Supreme Court considers fate of Biden's student loan relief plan

The so-called "Major Questions Doctrine" is already seeing a lot of attention as the red states’ case is debated before the justices on Tuesday.

But what exactly is it?

Last term, the court cited the “Major Questions Doctrine” in a 6-3 decision that curbed the Environmental Protection Agency’s ability to broadly regulate carbon emissions from existing power plants.

Under the theory, if an agency acts in a way that could have major political or economic implications, it must have the authority of Congress. The states are saying here that essentially, the college debt relief plan is too big for the Biden administration to use the authority in its citing.

It's an argument that will appeal to the court's conservatives and their 6-3 majority over the liberals. Justice Samuel Alito, for instance, brought it up.

“Well, of course, we think Congress did address this expressly here. And Congress directed that in the context of a national emergency – that is the limitation of the HEROES Act.” Prelogar replied.

“The (Education) secretary acted within the heartland of his authority and in line with the central purpose of the HEROES Act in providing that relief here. To apply the Major Questions Doctrine to override that clear text will deny borrowers critical relief that Congress authorized and the secretary deemed essential,” Prelogar said.

Chief Justice John Roberts drew attention to the fact that the Biden administration wants to use a power to "modify" federal student loan programs in order to cancel roughly $400 billion in debt.

"In an opinion we had a few years ago by Justice (Antonin) Scalia, he talked about what the word 'modify' means, and he said 'modified' in our view connotes moderate change," Roberts said.

"We're talking about half a trillion dollars and 43 million Americans. How does that fit under the normal understanding of modified?" Roberts asked.

The Biden administration argues it has the power to cancel federal student loan debt under a 2003 law called the HEREOS Act. But the law does not explicitly say the secretary of education has the power to cancel or forgive student loan debt.

Instead, the law says the secretary of education has the power to “waive or modify” a federal student loan program in order to ensure that individuals “are not placed in a worse position financially” because of “a war or other military operation or national emergency.”

US Solicitor General Elizabeth Prelogar argued that in the context of the statute, "modify has to mean making a change up to the point of wholesale elimination."

"It would be really strange for Congress to say you can eliminate obligations altogether or tweak them just the littlest bit. But you can't do anything in between," she said.

It did not take long for the issue of so-called "standing" to come up in Tuesday's arguments on the student loan relief program.

What does this mean? "Standing" refers to the harm a plaintiff must show they are facing in order for a court to intervene. The Biden administration argues that the challengers in the student debt forgiveness case have not overcome this procedural threshold, meaning that the Supreme Court could reject their case without even getting into the legal merits of the relief program.

Justice Samuel Alito dug in on the issue in questions to US Solicitor General Elizabeth Prelogar and signaled that he was sympathetic to the argument that the states suing the administration had established standing. He pointed specifically to Missouri's claim that that the revenue shortfalls the Biden action could cause the Missouri Higher Education Loan Authority (MOHELA) — an entity that was created by the state to service student loans — could cause knock-on financial harms to Missouri itself.

Justice Ketanji Brown Jackson ultimately jumped in, to back up an argument Prelogar was making: that the financial interests of Missouri and MOHELA were not sufficiently entangled to give Missouri standing.

Justice Clarence Thomas kicked off the oral arguments with the first round of questions, asking US Solicitor General Elizabeth Prelogar how the mass loan forgiveness amounts to the terminology used in the relevant statute.

"Would you take a minute to explain how a waiver or modification amounts to a ...cancellation," Thomas said.

The Biden administration's foes in the case say that the terms "waive" or "modify" in the law giving the Education secretary certain powers applies to smaller bore actions to adjust repayment plants, rather than a blank cancellation of classes of debt.

Prelogar told Thomas that the law in question, the HEROES Act, contemplates many forms of action an Education secretary could take in the face of a national emergency.

Congress was trying to “cover the field” to give the secretary tools to respond to a national emergency, she said.

The Supreme Court is now hearing oral arguments on two challenges to President Joe Biden’s student loan forgiveness program – an initiative aimed at providing targeted debt relief to millions of student-loan borrowers – that has so far been stalled by legal challenges.

Republican-led states and conservatives challenging the program say it amounts to an unlawful attempt to erase an estimated $430 billion of federal student loan debt under the guise of the pandemic.

At the heart of the case is the Department of Education’s authority to forgive the loans. Several of the conservative justices have signaled in recent years that agencies – with no direct accountability to the public – have become too powerful, upsetting the separation of powers. They have moved to cut back on the so-called administrative state.

Tuesday’s cases will also highlight an important threshold question that could block the court from reaching the merits of the dispute: whether the parties behind the challenge have the legal right, or “standing,” necessary to bring suit.

What both sides are arguing: The Biden administration argues that the secretary of education had the clear authority to provide the relief to borrowers making less than $125,000 per year ($250,000 for households) in 2020 or 2021 in order to protect them from financial harms brought on by the pandemic such as the inability to buy food or make rent or mortgage payments.

As for the states, Nebraska Attorney General Michael T. Hilgers, who is also representing Missouri, Arkansas, Iowa, Kansas and South Carolina, stressed that the Biden administration exceeded its authority by using the pandemic as a pretext to mask the true goal of fulfilling a campaign promise to erase student-loan debt.

Desiree Veney, a senior at Morgan State University who qualified for potential loan forgiveness, said history is being made today.

