April 03, 2023

Last August, the Biden administration announced it would forgive $10,000 in federal student debt ($20,000 for Pell Grant recipients) for borrowers earning less than $125,000 annually. The White House said the pandemic justified student loan forgiveness because it hampered many borrowers’ finances, even though payments have been on pause since 2020.

But President Biden’s plan for student loan forgiveness has hit a snag. After forgiveness applications opened last fall, they were quickly suspended as courts blocked repayments. In December, the Supreme Court decided to hear two lawsuits against the program.

One case is from six Republican-led states arguing loan forgiveness could harm a Missouri-based loan servicer and others. The other case was brought by two individual borrowers backed by the conservative Jobs Creator Network Foundation.

They Biden administration said it can implement the program and that challengers have no standing to challenge it in court. Republicans have fought student loan forgiveness pretty much from the start, calling it short-sighted and harmful to taxpayers.

Solicitor General Elizabeth Prelogar represents the government and said the Biden administration is permitted to cancel student debt in response to the COVID-19 pandemic. However, Justice Brett Kavanaugh pointed out how some of the biggest mistakes in Supreme Court history came when deferring to emergency powers.

The decision could take up to three months. I’ve seen lots of coverage indicating the conservative-leaning court could overturn the program and leave the decision to Congress. Either way, borrowers should know their forgiveness fate by this summer. But by then, many of them will probably be sweating the thought of resuming payments.