Student debt programs on the line if SCOTUS overturns student loan forgiveness

Student debt programs on the line if SCOTUS overturns student loan forgiveness

If the U.S. Supreme Court rules against President Joe Biden’s widespread student loan forgiveness plan, that could open the door for conservatives to challenge more of his administration’s recent changes to the federal student loan program.

That includes possible challenges to modifications to income-driven repayment plans that make them more affordable for borrowers, says Michael Brickman, adjunct fellow at the conservative American Enterprise Institute.

“What you’ve seen not just on the loan forgiveness issue, but a number of other issues, is the Biden administration pushing the limits of its authority and seeing where those limits really are,” Brickman says. “This court case is a major test of that.”

Currently, the justices are deciding whether or not Biden and the U.S. Department of Education overstepped their authority when they implemented up to $20,000 in student loan forgiveness for most federal borrowers without Congressional approval.

The administration used the HEROES Act as the legal basis for its cancelation plan, which allows the Secretary of Education to make modifications to federal student loan repayments during times of national emergency. Conservatives, though, argue a change of this magnitude—the plan is estimated to cost upwards of $400 billion—was not the intent of the original law.

Brickman says if the Supreme Court strikes down the forgiveness plan, it could signal that Biden is over-stepping his authority more broadly, which would make it more likely that other changes his administration has implemented could also be rolled back.

In January, the Education Department released new draft rules for the Revised Pay As You Earn, or REPAYE, income-driven repayment (IDR) plan. Currently, borrowers on this repayment track make monthly payments based on their income and family size, and any remaining debt is forgiven after 20 to 25 years. Under the revised rules, monthly payments for many borrowers would fall significantly, and many would reach forgiveness in 10 years. Many of the poorest borrowers would not have to pay anything.

Education experts view changes to the REPAYE program as potentially more helpful for struggling borrowers than Biden’s one-time forgiveness effort, and they apply to far more borrowers.

Previously, experts have told Fortune that the changes are well within the Education Department’s authority, which includes defining repayment amounts and forgiveness periods. But again, Brickman says, conservatives would argue that authority is now being used in a way that was not originally intended. Already, the Supreme Court has ruled against other federal agencies in cases in which the conservative justices—who out-number the liberal justices 6-3—say they are overstepping.

“It’s about finding where the limits are,” Brickman says. “If the department has the ability to create a repayment program as generous as the one they proposed, while putting the balance of those loans on taxpayers, why not just say everybody pay one dollar and the rest is forgiven?”

IDR plans have been plagued with problems for decades, which is why the Education Department wants to modify them; in fact, the government has made many changes to them over the past few decades. Investigations have found that loan servicers often steer qualifying borrowers away from the plans that would lower their monthly payments, or miscount the number of payments they’ve made over the years.

The changes are meant to ensure that borrowers do not pay more than they can afford, and that they actually receive loan forgiveness when they qualify for it.

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