaret_nesi@brown.edu.