Sen. Elizabeth Warren (D-Mass), at a student debt relief advocates' rally on Capitol Hill. (AP Photo/Patrick Semansky)
This past Tuesday, February 28, the Supreme Court heard oral arguments from two cases challenging the legality of President Biden’s federal student loan relief plan.
The plan, announced in August 2022, would allow the government to forgive up to $20,000 in debt per borrower for Pell Grant recipients who met the income eligibility requirements, and up to $10,000 per borrower for everyone else who meets the income eligibility requirements. Over 40 million Americans are eligible for loan forgiveness, and over 26 million managed to apply in the month between the application opening in October 2022 and being closed due to the legal uncertainty in November of the same year. The Congressional Budget Office estimates that the plan, were its legality to be upheld, would cost the federal government an estimated $400 billion.
U.S. Solicitor General Elizabeth Barchas Prelogar and the Biden administration maintain that this plan is legal first under the Higher Education Act (HEA) of 1965, which broadly gives the federal government the ability to cancel student debt, and more specifically under the HEROES Act of 2003, which gives the Secretary of Education the ability to “alleviate hardships” federal student loan recipients could suffer in result of a national emergency, in this case the COVID-19 pandemic. Federal student loan payments have already been halted in the wake of the pandemic as of March 2020, and will not resume until either 60 days after the Supreme Court decision or early August, whichever comes first.
The first case is brought forth by six states - Arkansas, Iowa, Kansas, Missouri, Nebraska, and South Carolina - and argues that this plan exceeds the boundaries of the HEROES Act and therefore needs Congressional approval. Notably, the states also claim to argue on behalf of MOHELA, the Missouri student loan authority that Nebraska Solicitor General Jim Campbell claims is a “state-created, state-controlled public entity”. In the second case, two members of the public who are not eligible for the full $20,000 of loan relief, backed by the Job Creators Network Foundation, argue on the basis of equality and claim the government should have sought out public comment and opinion before carrying out the plan.
Despite these accusations, the main dispute in both of these cases is whether or not the plaintiffs have legal standing. As discussed in class, legal standing refers to the requirement that the plaintiff is negatively affected by the action they are challenging. In the case of the states, both conservative and liberal justices are skeptical of the states’ ability to argue on behalf of MOHELA due to Missouri’s “arm-length relationship” with the organization. Additionally, the Biden administration plans to add the costs of the plan to the federal deficit, which means there is no direct payment required from taxpayers. However, some have noted that repercussions may arise in the future through efforts to lower the federal deficit, which was around $1.38 trillion in the 2022 fiscal year. For the second case, data has proven that although Pell Grant recipients receive more aid from the government than other student loan recipients, they also have a harder time paying it back in the future, making the relief inequality reasonable. If the Supreme Court upholds the standing of at least one of the cases, legal experts are in general agreement that the Court’s conservative supermajority will vote to overturn the plan.
One aspect that many are keen to point out is that President Biden’s debt relief is a one-time loan forgiveness model. Post-secondary education still racks up tens of thousands of dollars in debt per student, and the current rise in inflation is showing no signs of making these debts any easier to repay. On top of this, the job market is becoming more and more reliant on college degrees, with many industries being made virtually inaccessible to anyone without a degree in the field. While many states have worked to provide more accessible college education, with 26 states, including California, offering some form of free community college, the future is still bleak for those hoping to continue their studies after high school. If the Supreme Court upholds President Biden’s debt-relief plan, it could potentially set in motion additional policy to make post-secondary education more accessible to everyone. However, the more likely result, the Supreme Court striking down President Biden’s plan, would further separate college education from the state, establishing a precedent that would provide little leeway for the federal government to manage the costs of college degrees in the future. More immediately, the Biden administration has admitted that they have few alternatives available were this plan to fail. Either way, the Supreme Court’s decision will set important precedent on the ability of the government to involve itself in postsecondary education, for better or for worse.
https://www.cnbc.com/2023/02/28/biden-student-loan-case-argued-at-supreme-court.html
https://time.com/6259839/student-loan-repayments-supreme-court/
https://www.cnn.com/2023/03/05/politics/biden-student-loan-forgiveness-scotus/index.html
https://www.nytimes.com/2023/02/28/briefing/supreme-court-student-debt.html
https://www.forbes.com/advisor/personal-finance/who-pays-for-student-loan-forgiveness/
https://fiscaldata.treasury.gov/americas-finance-guide/national-deficit/#:~:text=In%20FY%202022%20total%20government,from%20the%20previous%20fiscal%20yearhttps://www.forbes.com/advisor/student-loans/are-community-colleges-free/
3 comments:
All legal squabble aside, doesn't the government really have the ethical obligation to enact this kind of plan and help students out? The more they flounder in the debt crisis, the worse the future's gonna get as they struggle to survive instead of being able to productively use their degrees for a better future. It's like some kind of twisted version of nipping a problem in the bud, only it's not a problem being cut short, rather the cutting itself is the problem. To my knowledge, the student debt amount is something like 1.7 trillion, which is just nuts and shouldn't even happen to begin with. Combined with the current job market situation like you talked about, college degrees being the norm just to acquire some livable job and the extreme consequences of going to college is a complete nightmare for all those who simply don't have that kind of money to be able to scrape together a foreseeable future for themselves. Without this decision that could impact the future of higher education, there ain't gonna be no higher education soon enough.
While the constitutionality and ethics of student debt loans can be debated, the economics and actual outcome of the proposed plan are more important. One issue with student loans is that the requirements to take them on are very low, subsequently, millions of students have taken them with little chance of paying them back. At the same time college education is becoming more like high school degrees in that many jobs require them and students see it as a necessity post-high school. Students that have less debt will be able to spend more and take out future loans and make more payments. The question for the government is whether the economic stimulation for the forgiven loans makes up for the lost tax revenue in an environment where the U.S. is already taking on more debt than it needs. As Daniel pointed out, the money seems to be a drop in the bucket compared to the issue at large, but I think the outcomes and economics of the situation are more important than the legality given the state of the U.S
Relating to student loan forgiveness before the Supreme Court, there are some legal and fairness issues. From a legal standpoint, there has been a longstanding separation of powers where congress has the power to control the nation’s budget. The President cannot unilaterally allocate taxpayer dollars without congressional approval. The legal issue is whether under existing laws passed, the President can forgive $400 billion of student debt, which will increase the deficit by $400 billion, and will need to be paid back by the taxpayers at some future date through higher taxes or less spending other programs. The issue of fairness comes up in deciding if the government should forgive debt related to someone getting an education, which generally leads to higher income, while not offering debt forgiveness for other debts incurred, such as debt incurred through starting a business, paying medical bills, buying food, or other necessities. Additionally, we need to consider those who worked nights to pay for their education instead of taking on debt – will that person get a refund? And what is being done to reign in college costs which go up faster than the rate of inflation? These are the possible moral hazards involved here that may arise form forgiving student debt, and it does raise some very difficult questions around who deserves a bail out. It will be interesting to see how this plays out, and it would be good to see congress come up with a solution to provide some relief to people who have too much student debt. The underlying problem of the skyrocketing cost of a college degree definitely needs to be addressed, although other solutions may be better in tackling this problem. I would suggest some reasonable caps on annual increases for college costs if such colleges wanted to have access to federal financial aid, and more grant-based assistance to students.
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