How Supreme Court could kill Student Loan Forgiveness

This week marks another critical moment for US President Joe Biden's one-time student loan forgiveness plan.

The Supreme Court is reconvening to hear two cases related to the programme, which could determine whether more than 40 million people in the US are able to have thousands of dollars in debt cancelled.

Mr Biden announced a plan last August to cancel up to $10,000 (£8,400) in federal student loans for Americans who earned less than $125,000 each year, but applications for the programme were halted after a lower court judge ruled last November that it was unlawful.

On Tuesday, the 6-3 conservative majority Supreme Court will begin to hear arguments about two lawsuits challenging the plan and could issue a ruling that would effectively strike down or uphold the programme by the summer.

Some legal experts told the BBC that the cases - as well as future potential legal challenges - spell trouble for one of Mr Biden's 2020 presidential campaign pledges.

"It's doomed," Jed Shugerman, a professor at Fordham Law School, told the BBC. "By choosing an obviously flawed path that was always likely to get struck down by the court, the Biden administration has run out of time in these four years to get anything like this through."

More than 25 million people applied to the Biden administration's loan forgiveness plan before applications were halted.

The plan was expected to forgive an estimated $430bn of debt in total and would allow almost 20 million borrowers to have their entire student loan balances cancelled, according to the White House.

It also provides up to $20,000 of debt forgiveness for students on Pell Grants, which applies to those in greatest financial need.

Mr Biden's plan has drawn criticism from Republicans who have argued the administration overstepped its authority in using executive power related to national emergencies to push the programme through.

Biden officials have argued a federal law known as the Heroes Act of 2003 authorises the administration to forgive student loans in the wake of the Covid-19 pandemic. The law was enacted after the 11 September attacks and allows for loan cancellation for people who have suffered economic hardship because of a national emergency.

While several legal challenges to the plan have been dismissed, two federal courts have sided with the challengers, leading the Biden administration to appeal to the Supreme Court to make a ruling on the programme's legality.

The Supreme Court will begin to hear two consolidated cases on Tuesday: Department of Education v Brown and Biden v Nebraska.

The first case involves two student loan borrowers who argue the administration unfairly excluded some - including those who have commercially held loans - from debt cancellation and that it did so without allowing for a period of public comment.

The latter concerns a legal challenge from six Republican-led states - Nebraska, Missouri, Arkansas, Iowa, Kansas and South Carolina - that argue the Department of Education did not have the authority to cancel student debt and that the Biden administration used the Covid-19 pandemic as a pretext to enact a broader policy goal.

Both cases hinge on whether challengers to the loan forgiveness plan can demonstrate they would be harmed by the programme. If so, they would have the standing to challenge - the legal right to sue - effectively sending the Biden administration back to attempt modifications to the policy before it could be implemented.

Standing is "a sort of jurisdictional requirement before a case can even get heard making sure that there's a real person whose interests are really affected by the challenged government action", said Thomas Bennett, an associate professor of law at the University of Missouri. To bring a case in federal court, he said, a plaintiff must be able to demonstrate that they would suffer from concrete harm or injury because of a policy.

Experts said the strongest case comes from the state of Missouri, which argues that its loan servicer, the Missouri Higher Education Loan Authority (MOHELA), will suffer financially because it will no longer receive millions of dollars in fees for loans forgiven by the programme.

"Missouri's claim is much more direct in that you can see the pocket-book injury simply from the fact that MOHELA will have fewer loans in its portfolio," Mr Bennett said.

Experts said the cases could lead to several different Supreme Court rulings, which would likely be delivered at the end of June or in early July.

The justices could dismiss all of the plaintiffs' cases, upholding the student loan programme.

But if the court rules that any one of the plaintiffs has standing, it would effectively strike down Mr Biden's plan, as the long process of modifying the plan could stall hopes of debt relief any time soon for applicants.

That is the "more likely scenario," said Tara Grove, a professor at the University of Texas School of Law.

Mr Shugerman said that although he supported the broader policy goal of student loan forgiveness, he did not believe the administration's argument of worsening financial situations due to the Covid-19 pandemic would hold up in court.

"There are lots of people who made more than the $125,000 threshold who were put in a worse financial position because of Covid, but they're cut off. And there were people who were under that threshold, who perhaps even benefited from Covid," he said, pointing to people in the pharmaceutical industry.

Experts added that even if the Supreme Court dismissed the legal challenges and upheld the programme, the policy is still likely to face an uphill battle that could leave the more than 40 million borrowers without relief.

"I would expect new lawsuits to be filed right away seeking injunctive relief that could put the whole programme on pause once again," said Mr Bennett.