Biden Administration’s Federal Student Loan Relief Program Faces Legal Challenges and Economic Criticisms

President Biden announced on August 24th, 2022, his federal student loan relief program. The program is funded by the Biden-Harris administration and is offering to relieve borrowers of their debt. The Biden administration’s goal was to “help working and middle-class federal student loan borrowers transition back to regular payment as pandemic related support expires”. [1] Those who qualified for a federal Pell Grant, can receive up to twenty thousand dollars of loan debt canceled. For other borrowers who make under 125,000 dollars a year, they can receive up to ten thousand dollars in cancellation. The relief program is also extended to those who are currently in school and hold federal student loan debt. Typically, to apply for relief, one would head to fafsa.gov, but the portal is now closed due to imminent legal challenges. The Biden administration is currently facing lawsuits over the program due to questions of constitutionality, is it within their right to cancel student loan debt?

The Biden administration faced heavy scrutiny after the announcement last August, with many wondering if Congress or the President have the power to broadly cancel massive loan debt? Litigators for the few lawsuits making it to the Supreme Court, the grant is not tailored to address the effects the pandemic had on federal student loan borrowers [2]. There are two cases that made it to the Supreme Court. The suit led by Nebraska, Missouri, Arkansas, Iowa, Kansas and South Carolina was dismissed on the grounds that the Court lacked jurisdiction. The second case is currently pending, Myra Brown and Alexander Taylor v. U.S Department of Education and Miguel Cardona. Both plaintiffs are college graduates who argue that the relief program excludes certain borrowers, specifically those who did not receive a Pell Grant in college. A Pell Grant is federal student aid that is awarded to those “who display exceptional financial need and have not earned a bachelor’s, graduate, or professional degree.” [3] The main concerns surrounding the implementation of the program are economic issues, such as inflation. A study conducted by Aubrey George and Thomas A. Lubik, done for the Federal Reserve Bank of Richmond, found that inflation is anticipated to rise by at least 1% if the program is to ensue. [4] The suit led by the six states cited this and higher tax rates as their main causes of concern. Critics of the program have inquired whether it is even possible for the Biden administration to cancel student loan debt. The answer to the question is essentially, yes. If the president intends to make decisions on significant issues, it should only be done with explicit approval from Congress to establish the policy. The program has been highly criticized, but it was proposed and executed for a reason to begin with.

While inflation may increase if the program is executed, 13% of Americans are suffering from federal student loan debt. That is 45.5 million people (about twice the population of New York) across the country. [5] In its totality, student loan debt in America is at 1.5 trillion dollars (about $4,600 per person in the US). [6] Student loan debt is a hidden epidemic in this nation. If the program is implemented, 5.2 million households could be lifted out of poverty. [7] Research has shown that Black students take out more loans than their white counterparts [8], canceling the debt would help fight racial injustice as well. A further critique on the relief program is that pardoning student loan debt would simply serve as a short-term solution for the more significant issue of inflated college costs. To this critique, I concede. The root of this problem is the exorbitant cost of college in the United States and is the reason the loan debt even exists. But, aiding those who are struggling is never a bad idea. Canceling federal student loan debt has the potential to create 1.5 million new jobs across the country. [9]

The Supreme Court heard oral arguments for the two cases on March 3rd of this year. The Court is expected to deliver a decision by this June. It is notable to mention that on April 13th the Court rejected intervening on a $6 billion student loan debt settlement. [10] There is no telling which way the Court will go when deciding on this issue. It is an unprecedented event in Supreme Court history. For more resources on student loan debt and aid go to https://fafsa.gov.