Student loan debt: Borrowers brace for Supreme Court decision

President Biden’s student debt forgiveness plan will finally see an end to its months-long limbo in the courts this week.

With repayments set to start again in October after a years-long pandemic-related pause, the Supreme Court’s forthcoming ruling on the legality of Biden’s proposal is the last piece of the student loan puzzle, offering a clearer landscape moving forward.

Many borrowers are fearful as the conservative-majority Supreme Court, which could make its decision known as soon as Tuesday morning, seemed skeptical of Biden’s plan during oral arguments in February. 

“Generally, I hope that no matter what happens with this Supreme Court decision, that our decisionmakers keep talking about options when it comes to providing student debt relief,” Sabrina Golling, a 27-year-old student loan borrower, told The Hill on Monday.

“No plan to reduce or eliminate student debt will be perfect, and no plan could ever benefit everyone the same amount, but we should not let the perfect get in the way of the good when it comes to trying to limit the impact of these debt burdens. I am not overly hopeful that this attempt will pass, but I am hopeful that we can keep talking about the possibilities as time moves on, since this problem isn’t going away any time soon,” she added.

The justices heard two cases against the forgiveness plan, one brought by two individual student loan borrowers and another from six Republican attorneys general. 

The justices first must decide whether the challengers have standing, meaning the right to sue the government over the plan. The plaintiffs must pass this bar to even have the case considered, at which point the court will determine if the government has the power to implement the proposal. 

While Democrats have tried to maintain an optimistic tone, even Biden himself has shown skepticism at the idea the Supreme Court will rule in his favor. 

“I’m confident we’re on the right side of the law. I’m not confident about the outcome of the decision yet,” he said in March. 

Advocates found a bit of hope Friday after the court released an 8-1 decision in a case where two Republican states tried to challenge the Biden administration on immigration policy. The high court ruled against the two states, saying they did not have standing to sue.  

If the plan is ruled legal, the timeline of events is a bit unclear. 

Last year, the Education Department released an easy two-minute form for borrowers to fill out to apply for debt relief: up to $10,000 for most borrowers and up to $20,000 for Pell Grant recipients.

Around 26 million people filled out the form while it was up, and more than 16 million were approved for relief before a court order forced the administration to take down the application. 

It is unknown how quickly things would move if the court lets the plan stand, but the department has previously said it is ready to put its application back online and has already sent the information of those approved for relief to their loan servicers. 

Advocates will also be pushing for the deadline for the application to be extended since borrowers were supposed to have from last fall to the end of 2023 to apply before the plan got held up in the court system. 

If the plan is struck down, borrowers can expect no relief, while interest on their loans restarts Sep. 1 and payments resume Oct. 1. 

Republicans have been pushing for this outcome, arguing for months the $400 billion plan is unfair to those who never went to college or who paid off their student loans without assistance. 

“Moreover, this administration is bypassing Congress, which is elected by the American people to protect their interests,” Rep. Virginia Foxx (R-N.C.), the chairwoman of the House Committee on Education and the Workforce, previously said. “Congress is the only body with the authority to enact sweeping and fundamental changes of this nature, and it is ludicrous for President Biden to assume he can simply bypass the will of the American people.” 

The president would find himself in a bind as $10,000 in student debt relief was one of his signature campaign promises, and the administration has refused to disclose if a backup plan is in place to deliver on his word. 

“Black borrowers are disproportionately impacted by student loan debt, and with payments starting back potentially in October, we need to make it very clear that regardless of what happens with this SCOTUS decision, we have to make sure student debt cancellation happens because the Black voters, Black borrowers are the ones who are going to benefit the most,” Satra Taylor, director of higher education and workforce policy at Young Invincibles, told The Hill during a rally outside the White House last week.

Regardless of the outcome, borrowers should be preparing for student loan payments to resume this fall. 

While student loan advocates had been hoping they could push for another extension, Biden, as part of the bipartisan deal on raising the debt ceiling with House Speaker Kevin McCarthy, promised payments would restart this fall regardless of the Supreme Court’s decision.

—Updated at 3:10 p.m.