What if the U.S. Supreme Court ruled against the Biden administration and prevented the president from implementing his student loan forgiveness plan? What are the alternatives, if any?
What if the Biden administration wins?
We explore some of the alternative paths to student loan forgiveness, including potential challenges to these alternatives if President Biden’s comprehensive student loan forgiveness plan is blocked by the Supreme Court.
Plan A: President Biden Wins Supreme Court Case
As of November 2022, a total of 26.3 million borrowers have applied for the President’s Student Loan Forgiveness Plan. Of these, 16.5 million applications have been processed and approved by the Biden administration.
If the Biden administration wins both cases in the U.S. Supreme Court, they will soon implement the pardon. The U.S. Department of Education tells student loan servicers to seek forgiveness immediately. It may take him a week or two to complete.
It will likely take several weeks to process the remaining applications and new applications.
If the case is dismissed because the plaintiff lacks legal status, new plaintiffs who have legal status may file suit to thwart the president’s plans. They are likely to seek a temporary injunction that would stop the Biden administration from allowing student loans while the lawsuit is being considered.
The primary plaintiff with legal status is MOHELA, as the Biden administration has granted MOHELA with legal status at a February 28, 2023 hearing. However, MOHELA is unlikely or should have already filed such a lawsuit.
The U.S. House of Representatives could file a lawsuit to block the president’s plan.
Another way to cover up student loan forgiveness?
If the Biden administration loses any case in the U.S. Supreme Court, it will no longer be able to rely on the Heroes Act of 2003 to enforce the president’s student loan forgiveness plan. So what are the alternatives?
The decision to pursue alternative approaches to loan forgiveness may depend more on politics than policy.
The Biden administration may decide to call a U.S. Supreme Court ruling to the end of the matter. As a result, the administration may shift its focus to other forms of financial relief for student loan borrowers.
The new REPAYE plan provides significant financial relief to struggling borrowers, cutting monthly loan payments for undergraduate student loans in half and offering early forgiveness to borrowers with low loan balances.
But forgiveness advocates may pressure the Biden administration to do more about student loan forgiveness. There are several options available, including suspension of payments and permanent extension of interest exemptions, exemption powers under the Higher Education Act of 1965, and the creation of new exemption plans using regulators based on income conditional repayments.
However, none of these options seem like a good solution.
Plan B: Permanent suspension of payments
The president can decide to extend the suspension of payments and interest forgiveness indefinitely. Not only does this provide ongoing financial relief to eligible borrowers, but suspended payments will be reimbursed for his 20 or 25 years at the end of the public service loan forgiveness and income-driven repayment plans. It counts as a payment for the waiver.
The power to implement payment suspensions and interest forgiveness is based on the Heroes Act 2003. The power to implement payment suspensions and interest waivers will end when the state of emergency ends. The President has announced his intention to end the state of emergency on May 11, 2023.
The Biden administration has said the power to implement payment suspensions and interest waivers will continue after the national emergency ends, as the economic impact of the pandemic continues. The current (eighth) extension may be enough to reach a conclusion 60 days after the U.S. Supreme Court has issued its opinion on pending litigation, but the Biden administration will not issue a new extension. is quite troublesome.
Of course, the president’s plan to end the national emergency declaration is subject to change. Perhaps the Covid-19 virus will mutate and the zombie apocalypse will begin. Or maybe aliens land on the White House lawn. There is always the possibility of an excuse to extend the suspension of payments and interest forgiveness.there is Currently, 42 national emergencies have been declared.
However, pending lawsuits may prevent further extension of suspension of payments and interest waivers.
SoFi filed a lawsuit on March 3, 2023 to suspend payments and waive interest. He, a private student loan and private refinance lender, SoFi argued that the latest extension had nothing to do with the pandemic and therefore was not justified under the 2003 Heroes Act. I’m here. SoFi also claims it is not aimed at affected individuals. The case is SOFI BANK, NA and SOFI LENDING CORP. v. MIGUEL CARDONA and UNITED STATES DEPARTMENT OF EDUCATION, case number. 1:2023cv00599United States District Court for the District of Columbia.
The briefing schedule for the lawsuit runs through June 26, 2023, so it is unlikely that the current extension will end early.
If SoFi wins, it could be a pure win, as borrowers are unlikely to refinance federal loans to lenders who forced them to repay. Also, by then, interest rates on private student loans will be much higher than most federal student loans, even for borrowers with good credit.
Plan C: Higher Education Act (HEA) Exemption Authority
Some supporters of student loan forgiveness argue that the president has the power to forgive student loans using the waiver powers of the Higher Education Act of 1965 (HEA).
There are some problems with this approach.
- It relies on a misreading of the HEA, taking its waiver powers out of context. The preamble to that section of the HEA limits powers to those granted by the HEA to the U.S. Secretary of Education. In other words, they can only allow student loans if they were previously approved by Congress.
- Waiver powers appear only in Parts B and E of the HEA. Part B covers the Federal Home Education Loan Program (FFELP) and Part E covers the Federal Perkins Loan. Part D covering the William D. Ford Federal Direct Loan Program (DL) is clearly missing. To address this, you must resort to parallel conditional clauses, but the power of waiver is outside the loan, not the terms of the loan.
- Waiver Powers does not use the term “notwithstanding” as the Heroes Act of 2003 does. This means that this power may be limited by other statutory and regulatory language. In particular, it is subject to restrictions on waivers. 31 CFR 902.2This limits the waiver to situations where the borrower is unable to repay the debt and the federal government requires the loan to be recovered through wage foreclosure and offsetting. 31 CFR 901.1(a) To “aggressively collect all debts”.
Also, to the extent HEA’s waiver powers were mentioned in one of the legal summaries, the US Supreme Court may decide to address it.
Plan D: Forgiveness with Income Repayment
The four income-based repayment plans, ICR, IBR, PAYE, and REPAYE, are effectively loan forgiveness plans. They forgive the remaining debt after 20 or 25 years worth of payments.
Congress wants broad regulation of the Income Conditional Repayment (ICR) sufficient to recast the ICR into a broad student loan forgiveness plan by changing the percentage of discretionary income, the definition of discretionary income, and the number of years to forgiveness. provided the authority.
This regulatory flexibility has already been used twice in the creation of PAYE and REPAYE plans, so this is not just a theoretical argument. These new repayment plans will reduce the percentage of disposable income from 20% to 10%, reduce the definition of disposable income from AGI – 100% PL to AGi – 150% PL, and reduce the number of years to forgiveness from 25. Reduce to 20.
The law does not allow the repayment period to be less than 5 years and there is some question as to whether it could be less than 10 years, but there is a means-tested forgiveness that forgives the remaining debt after 10 years of repayment. Sure you can make a plan.
You can also allow payments on other income-based repayment plans to count toward forgiveness, so borrowers who have already made payments can switch to a new repayment plan and forgive their loans.
The Biden administration has included several ideas along these lines in its updated REPAYE plan. Later the loan will be forgiven. Each addition yields a yield of $1,000 per year until the loan is forgiven.
They decided to do this instead of delaying the issuance of the Notice of Proposed Rulemaking (NPRM) until after the U.S. Supreme Court’s decision. No consensus was reached during the negotiated rulemaking, allowing the U.S. Department of Education to do whatever it wanted with her NPRM. However, they decided to go ahead with a revised version of REPAYE. The public comment period for NPRM ended on February 10, 2023 with 13,635 public comments. If the final rule is published by November 1, 2023, the new version of REPAYE will take effect on July 1, 2024. can be selected).