Can the Supreme Court Prevent Student Loan Forgiveness?July 15, 2022
According to numerous news reports, the Biden Administration is considering canceling up to $10,000 in student loan debt per borrower.
This would be in keeping with Biden’s campaign promise to offer federal student loan forgiveness. The most recent proposals would make loan forgiveness available to individual tax filers making $150,000 or less per year and to married joint filers who make under $300,000.
According to CNBC, a spokesperson for the White House indicated that no decisions had yet been made regarding federal student loan forgiveness. However, there is widespread speculation that President Biden will announce a forgiveness plan prior to the end of August. That is when payments are scheduled to resume, as repayment on federal student debt is currently paused due to the COVID-19 pandemic.
If the White House does take action to try to forgive up to $10,000 in student loan debt, however, there’s a possibility that the U.S. Supreme Court could reject Biden’s efforts to cut back outstanding student loans. Here’s what you need to know.
Could the Supreme Court Prevent Federal Student Loan Forgiveness?
Supporters of student loan forgiveness have argued that the presidential administration has absolute authority to take this action. These supporters, including Senate Majority Leader Chuck Schumer (D-NY) and Senator Elizabeth Warren (D-MA), argue that this authority comes from the Higher Education Act of 1965. In fact, they claim that under this Act, the president was given an unlimited right to cancel any student loan debt desired by any number of borrowers.
However, the Supreme Court has ruled in past cases to curtail the executive branch’s power, and it has the potential to do so again in this case. If the Supreme Court opts for a narrow view of administrative power, this could limit the president’s ability to order the Department of Education to forgive student loans.
If the Biden Administration does cancel student loan debt, this would most likely be enacted by an executive order from the president rather than as a result of legislation passed by Congress. This distinction may give the Supreme Court an opening to reject student loan forgiveness, according to Forbes.
What Legalities Could Prevent Student Loan Forgiveness?
There are two different legal arguments that the Supreme Court could rely on to prevent the Biden Administration from moving forward with student loan forgiveness.
The court could argue that if Congress wanted to give the Department of Education the power to grant student loan forgiveness, it would have explicitly done so by law, but it has not. The court could also rely on a legal doctrine called the nondelegation doctrine, which prevents Congress from delegating its constitutional powers to the executive branch.
These arguments essentially boil down to the fact that the president and the Department of Education cannot act alone to unilaterally forgive student loan debt because the law doesn’t allow them to do so — and it would be unconstitutional if Congress tried to pass a law that gave them this authority.
There is no way of knowing if the court would rule against the Department of Education’s efforts at loan cancellation unless the Department acts and its decision is challenged in court. That said, it is possible that the court would not favor this type of effort if President Biden does move forward with loan forgiveness.
Should Borrowers Wait for Federal Student Loan Forgiveness?
Borrowers should not count on federal student loan forgiveness, as it’s unclear whether the Biden Administration will attempt to wipe out debt balances – and even if they do, whether the Supreme Court will challenge the decision. Instead, it pays to be proactive in finding realistic ways to cope with an unpaid student loan balance.
Even if you’re waiting for student loan forgiveness, you can still take action now to make repayment easier. For example, choosing an income-based repayment plan for your federal student loans could cap your monthly payments as a percentage of your income to make them more manageable. It’s also possible to consolidate federal student loans through the Department of Education. Keep in mind that extending your repayment term will mean paying more in interest but can give you more financial flexibility month-to-month.
Programs such as Public Service Loan Forgiveness could also be a solution for those working for an eligible employer. And there are other loan forgiveness or repayment programs for certain eligible workers as well.
If you have private student loans, you may also choose to look into refinancing. Because presidential student loan forgiveness would only apply to federal loans, refinancing private loans could benefit your budget regardless of the outcome. This process involves taking out a new loan at a better rate and more favorable terms to repay existing student debt.
ELFI can help you to explore your options for refinancing student loans. Click here to learn more.*