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OUR PERSPECTIVES

The Student Loan Debt Landscape Post-Biden v. Nebraska



In the early days of the pandemic, the Trump Administration invoked the HEROES Act - a post-9/11 statute protecting borrowers in the event of “war or other military operation or national emergency” - to pause student loan repayment requirements and interest accumulation. In 2022, the Biden Administration cited the 2003 law in an attempt to further relieve the burden on federal student loan holders by expunging up to $20,000 in individual loans.


After almost a year of anticipation as to whether hundreds of billions of dollars in student loans would be cancelled by the Department of Education, the Supreme Court held 6-3 in Biden v. Nebraska that the President did not have such authority under the HEROES Act. As stated by Chief Justice John Roberts, "the HEROES Act allows the Secretary [of Education] to 'waive or modify' existing statutory or regulatory provisions applicable to financial assistance programs under the Education Act, but does not allow the Secretary to rewrite that statute to the extent of canceling $430 billion of student loan principal."


The Court's decision to block the Biden Administration's student loan forgiveness plan has severely limited the President's ability to provide relief to borrowers. Furthermore, with loan interest restarting this coming September and repayment beginning in October (a stipulation included in the debt ceiling solution, the Fiscal Responsibility Act), economists fear large-scale default caused by the effects of high inflation on borrowers’ ability to pay. However, there may still be a few avenues the President can take to address mounting student debt.


Executive Order: The President could exercise his executive authority to cancel student loan debt for borrowers who meet certain criteria, such as those who work in public service or who have experienced economic hardship. President Biden previously used this authority to cancel student loan debt for borrowers who were defrauded by their colleges. However, legal scholars have pointed out that this was done with congressional authorization and are questioning whether deploying an executive order to cancel hundreds of billions in loans would be constitutional.


Presidentially-Backed Legislation: President Biden could also try to work with Congress to pass legislation that would provide student loan relief. This would be an extremely difficult task to say the least. In the Senate, Democrats don’t have the votes to pass such legislation without Republican support. Even if coupled with GOP-priorities like tax reform, there is almost no scenario where 10 Republican Senators would vote to cancel over $400 billion in student debt. Further, such legislation would be a non-starter in the House, where much the majority’s agenda is focused on cutting spending and countering the Administration’s priorities.


Administrative Relief: Finally, President Biden could also take steps to make it easier for borrowers to repay their student loans. This could include expanding income-driven repayment plans, which cap monthly payments at a percentage of borrowers' income, or providing further loan forgiveness for borrowers who work in public service.


It’s important to note that virtually any student loan relief that the Biden Administration attempts to provide would likely be challenged in court. However, the Supreme Court's decision does not necessarily mean that all forms of student loan relief would be struck down. It is possible that the court would uphold some forms of relief, such as targeted cancellation for borrowers who meet certain criteria.


Ultimately, whether the Biden Administration can provide student loan relief will depend on a number of factors - including the makeup of the 119th Congress, the willingness of the courts to uphold his actions, and most importantly, the outcome of the 2024 general election. Even so, it’s difficult to imagine a scenario where the conservative-leaning Supreme Court, which is unlikely to see a major ideological shift in the foreseeable future, upholds any action providing significant student loan relief.

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