Supreme Court agrees to hear case over Biden student loan forgiveness

Washington — The Supreme Court said Thursday it will take up a court fight between the Biden administration and a coalition of six Republican-led states challenging the legality of the president's student loan forgiveness program.

Solicitor General Elizabeth Prelogar asked the Supreme Court last month to lift an injunction from a federal appeals court that blocked implementation of the plan, but told the court that if it denied relief, it should agree to consider the merits of the case instead.

The court said in a brief order that it will hear arguments in February, but will keep the program on hold for now. Last week, President Biden extended his pause on federal student loan payments until June 30, 2023, to give the court time to consider the dispute.

The order from the high court came in an ongoing legal battle mounted by six Republican-led states challenging Mr. Biden's plan to provide up to $20,000 in student-loan relief to millions of borrowers. The states that sued the administration over the program are Arkansas, Iowa, Kansas, Missouri, Nebraska and South Carolina.

A three-judge panel from the federal appeals court in St. Louis sided with the states and issued an injunction blocking the plan earlier this month, after which the Biden administration asked the Supreme Court to intervene.

"The Eighth Circuit's erroneous injunction leaves millions of economically vulnerable borrowers in limbo, uncertain about the size of their debt and unable to make financial decisions with an accurate understanding of their future repayment obligations," Prelogar, the solicitor general, told the Supreme Court in a filing.

Mr. Biden announced in August he planned to cancel up to $10,000 in federal student debt for Americans earning less than $125,000 per year, and an additional $10,000 for recipients of Pell Grants, which are awarded to students with the greatest financial need. More than 26 million people have already applied for forgiveness, and 16 million applications have been approved, according to the Department of Education.

The White House estimated that up to 43 million borrowers will be provided relief under the administration's plan, of which nearly 20 million people will have their remaining debt fully canceled.

After the debt forgiveness plan was announced, the Departments of Justice and Education issued memos detailing the legal authority for student debt cancellation, relying on a 2003 law called the HEROES Act, enacted after the Sept. 11, 2001, terror attacks. The law, the Biden administration argued in the memos, vested Education Secretary Miguel Cardona the authority to grant relief to federal student loan recipients during national emergencies, like the COVID-19 pandemic.

But the relief program was swiftly met with legal challenges from states, Wisconsin taxpayers and conservative groups who argued the Biden administration overstepped its authority. In its lawsuit filed in federal district court in Missouri, the six-state coalition said the plan will hurt revenues earned from servicing federal student loans.

The Missouri court dismissed the suit for lack of legal standing, but the U.S. Court of Appeals for the 8th Circuit granted a request from the states to block implementation of the plan, prohibiting the Department of Education from discharging any student loan debt under the program.

In asking the Supreme Court to lift the 8th Circuit's injunction, Prelogar argued the states do not have legal standing to challenge the student loan program, as it "confers benefits" on third parties and does not harm the states in any way. 

She also stressed that federal law authorizes the secretary to change federal student loan provisions in response to national emergencies, and noted both the Trump and Biden administrations invoked the HEROES Act to issue relief to borrowers during the pandemic.

"On the merits, the plan falls squarely within the plain text of the secretary's statutory authority," Prelogar told the court. "Indeed, the entire purpose of the HEROES Act is to authorize the secretary to grant student-loan-related relief to at-risk borrowers because of a national emergency — precisely what the secretary did here."

But in a filing responding to the Biden administration's request, the six states argued they have the legal standing to sue in part because they would be harmed by a loss in tax revenue if the plan were to be reinstated. They also reiterated to the Supreme Court that the student debt cancellation and its scope exceed the education secretary's authority.

"The act requires a real connection to a national emergency," top officials from the states wrote. "But the department's reliance on the COVID-19 pandemic is a pretext to mask the president's true goal of fulfilling his campaign promise to erase student-loan debt."

The injunction from the 8th Circuit came just days after a federal district judge in Texas found the student loan relief plan to be unlawful, stopping the department from canceling any debt. The Biden administration has appealed that decision and asked the U.S. Court of Appeals for the 5th Circuit to stay the district court's ruling.

In response to the decision from the Texas court, the Biden administration announced it had stopped accepting applications for the debt relief program.