The Supreme Court heard oral arguments on President Biden's student loan forgiveness plan on Tuesday, escalating an ongoing legal battle that could affect tens of millions of borrowers.
The big picture: The historic proposal has been on ice after court orders, leaving in limbo both borrowers and a potential pillar of Biden's legacy.
- The high court weighed two challenges to the student loan plan: One brought by a group of Republican-led states and the other on behalf of two students.
- Biden in August announced his plan — which has been estimated to cost about $400 billion over 30 years — to cancel up to $20,000 in student debt for Pell Grant recipients and up to $10,000 for individual borrowers who make under $125,000 per year.
What's at stake?
Depending on how the high court rules, millions of borrowers stand to gain or lose.
- Some 26 million people applied for student loan debt relief, and more than 16 million of those borrowers’ applications were fully approved, per the White House.
What are the legal challenges being considered?
In one of the cases, six GOP-led states filed a complaint seeking to overturn the Biden administration's program, saying that the administration overstepped its authority. The states also argue that the plan would impact their tax revenue.
- The coalition of Republican states wrote in a complaint that the Biden administration should have gone through Congress to authorize the program.
In the other case, the conservative-leaning nonprofit Job Creators Network Foundation filed a lawsuit on behalf of two students, accusing the administration of not seeking public input on the program.
The Biden administration in January filed a legal brief with the Supreme Court, defending the plan and saying that the legal challenges do not show harm from the program.
What issues did the justices focus on?
Conservative justices zeroed in on whether Biden had the legal authority to offer the debt relief. The justices invoked the “major questions doctrine,” which holds that the executive branch needs explicit congressional approval to act on the biggest issues.
- "I think most casual observers would say if you’re going to give up that much amount of money, if you’re going to affect the obligations of that many Americans on a subject that’s of great controversy, they would think that’s something for Congress to act on," Chief Justice John Roberts said.
The justices also considered whether the HEROES Act of 2003 gave the Biden administration the authority to introduce the debt relief plan.
- The law allows the education secretary to “waive or modify” student financial assistance programs "as the Secretary deems necessary in connection with a war or other military operation or national emergency."
- Former President Trump and Biden both used the HEROES Act to pause student loan payments since the outset of the COVID pandemic.
- U.S. Solicitor General Elizabeth Prelogar defended the Biden administration's plan and said it falls under the HEROES Act.
Are there any indications of the justices' views?
Legal scholars say the 6-3 conservative-majority Supreme Court, whose public confidence recently a hit historic low, could imperil Biden's plan.
- "The court’s conservatives have been very aggressive in striking down the decisions of Congress and the president," Gregory Caldeira, a political science professor at Ohio State University, told CNBC.
- The court in recent years has struck down some previous pandemic-era policies, including Biden's moratorium on evictions, Politico notes.
What's next
The court is expected to issue its decision by the end of June, AP reports. Student loan repayments are on pause through June 30.
- Biden previously said the June extension timeline "would give the Supreme Court an opportunity to hear the case in its current term."
- The Education Department in January announced a student loan payment proposal that would lower monthly payment amounts for some Americans while completely pausing payments for others.
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