US Supreme Court to hear Biden's bid to reinstate student debt cancellation plan

Decision brings back financial stress for debt holders, some of whom owe tens of thousands of dollars

Activists gather in front of the White House in Washington to rally in support of cancelling student debt. AFP
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The US Supreme Court on Thursday said it would review US President Joe Biden's plan to cancel student loan debt, further delaying reimbursement payouts for millions of Americans who applied to the programme.

The country's top court said that it would hear arguments on the issue in late winter, with a possible ruling made in mid-2023.

“We welcome the Supreme Court’s decision to hear the case on our student debt relief plan for middle and working class borrowers this February,” White House Press Secretary Karine Jean-Pierre said in a statement.

Mr Biden's plan promises $10,000 in student loan forgiveness to people earning less than $125,000 annually, and another $10,000 in debt relief for Pell Grant Recipients.

US higher education can cost more than $100,000, saddling Americans with debt throughout their adult lives. Mr Biden's programme is designed to aid borrowers who are at highest risk of delinquency or default.

“This programme is necessary to help over 40 million eligible Americans struggling under the burden of student loan debt recover from the pandemic and move forward with their lives,” Ms Jean-Pierre said.

“The programme is also legal, supported by careful analysis from administration lawyers.”

The Department of Education started reimbursements for more than 16 million people — out of the 26 million who have applied for relief so far — but stopped processing applications in November.

That same month, an appeals court blocked the Biden administration from cancelling loans after a lawsuit brought by the states of Nebraska, Missouri, Arkansas, Iowa, Kansas and South Carolina, who called the programme illegal. In addition, a federal Texas judge called the programme unlawful.

The Biden administration had hoped that the Supreme Court would allow student loan relief payments to continue while justices deliberate the case, but justices continued the hold on debt cancellation.

“As we previously announced, student loan payments will remain paused while the Supreme Court resolves the case,” Ms Jean-Pierre said.

The pandemic-era student loan repayment pause is set to expire at the end of the year, months before the court is expected to issue a ruling on the current reimbursement programme.

If the programme is ultimately cancelled, debt holders will need to continue to pay off loans amid soaring interest rates, record-high inflation and a looming recession.

Thursday's move is the latest in a string of Supreme Court disappointments for the White House.

Rulings by the court this year have limited the Environmental Protection Agency's authority to curb carbon emissions and ended New York state's efforts to enact stricter gun control.

The biggest blow was the court's decision to overturn Roe v Wade, which ended national protections for abortion. The move caught Mr Biden's team off guard and many believe it was politically motivated.

Amid the disappointments, the White House did manage to get a big win on an immigration ruling, which ended a Trump-era migrant programme that sent people looking to apply for asylum in the US back to Mexico while their cases were reviewed.

In a more perfect union, the work done in the executive branch and the top court is done independently — at least that's what the US Constitution says. But the current struggle between the White House and the Supreme Court is not a unique one and generally occurs with every administration.

Updated: December 01, 2022, 11:50 PM