Nivarthy: The Supreme Court Is Right to Scrutinize Student Loan Forgiveness
President Biden’s $400 billion loan forgiveness plan finally reaches the Supreme Court, and they are right to consider it for its breadth and unfairness to many groups of Americans.
Last week, the Supreme Court heard oral arguments in two cases that challenge President Biden’s student loan forgiveness plan. President Biden’s plan, introduced by executive order in August 2022, eliminates $10,000 in loan debt for most borrowers and up to $20,000 for Pell Grant recipients. The plan also caps the income eligibility of those receiving loan forgiveness at $125,000 for individuals and $250,000 for couples.
Both cases brought against the Biden administration’s plan — Biden v. Nebraska and Department of Education v. Brown — generally challenge the Biden administration for its broad use of executive power in putting forward the loan forgiveness plan. The plaintiffs in Biden v. Nebraska, six states alleging various types of injury to their state agencies, argue that the Department of Education has exceeded its authority in implementing such a policy.
Indeed, the scrutiny toward President Biden’s plan is warranted on two grounds: scope and fairness. The plan is too sweeping for the executive branch to unilaterally institute, and it also leaves behind key groups of Americans.
On scope, the plan is not only too far-reaching to be left to executive order, but also takes a broad interpretation of the Higher Education Relief Opportunities For Students Act. The 2003 law, put in place in the aftermath of Sept. 11 in order to assist those affected by a war or national emergency, was invoked as part of President Biden’s loan forgiveness plan. While the administration purports that the pandemic makes for that national emergency, the spirit of the law is to help those impacted by a war-like national emergency — as evidenced by the bill’s language on those suffering harm “as a direct result of a war or other military operation or national emergency.” In fact, legal experts continue to debate whether the economy’s recovery from COVID-19 constitutes the national emergency-like conditions necessary for this plan, and whether the spirit of the HEROES Act is to aid service members. It is even more unclear if the administration is permitted to implement such an expansive loan forgiveness plan, given that the HEROES Act only authorizes the Department of Education to “waive or modify” existing regulations.
Moreover, as a matter of separation of powers, such an expansive federal spending plan — Biden’s plan puts $400 billion of federal funds toward loan forgiveness — demands the action of Congress, not the executive branch because of the policy’s substantial economic and political implications.
While the Court is less explicitly considering the fairness questions associated with this policy, several moments in last Tuesday’s oral arguments touched on the groups of Americans left out of Biden’s plan yet who are still taking on its costs. The benefits of loan forgiveness tend to leave out two key groups: those who never took out student loans to begin with and those who saved and sacrificed in order to ultimately repay their loans. Importantly, the first group is a large majority of Americans — less than a fifth of Americans ever take out student loans — and less than half of Americans aged 25 and up even have a college degree. The cost of such a massive program should not be put on the backs of Americans who never attend college or already made sacrifices to pay off their loans.
The point here is not that no one should be helped with federal government support, but rather that this particular plan is not targeted toward those who need help the most. Specifically, including graduate school loan debt and the income caps of $125,000 or $250,000 for couples means those at the higher end of the income spectrum will receive a disproportionate amount of the overall financial benefit of debt cancellation. This is because the income cap deals with borrowers’ income right out of college, and the national average starting salary is less than $60,000. A lower cap is one step toward making the plan more targeted.
Another question on fairness is why student loan debt? Mortgage loans are the biggest form of consumer debt in America and auto loans are a close third behind student loans. Evidently, a politically salient demographic — current or recent college students — has motivated this policy, but the outstanding issue with Biden’s plan is that it disproportionately benefits those at higher incomes.
Fundamentally, the policy fails to address the root cause of the student loan crisis: the skyrocketing cost of a college degree in America. Outpacing inflation by a factor of 4.6 in the past five decades, the increase in college tuition should be truly alarming to policymakers. But an untargeted program only exacerbates this issue. Future solutions must consider how aid can be directed towards low earners who otherwise would not attend college.