Student loan debt: Supreme Court to review policy that forgave $17 billion

USA Supreme Court According to Politico, he plans to consider the student loan debt forgiveness policy, which has allowed the Biden administration to forgive $17 billion.

Newsweek on Saturday afternoon, contacted the White House via email and the Supreme Court via an online form requesting comment.

Why it matters

Since you took office, Mr. President Joe Biden and his administration have made several efforts to forgive student loans as the Department of Education (DOE) has approved approximately $180 billion in student loan debt forgiveness. Nearly 5 million Americans were affected, and millions of others saw lower monthly payments under Biden’s means-tested repayment programs. But this came after the Supreme Court had previously thwarted Biden’s sweeping forgiveness efforts.

What’s worth knowing

The Court is set to consider a controversial Biden administration rule intended to simplify the process for student loan borrowers defrauded by colleges to apply for loan forgiveness.

Since April 2024, the Biden administration has canceled more than $17 billion in loans to borrowers defrauded by their institutions using the borrower defense to repayment principle. The provision, originally introduced in 1994, was updated in 2016, 2019 and most recently in 2022 under Biden’s leadership. The latest amendment aimed to provide greater transparency of claim submission criteria and officially entered into force in 2023.

However, the high court’s review follows a lower court decision that blocked the rule when the Biden administration’s efforts hit a major legal hurdle in 2023 when Career Colleges and Schools of Texas (CCST) filed a lawsuit challenging this policy. CCST argued that the updated borrower defense rules made it too easy for students to seek relief, potentially harming for-profit institutions.

Later that year, the 5th U.S. Circuit Court of Appeals sided with CCST, halting implementation of the rule nationwide. The court’s decision placed significant restrictions on the DOE’s ability to grant relief, stating that forgiveness could only be granted if the borrower had defaulted on the loan and the government had commenced legal proceedings to recover that amount.

The ruling has since sparked a heated debate over the scope of federal authority to address student debt, and could have lasting consequences for both borrowers and higher education institutions.

The Court will consider whether the lower court erred in holding that the Higher Education Act of 1965 does not allow borrowers to defend a borrower against default.

This comes as President-elect Donald Trump is preparing to take office on January 20, and many Americans across the country are wondering what that will mean for them student loans.

The loan concerns come as Trump has been opposed to student loan forgiveness in the past, and his influence on the DOE could have broad and far-reaching effects.

Based on Trump’s track record, it’s unlikely that student loan borrowers will see much relief under the new administration. During his first term, his administration pushed to increase monthly payments from 10 to 12.5 percent of borrowers’ discretionary income and also sought to combine all income-driven repayment plans into one simplified option. These moves could return during his second term.

What people say

Jason Altmire, president and CEO of Career Education Colleges and Universities, told Politico on Friday the Court’s decision does not support the Biden administration’s arguments.

“It simply means that the Supreme Court will hear arguments about the scope of the Department of Education’s authority related to (the borrower defense rule). Time will tell how the incoming Trump administration will argue the government side, but we strongly believe that the facts of this case will demonstrate that the Department’s burdensome (borrower defense rules) went far beyond the agency’s authority,” Altmire said.

Eileen Connor, president of the Project on Predatory Student Lending, said in an interview with Politico on Friday“The reason the administration wanted the Supreme Court to look at this case is because it is fundamentally flawed and deprives students of critical protections that Congress unquestionably authorized. I hope this will be an opportunity to correct the fifth track.”

Kevin Thompson, founder and CEO of 9i Capital Group, talked about this earlier Newsweek: “Borrowers shouldn’t expect much relief under Trump. He has never been a supporter of universal debt relief, and history suggests he views personal responsibility as the basis for financial obligations. Trump University’s $25 million settlement is a reminder that this is not the case. He does not part with money easily and many believe he has a vendetta against anything that resembles government aid to citizens.

What will happen next

However, it is unclear what Trump will do once he takes officewith the Court agreeing to review a lower court’s ruling on the borrower defense rule, the future of the Biden administration’s efforts to pursue broader loan forgiveness may be in jeopardy. If the rule is scaled back, it would represent a significant setback for Biden’s signature student debt policy – a centerpiece of his presidency.