President Joe Biden’s administration urged the US Supreme Court to uphold his embattled student-debt relief plan, defending a far-reaching program that would affect more than 40 million borrowers at a cost of potentially $400 billion.
(Bloomberg) — President Joe Biden’s administration urged the US Supreme Court to uphold his embattled student-debt relief plan, defending a far-reaching program that would affect more than 40 million borrowers at a cost of potentially $400 billion.
In court papers filed Wednesday, the administration contended the Education Department secretary has broad power to slash student debt given that millions of people are still facing financial hardship because of the coronavirus pandemic.
“The secretary responded to the devastating economic consequences of the Covid-19 pandemic by granting targeted relief to borrowers at higher risk of delinquency and default due to the pandemic,” argued US Solicitor General Elizabeth Prelogar, the administration’s top courtroom lawyer. “That relief falls squarely within the secretary’s express statutory authority.”
The justices are set to hear arguments Feb. 28. Lower court decisions are blocking the plan, and the Supreme Court last month declined to lift those rulings right away. Student loan payment obligations will remain paused until the case is resolved, the White House has said.
The legal limbo is imperiling one of Biden’s core policy measures, one that many Democrats credit with spurring the midterm-election turnout that helped them avoid what is typically a bleaker result for the party holding the White House.
Biden is under pressure to find a way to enact the plan, which he’d earlier called on Congress to approve through legislation. There was virtually no signal that the last Congress had any appetite for it. The Republican victory in the House — and the disarray playing out over picking a speaker — all but guarantees the measure wouldn’t proceed if it can’t be done by presidential power alone.
In what is likely to be the bigger of the two cases the court will hear, six Republican-led states contend Congress didn’t authorize the president to unilaterally take a step with such sweeping economic and political ramifications. The states say Biden is misusing a law, known as the Heroes Act, that lets the Education Department provide debt relief in response to national emergencies.
The plan would forgive as much as $20,000 in federal loans for certain borrowers making less than $125,000 per year or $250,000 for households. About 26 million people requested forgiveness before the Education Department stopped accepting applications, and the administration says more than 40 million Americans would be eligible.
The Congressional Budget Office estimates that the cancellation would cost about $400 billion over 30 years.
Standing to Sue
The biggest legal issue for opponents has been establishing standing to sue — that is, showing they are being directly harmed by the policy. The 8th US Circuit Court of Appeals said the states had standing because of the impact on a loan servicer, the Missouri Higher Education Loan Authority, that has financial ties to that state’s treasury.
The servicer, known as MOHELA, is a nonprofit, state-created entity that by law must contribute to a fund Missouri uses to pay for projects at public colleges. The states say MOHELA risks losing at least half of the direct loan accounts it services.
The Biden administration contends that Missouri set up MOHELA as a legal entity separate from the state and that the servicer’s links to the state treasury are too tenuous to support a lawsuit.
“It is pure speculation that, if the plan causes a reduction in MOHELA’s revenues, MOHELA will respond by defaulting on its obligations rather than, say, cutting its other expenditures,” Prelogar argued.
The second case involves a challenge by two borrowers who contend they are being unfairly excluded from the full scope of the program. One is ineligible for relief because her loans are held by commercial entities, rather than the Education Department. The other is eligible for $10,000 in relief, but not the $20,000 he would get if he had received a Pell Grant.
The cases are Biden v. Nebraska, 22-506, and Department of Education v. Brown, 22-535.
–With assistance from Josh Wingrove.
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