US justice department defends Biden’s student loan forgiveness plan in Supreme Court

Washington — The US justice department filed a brief with the Supreme Court late on Wednesday defending President Joe Biden’s plan to cancel billions of dollars in federal student loans, arguing that two cases lacked standing to challenge the debt relief.

Biden in August said the US government would forgive up to $10,000 in student loan debt for borrowers making less than $125,000 a year, or $250,000 for married couples. Students who received Pell Grants to benefit lower-income college students would have up to $20,000 of their debt cancelled under the plan.

Biden’s centrepiece plan, which makes good his 2020 campaign pledge to help debt-strapped younger Americans, has been put on ice by two legal challenges — one from six mostly Republican-led states who say the Biden administration overstepped its authority, and a separate Texas-based case that argues the public should have been allowed to comment.

The Biden administration estimates that up to 40-million people are eligible for the relief, giving them resources to buy a car or a home or start a family. Republicans insist the plan, estimated to cost about $400bn, will fuel inflation, which hit 9% last summer, but has eased somewhat since then.

Biden in November said he was confident the plan is legal, and extended Covid-19-era temporary relief for borrowers until August, providing time for the court cases to be resolved.

Heroes Act

In its brief, the justice department said education secretary Miguel Cardona had clear authority to provide debt relief to borrowrs under the Higher Education Relief Opportunities (Heroes) Act of 2003. Sources familiar with the filing said the act was also used by the former Trump administration.

The Heroes Act gave the secretary of education the authority to make changes to any provision of applicable student aid programme laws after the September 11 2001 attacks to alleviate hardships caused by national emergencies.

“We remain confident in our legal authority to adopt this programme,” Cardona said in a statement. “We are unapologetically committed to helping borrowers recover from the pandemic.”

One of the sources said the legal arguments were “very strong ... and should prevail before the court”.

Delinquency and default rates would spike above pre-pandemic levels without relief for lower-income borrowers, the brief said. Households were also facing “acute inflationary pressures”, one of the sources said.

The brief rejected Missouri’s ability to challenge the ruling on behalf of the Missouri Higher Education Loan Authority (Mohela), since it is entirely separate from the state and any harm to it would not damage the state.

One of the sources said Mohela had publicly distanced itself from the lawsuit and expressed its independence from the state.

The justice department also rejected the argument of two borrowers in a separate Texas lawsuit, who said they could challenge the plan, because the education department had not allowed public comment before finalising it. The brief said, the Heroes Act expressly exempted the department from notice and comment procedures.

The Supreme Court, which has a 6-3 conservative majority, has fast-tracked both cases for oral arguments in late February or early March, with a ruling due by the end of June.

Over 16-million borrowers have already been approved for debt relief and millions more have applied. Nearly 90% of the benefits will go to out-of-school borrowers making less than $75,000 a year, according to the White House.

Reuters