When Will Student Loans Be Forgiven?

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President’s Biden student loan forgiveness program was seemingly underway as millions of former and current students signed up for the chance to have up to $20,000 in debt wiped from the record books. Unfortunately, the controversial debt relief program still has a few road bumps to clear before any checks can be written, with more being added seemingly by the day. The question remains: When will student loans be forgiven?

Well, at the moment, it’s woefully unclear when, or even if, President Biden’s loan forgiveness program will happen. Currently, the executive action is tied up in federal court, with the Supreme Court blocking the initiative until Justices get the chance to hear oral arguments on the case, scheduled for February. And the highest court in the land isn’t expected to reach a decision until June at the soonest. So it’s unclear if any of the 26 million applicants will see some, if any, of their debt canceled until then.

Interestingly, on Monday the Supreme Court announced it will hear arguments on a second case related to President Biden’s student loan program. Individual borrowers, Myra Brown and Alexander Taylor sued the Department of Education in a Texas District Court, arguing the Biden administration failed to notify the public or carry out a public hearing on the matter before passing the debt relief program.

It’s unclear whether the Supreme Court will consolidate the two cases.

Student Loans Hang in Balance Ahead of Supreme Court Decisions

Biden’s student debt relief program has battled through resistance practically from its origin. Shortly after being announced, a group of states challenged the plan but were dismissed in District Court for lack of legal standing. It seemed all clear for the program — the Biden administration even began informing people who were approved for student loan relief.  On Nov. 8, however, the U.S. Circuit Court of Appeals reversed the district court’s decision, blocking the program.

The merit of the appellate decision has been fiercely argued. In a statement to the Supreme Court, Solicitor General Elizabeth Prelogar claimed the “erroneous injunction” leaves millions uncertain over the status of their financial obligation.

If you recall, the Department of Education paused all payment requirements for all federal student loans since the onset of the pandemic. Since then the student loan moratorium has been repeatedly extended, eight times to be exact. This is, in many ways what spurred the Biden administration into taking action against these frozen loans. But no more. Biden has offered an ultimatum of sorts: Payments will resume either 60 days after the end of the litigation battle or at the end of next summer.

Will the Student Loan Forgiveness Program Get Cancelled?

Clearly, not everyone’s in agreement over the validity of the loan forgiveness plan. What’s the legal case against the program?

Well, the story starts at the program’s birth. The Biden administration passed the student debt relief forgiveness program as an executive action. Typically this would be considered beyond the scope of the Executive branch’s authority. Only Congress has the power of the purse, after all, including for waiver authority, which refers to any and all loan forgiveness programs.

The Biden administration and Secretary of Education are essentially relying on waiver authority granted in the HEROES Act of 2003, which allows the Secretary of Education to change or waive any provision of Title IV of the Higher Education Act of 1965, related to war, or national emergency, “as may be necessary to ensure that affected individuals are not placed in a worse position financially in relation to that financial assistance because of their status as affected individuals.”

The argument here is that because Covid-19 was considered a national emergency, President Biden, or rather, the Secretary of Education, has the authority to categorically forgive student loan debt. Unfortunately, many legal experts argue this is beyond the scope of the HEROES Act, which only authorizes a payment pause or interest waiver, but not broad-spectrum loan forgiveness.

In that way, it’s still unclear what conclusion the higher court will come to in 2023. With millions of dollars of potentially life-changing loans on the line, many Americans are eager for a conclusion to the Biden administration’s latest stimulus program.

On the date of publication, Shrey Dua did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

With degrees in economics and journalism, Shrey Dua leverages his ample experience in media and reporting to contribute well-informed articles covering everything from financial regulation and the electric vehicle industry to the housing market and monetary policy. Shrey’s articles have featured in the likes of Morning Brew, Real Clear Markets, the Downline Podcast, and more.

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