Crowds of people are outside the US Supreme Court Tuesday ahead of oral arguments in two cases that could decide the fate of President Joe Biden's student loan forgiveness program.

"It's a very important day in history for not only me and also my peers," she told CNN.

Veney, who is also the vice president of her college's NAACP chapter, is from Harrisburg, Pennsylvania, but attends school in Maryland. This means she pays a lot more than some other students for out-of-state tuition, something she said will leave her at a disadvantage when she graduates.

Student debt has also prevented students at historically Black colleges and universities specifically from being able to invest or purchase homes, Veney said, expanding the racial wealth gap.

Debt forgiveness would be an "opportunity to create a stronger and a more stable foundation for my family and to create generational wealth afterward," she said, adding that it would give her more financial security after graduation and help further continue her education.

The Supreme Court oral arguments on President Joe Biden's student loan forgiveness program will kick off soon. First up at the podium before the nine justices will be US solicitor General Elizabeth Prelogar.

She is expected to argue that the administration had the clear legal authority to provide relief to borrowers in order to protect them from the financial harms brought on by the pandemic, such as the inability to buy food or make rent or mortgage payments.

She will stress that the Higher Education Relief Opportunities for Students Act of 2003—known as the HEROES ACT—provides the legal authority for the relief. She will also say that the states do not have the sufficient injury necessary to bring the claim in the first place.

Next up will be Nebraska’s Solicitor General James A. Campbell – representing the six states involved — who will offer several theories to explain why the states will be injured if the plan is allowed to go into effect. Most of his theories revolve around the potential of lost tax revenue. He's also expected to stress that the plan amounts to an unlawful attempt to erase an estimated $430 billion of federal student loan debt under the guise of the pandemic.

Once Campbell wraps up, Prelogar will likely return to make a few closing arguments. The case is slated to last an hour, but look for it to go at least two hours.

Next comes the second case: With no break, the justices will then tackle the second case initially brought by two student borrowers.

Prelogar will appear again and is expected to say that the students – Myra Brown and Alexander Taylor — like the states, don’t have the legal right to bring the case. She is likely to emphasize that the borrowers didn’t qualify for full relief in the first place, so they won’t be injured if the plan goes into effect.

J. Michael Connolly will then step up on behalf of Brown and Taylor. Connolly works for the boutique law firm Consovoy McCarthy, which also represented former President Donald Trump in some of his legal battles. The attorney is likely to repeat what he said in briefs. The HEROES ACT “does not authorize the Secretary to cancel nearly half-a-trillion dollars in debts held by tens of millions of individuals."

This case may not go as long as the first because so many of the issues are the same. Prelogar will then return to end the marathon session.

What happens next: Under normal circumstances, a case with such high political stakes would likely be resolved in late June or early July. But because the justices expedited the briefing, there is a possibility they may prioritize the opinion and release it before the end of the term.

The Supreme Court on Tuesday will take up two challenges to President Joe Biden’s student loan forgiveness program.

Under the plan, approximately 40 million working and middle-class borrowers would receive up to $20,000 in relief, but Republican-led states and conservatives challenged the program shortly after in was announced, saying it's an unlawful attempt to erase an estimated $430 billion of federal student loan debt under the guise of the pandemic

Advocates for student loan relief gathered outside the court ahead of the hearing on Monday night and Tuesday. See photos from the scene:

About 26 million people had already applied for President Joe Biden's federal student loan forgiveness program when a federal district court judge struck down the plan in early November. No debt has been canceled thus far.

The Supreme Court will hear arguments on Tuesday in two cases related to the program, with a decision expected by late June or early July.

Here's what to know about Biden's challenged plan:

Who is eligible? If the courts ultimately allow the program to move forward, not every student loan borrower is eligible for the debt relief. First, only federally held student loans qualify. Private student loans are excluded.

Second, high-income borrowers are generally excluded from receiving debt forgiveness. Individual borrowers who make less than $125,000 a year and married couples or heads of households who make less than $250,000 annually could see up to $10,000 of their federal student loan debt forgiven.

If a qualifying borrower also received a federal Pell grant while enrolled in college, the individual is eligible for up to $20,000 of debt forgiveness.

What about current students? Some current students would be eligible under Biden’s plan if it’s allowed to take effect. Eligibility for borrowers who filed the Free Application for Federal Student Aid, known as the FAFSA, as an independent will be based on the individual’s own household income.

What kinds of loans qualify? There are a variety of federal student loans and not all are eligible for relief if the program is allowed to proceed. Federal Direct Loans, including subsidized loans, unsubsidized loans, parent PLUS loans and graduate PLUS loans, are eligible.

But federal student loans that are guaranteed by the government but held by private lenders are not eligible unless the borrower applied to consolidate those loans into a Direct Loan by September 29, 2022.

Will borrowers have to pay taxes on forgiven loans? Borrowers will not have to pay federal income tax on the student loan debt forgiven, thanks to a provision in the American Rescue Plan Act that Congress passed in 2021.

But it’s possible that some borrowers may have to pay state income tax on the amount of debt forgiven. There are a handful of states that may tax discharged debt if state legislative or administrative changes are not made beforehand, according to the Tax Policy Center. The tax liability could be hundreds of dollars, depending on the state.

Find answers to other questions about the program here.