What You Need To Know About What Supreme Court Decides About Student Loan Debt Relief

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The Supreme Court has set the month of February 2023 to hear oral arguments in two legal challenges that face President Biden’s one-time student loan forgiveness program.

 Supreme Court Decision on Student Loan Debt Relief
Supreme Court Decision on Student Loan Debt Relief

US President Joe Biden announces the student loan forgiveness on August 24, 2022. The supreme court judgement process would eventually decide the fate of the unprecedented initiative to cancel student debt on a mass scale.

What You Need To Know About What Supreme Court Decides About Student Loan Debt Relief

Supreme Court to rule in two cases challenging Biden’s student loan forgiveness program the latest updates so far on the issue.

However, Biden’s initiative to cancel student debt is quite unprecedented. The program would have allowed borrowers to receive either $10,000 or $20,000 in student loan forgiveness programs on government-held loans, depending on whether they received a Pell Grant and earned income below certain thresholds in either 2020 or 2021.

The Education Department had initially estimated that 40 million borrowers would benefit from the program, with about half receiving complete or near-total loan forgiveness.

But the program has been blocked following a cascade of legal challenges. While most of these lawsuits were dismissed, two challenges have stuck.

First Case

The first case out of the 8th Circuit Court of Appeals resulted in a nationwide that causes the halting of the program while appeals continue.

Several Republican-led states filed the suit, arguing that the student loan forgiveness program will negatively impact state finances because of financial relationships the states allegedly have with quasi-public state-affiliated agencies that administer an older federal student loan program called the Family Federal Education Loan Program (FFELP).

The states argue that Biden’s initiative will effectively shrink the size of these FFELP agency loan portfolios, which will decrease their revenue, which in turn would ultimately harm state finances.

The Biden administration counters that this link is tenuous at best and that the states don’t have standing to sue because they cannot demonstrate that they would actually suffer a concrete injury from the loan forgiveness program.

Second Case

The second case, which the Biden administration is appealing from the 5th Circuit Court of Appeals, is a conservative-leaning organization argued on behalf of individual borrowers that the enactment of the loan forgiveness program violated federal procedures governing the establishment of new regulations, and unlawfully deprived borrowers of the opportunity to go through a public comment process, which is required in most cases when the government creates new initiatives or programs under existing federal law.

A lower federal district court had struck down the program on that basis (and the administration then appealed to the 5th Circuit). The Biden administration argues that the one-time student loan forgiveness program was enacted via the HEROES Act of 2003, which allows the government to implement emergency regulations without the usual public comment process.

The Supreme Court Sets Date for Oral Arguments in Student Loan Forgiveness Cases

The Supreme Court has finally fixed February 28, 2023, for a hearing on the two student loan forgiveness challenges. Attorneys for the Biden administration and the challengers will be required to attend the hearing, where they will make oral arguments and take questions from the Supreme Court justices.

Often, the way the justices frame their questions can provide critical insights into how the Court will ultimately rule. So this hearing will be a key date where borrowers can get some clues about where the Court may be leaning.

The Supreme Court could uphold the appeals court decisions on their merits, which would ultimately end Biden’s loan forgiveness program.

Alternatively, the Court could overturn those decisions, which may allow the Education Department to immediately resume processing student loan forgiveness requests and reopen the application portal.

Also, the Court could take a middle-ground approach and rule that no party in either challenge has legal standing to sue (which is the Biden administration’s position), regardless of the underlying legality of the program. This would keep Biden’s student loan forgiveness initiative intact, while not directly addressing its underlying lawfulness.

If the Supreme Court ultimately rules against the Biden administration, officials will have to consider several less-than-ideal alternative options, such as starting from scratch and creating a new student loan forgiveness program under a different legal authority.

A formal ruling is not expected until as late as June 2023. In the meantime, Biden extended the ongoing student loan pause.

FAQs

Who Qualifies for Student Loan Forgiveness?

To qualify for student loan forgiveness, your annual income must have fallen below $125,000 (for individuals) or $250,000 (for married couples or heads of households). If you received a Pell Grant in college and meet the income threshold, you will be eligible for up to $20,000 in debt relief.

How can Student Loans be Removed?

Student loans can be removed only in certain specific circumstances. This includes school closure, a school’s false certification of your eligibility to receive a loan, a school’s failure to pay a required loan refund, or your death, total and permanent disability, or bankruptcy.

Is there Any Way to Get Student Loans Forgiven?

If you work full-time for a government or Non-profit organization, you may qualify for forgiveness of the entire remaining balance of your Direct Loans after you’ve made 120 qualifying payments. This will be like 10 years of payments.

What is the Penalty for not Paying Student Loans?

Not paying student loans could lead to late fees, a damaged credit score, wage garnishment and more. Speak to your lender about repayment alternatives if you’re struggling to keep up.

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