Washington — The Supreme Court will hear a second challenge to President Biden’s student loan forgiveness program, it said Monday, setting oral arguments for late February or early March in a dispute brought by two borrowers with outstanding student loans.
The legal battle arising from Texas over Mr. Biden’s plan to provide up to $20,000 in student-loan relief to millions of borrowers joins another case brought by a group of six Republican-led states, both of which the Supreme Court will decide next year.
In its order announcing the decision to hear the Texas case, the Supreme Court said the parties will argue two questions: Whether borrowers Myra Brown and Alexander Taylor have legal standing to challenge the lawfulness of the relief plan, and whether the plan is “statutorily authorized and was adopted in a procedurally proper manner.”
In both legal fights before the Supreme Court, lower courts blocked implementation of the student loan forgiveness program nationwide, leading the Justice Department to file emergency requests with the high court asking it to reinstate the plan. But the relief program remains on hold pending oral arguments in the two cases. The president last month extended his pause on federal student loan payment until June 30, giving the high court time to consider the disputes.
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 student loan forgiveness program quickly was challenged in federal courts, including by the two Texas borrowers, Brown and Taylor. Brown is not eligible for relief under Mr. Biden’s plan, as her loans are held by commercial entities, while Taylor is eligible for $10,000 in loan forgiveness.
The two alleged in their lawsuit against the Department of Education and Cardona that he improperly promulgated the plan without notice-and-comment rulemaking, depriving them of the opportunity to comment on the program.
A federal district court in Texas sided with the borrowers, ruling the plan is unlawful and stopping the Education Department from canceling any debt. The Justice Department appealed, but the U.S. Court of the Appeals for the 5th Circuit denied its request to stay the lower court’s order while legal proceedings played out.
Solicitor General Elizabeth Prelogar asked the Supreme Court this month to reinstate the student loan forgiveness program or, if the court was not prepared to grant relief, hear the case along with the GOP states’ challenge.
“The harm to the government and the public from vacating the Secretary’s action is significant,” Prelogar told the court. “The HEROES Act reflects Congress’s judgment that the secretary must be able to act quickly and effectively to afford relief to student-loan borrowers affected by national emergencies. Here, the Secretary has crafted relief to protect vulnerable borrowers from delinquency and default (and thus from wage garnishment, credit-report damage, and seizure of federal benefits).”
The injunction issued by the district court, she said, “frustrates the government’s ability to respond to the harmful economic consequences of a devastating pandemic with the policies it has determined are necessary” and leaves borrowers in “untenable limbo.”
Like the lawsuit filed by the pair of Texas borrowers, the coalition of six states that challenged the Biden administration’s plan argued the Biden administration overstepped its authority with its plan to forgive student loan debt. The states — Arkansas, Iowa, Kansas, Missouri, Nebraska and South Carolina — also said the program will hurt revenues earned from servicing federal student loans.
A federal district court in Missouri 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.
Prelogar asked the Supreme Court in November to lift the 8th Circuit’s injunction or agree to hear the case. It agreed to do so at the beginning of the month.
