Skip to main content
Menu Icon Menu Icon
Close

InfoBytes Blog

Financial Services Law Insights and Observations

Supreme Court to fast-track review of student debt relief program

Courts Student Lending Department of Education HEROES Act Appellate Eighth Circuit Biden U.S. Supreme Court Covid-19 Consumer Finance Fifth Circuit

Courts

On December 1, the U.S. Supreme Court agreed to hear the Biden administration’s appeal of an injunction entered by the U.S. Court of Appeals for the Eighth Circuit that temporarily prohibits the Secretary of Education from discharging any federal loans under the agency’s student debt relief plan (announced in August and covered by InfoBytes here). In a brief unsigned order, the Supreme Court deferred the Biden administration’s application to vacate, pending oral argument. The Supreme Court said it will treat the Biden administration’s application as a “petition for a writ of certiorari before judgment,” and announced a briefing schedule will be established to allow the case to be argued in the February 2023 argument session to resolve the legality of the program.

The Biden administration filed its application last month asking the Supreme Court to vacate, or at minimum narrow, the 8th Circuit’s injunction. Among other things, the Biden administration claimed that the 8th Circuit failed to “analyze the merits of the respondents’ claims, much less determine they are likely to succeed” when it granted an emergency motion for injunction pending appeal filed by state attorney generals from Nebraska, Missouri, Arkansas, Iowa, Kansas, and South Carolina. As previously covered by InfoBytes, the 8th Circuit determined that “the equities strongly favor an injunction considering the irreversible impact the Secretary’s debt forgiveness action would have as compared to the lack of harm an injunction would presently impose,” and pointed to the fact that the collection of student loan payments and the accrual of interest have both been suspended.

The appellate court’s “erroneous injunction leaves millions of economically vulnerable borrowers in limbo, uncertain about the size of their debt and unable to make financial decisions with an accurate understanding of their future repayment obligations,” the Biden administration said, adding that if the Supreme Court “declines to vacate the injunction, it may wish to construe this application as a petition for a writ of certiorari before judgment, grant the petition, and set the case for expedited briefing and argument this Term to avoid prolonging this uncertainty for the millions of affected borrowers.”

In its application, the Biden administration argued that the universal injunction was overbroad. The application further argued that the states lack standing because the debt relief plan “does not require respondents to do anything, forbid them from doing anything, or harm them in any other way.” Moreover, the Secretary of Education was acting within the bounds of the HEROES Act when he put together the debt relief plan, the application contended. “The COVID-19 pandemic is a ‘national emergency declared by the President of the United States,’” the application said. “Both the Trump and Biden Administrations previously invoked the HEROES Act to categorically suspend payments and interest accrual on all Department-held loans in light of the pandemic.” The application further argued that the states “have not disputed that those actions were lawful,” and that the Secretary of Education “reasonably ‘deem[ed]’ relief ‘necessary to ensure’ that a subset of these affected individuals—namely, those with lower incomes—‘are not placed in a worse position’ in relation to their student-loan obligations ‘because of their status as affected individuals.’”

Meanwhile, on December 1, the 5th Circuit denied the Department of Education’s (DOE) opposed motion for stay pending appeal, following a ruling issued by the U.S. District Court for the Northern District of Texas related to whether the agency’s student debt relief plan violated the Administrative Procedure Act’s (APA) notice-and-comment rulemaking procedures. As previously covered by InfoBytes, the district court determined that while the HEROES Act expressly exempts the APA’s notice-and-comment obligations, the court stressed that the HEROES Act “does not provide the executive branch clear congressional authorization to create a $400 billion student loan forgiveness program,” and, moreover, does not mention loan forgiveness.

Earlier, on November 22, the Department of Education (DOE) extended the pause on student loan repayments, interest, and collections in an effort to alleviate uncertainty for borrowers. Saying “it would be deeply unfair to ask borrowers to pay a debt that they wouldn’t have to pay,” the DOE stated that payments will resume 60 days after it is allowed to implement the debt relief plan or the litigation is resolved, explaining that this will give the Supreme Court time to resolve the case during its current term. However, if the debt relief plan has not been implemented and litigation has not been resolved by June 30, 2023, borrowers’ payments will resume 60 days after that, the DOE explained.