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Biden's student loan forgiveness plan to face crucial test at Supreme Court

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Washington — The Biden administration's plan to cancel up to $20,000 in federal student loan debt for millions of Americans will come under scrutiny by the Supreme Court on Tuesday, facing a crucial test from a conservative court that has been wary of broad claims of executive power.

The program, unveiled in August, satisfies a campaign promise from President Biden and would provide relief to more than 40 million borrowers, 20 million of whom would have their loan balances wiped out altogether, the White House estimates.

But with a cost of roughly $400 billion, a group of six states and two borrowers from Texas are pushing the Supreme Court to invalidate the program and argue the Biden administration unlawfully invoked the COVID-19 pandemic to claim "breathtaking and transformative power," according to a court filing from the states. 

Arguments in the pair of cases to be heard by the justices Tuesday are the culmination of a political and constitutional clash that has left millions of borrowers in limbo. The Department of Education in November stopped accepting applications for the program and loan service providers are prevented from discharging any debt as a result of the legal challenges. 

The court is set to consider two questions when it convenes for arguments: first, whether the states and borrowers have the legal right to challenge the program, a concept known as standing, and then whether the Biden administration exceeded its authority with its plan to eliminate $430 billion of federal student loan debt.

Key to whether the justices even weigh the lawfulness of the program is whether the Biden administration can persuade a majority of the court that neither the GOP-led states nor the two borrowers, Myra Brown and Alexander Taylor, have the legal standing to sue. 

"Going back decades, the Supreme Court has been pretty clear on its rules for what a plaintiff needs to be able to bring a case in court," David Nahmias, a staff attorney with the Berkeley Center for Consumer Law and Economic Justice, told CBS News. The center filed a brief on behalf of Missouri consumer advocates in support of the Biden administration, arguing the states' threatened harms are "speculative."

"The court has made it very clear that you need a concrete harm, a concrete injury that is not abstract or hypothetical. It's an actual harm or imminent harm, and they've made that very clear, time and again, in their decisions," he said. 

Student loan borrowers gather at the Supreme Court on Jan. 2, 2023, in Washington, D.C.
Student loan borrowers gather at the Supreme Court on Jan. 2, 2023, in Washington, D.C. Photo by Larry French/Getty Images for We, The 45 Million

In the case brought by the six states — Arkansas, Iowa, Kansas, Missouri, Nebraska and South Carolina — a federal district court in St. Louis dismissed the case for lack of standing. But a federal appeals court blocked the debt relief program, finding that "Missouri is harmed from the financial losses that the cancellation inflicts."

The appeals court focused its decision on the Higher Education Loan Authority of the State of Missouri, or MOHELA, a state-created entity that services federal student loans, finding that the financial impact on the loan servicer due to the debt discharge threatened financial harm to Missouri.

In papers filed with the Supreme Court, Missouri argues the student debt relief program will inflict "substantial financial losses" on MOHELA and therefore injure the state, while the other states claim they will lose tax revenues as a result of the program.

For the second case from Texas brought by Brown and Taylor, a federal district court found the borrowers satisfied the requirements for standing and ruled the plan is an unconstitutional exercise of Congress's legislative power. A federal appeals court declined to reinstate the program.

Brown does not qualify for debt relief, as her loans are held by commercial entities, and Taylor is eligible for $10,000 in loan forgiveness. The borrowers claim the education secretary improperly promulgated the plan without the notice-and-comment process, depriving them of the opportunity to comment on the program. 

Solicitor General Elizabeth Prelogar, who will argue on behalf of the Department of Education, told the Supreme Court that any harm to the states' treasuries is "self-inflicted" and their theory of decreased tax revenues "unduly speculative." With regards to Missouri and MOHELA, the two are "legally separate entities," Prelogar said.

"The states assert standing based on injuries that are highly speculative, that they have inflicted upon themselves, or that fall upon a third party that is a stranger to this litigation," she said. "And private respondents purport to assert that the plan injures them because it provides too little debt relief, but seek a remedy that would result in no debt relief at all. This Court should reject those convoluted theories."

Nahmias noted that the Supreme Court only needs to find that one of the plan's challengers has legal standing in order to reach the larger question of whether the Biden administration had the authority to cancel student loan debt. 

But "states just don't have a right to bring this case," he said. "Specifically in the case of Missouri, their case is far too speculative to reach the requirement for Article III standing that the Supreme Court has set out. It relies on a very weak chain of events, and that's just not enough, it's too attenuated to establish standing."

In a friend-of-the-court brief filed with the court, law professors Samuel Bray of Notre Dame Law School and William Baude of the University of Chicago Law School argue that while they believe the student loan forgiveness program is unlawful, the standing theories put forth in the two cases "are wrong." 

"Even if the executive branch has exceeded its authority under Article II, that does not permit the judicial branch to exceed its authority under Article III," they wrote, later warning that accepting the theories of standing from the states would invite it to weigh in on future partisan disputes over actions by federal agencies. "Unless this court wishes to sit in constant judgment of every major executive action — which is not its constitutional role — it is time to say 'stop.'"

Mr. Biden's program would cancel up to $10,000 in federal student debt for Americans earning less than $125,000 annually, and an additional $10,000 for recipients of Pell Grants, which are awarded to students with the greatest financial need. 

In the less than four weeks that the application was available, more than 26.2 million people applied, and over 16 million of those applications were approved by the Department of Education, according to the White House. The Trump administration, followed by the Biden administration, paused federal student-loan payments during the COVID-19 pandemic, with the most recent extension running through June.

The Department of Education said its legal authority for the student debt cancellation rests on a 2003 law that authorizes the education secretary to "waive or modify" student financial assistance programs for borrowers "in connection" with a war, military operation or national emergency, such as the pandemic. 

But the states and borrowers told the court that the law, the HEROES Act, doesn't authorize the program.

"It is implausible that Congress authorized the secretary to engage in one of the department's most costly actions ever — a half-a-trillion-dollar loan-cancellation program — without any rulemaking procedures," the states said. 

Before announcing his student loan initiative, Mr. Biden faced pressure from some Democrats in Congress and activists to take action to help the more than 43 million borrowers with outstanding federal student loan debt totaling $1.6 trillion.

For Dan Stokes, 32, the debt relief available through the program — if it stands — would give him the freedom to change careers and save up enough money to buy a house. 

Stokes, who will join a rally outside the Supreme Court hosted by advocacy organizations on Tuesday, has $42,000 in student loan debt after attending a liberal arts college near Roanoke, Virginia, and transferring to Virginia Commonwealth University, from which he graduated with a bachelor of art's degree in international studies and African American studies in 2013. 

A special education teacher, Stokes is eligible for $20,000 in debt relief under the Biden administration's plan, and is also working to have the rest of his debt erased under the Public Service Loan Forgiveness Program, which forgives the remaining balance on loans after a borrower makes 120 qualifying payments. 

"I worked in this industry on good-faith that providing quality instruction, I would be recognized," Stokes, whose loans are serviced by MOHELA, told CBS News. "It's going to set me back from home ownership, and it's a situation where I feel I will have to put that on pause."

Stokes said while he enjoys working with his students, he feels underpaid and burnt out, and his monthly loan payment, though currently on hold, leaves him with little money to put away to move closer toward his goal of homeownership. 

"It's setting me back from building wealth for myself and purchasing a home," he said, adding that the program "really helps people to have some type of peace of mind."

A decision from the Supreme Court is expected this summer.

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