The Supreme Court hears oral arguments this week against and for President Joe Biden's student debt forgiveness plan.
Borrowers have been anxiously awaiting action on their debt since the administration said it would forgive up to $10,000 per borrower (up to $20,000 for Pell Grant recipients) last August. Many were encouraged by how quickly the application for forgiveness rolled out, with 26 million borrowers applying during the few weeks the website was live.
But two separate lawsuits cut that optimism for the time being as federal judges in Texas and St. Louis ruled the debt relief could not move forward. The Biden administration has appealed both rulings, maintaining the president is within his authority to cancel federal student debt.
That brings us to the Supreme Court this week. Now, the justices will decide whether borrowers will see any relief. Here's what we know so far.
When will we know the court's decision?
Unfortunately for borrowers trying to plan ahead, the Supreme Court likely won't announce its decision until the end of its current term, typically at the end of June or early July.
Student loan payments, which have been paused due to the pandemic for nearly three years, will also resume 60 days after the court issues its ruling. If the court hasn't decided by June 30, payments will resume 60 days after that.
How is the court expected to rule?
It depends who you ask. Legal experts have told CNBC that the court's recent politicization could lead the conservative-majority court to strike down Biden's plan more or less because of the plan's liberal favorability.
However, a Republican-nominated federal judge in St. Louis originally dismissed one of the lawsuits, known as Biden v. Nebraska. This suit, brought by six states — Arkansas, Iowa, Kansas, Missouri, Nebraska and South Carolina — argues that the president does not have the power to cancel debts and their state revenues would be hurt as a result of the forgiveness plan.
The suit was originally tossed out in October when the judge found the states lacked "standing," or evidence of harm. But the 8th Circuit Court of Appeals — also majority Republican-appointed — disagreed and blocked debt forgiveness from moving forward.
All to say, it wouldn't surprise many to see the conservative-leaning Supreme Court rule against a Democratic president, but it's not out of the realm of possibility for it to pass either.
"It's interesting that we've seen other courts, which are not seen as liberal courts, side with the president," Persis Yu, deputy executive director at Student Borrower Protection Center, told CNBC Make It in November. "I think it's through a very extraordinary reading of standing law and the authority of the courts that they came to this decision."
Who is eligible for student loan forgiveness?
Federal student loan borrowers who earn less than $125,000 per year or couples filing jointly and heads of household earning up to $250,000 qualify for up to $10,000 of debt forgiveness.
Pell Grant recipients are eligible for an additional $10,000 of relief.
Who will benefit the most from student debt forgiveness?
An estimated 43 million borrowers are eligible for debt relief with 20 million poised to see their total balances forgiven, according to a White House fact sheet. The Biden administration also estimates 90% of the relief aid will go to people earning less than $75,000 a year.
While economists and researchers can't conclusively say which income group will benefit most from debt forgiveness, most agree it's not going to be the wealthiest households.
What happens if the Supreme Court stops debt forgiveness?
The Biden administration has not indicated a back-up plan for mass student debt cancellation if the Supreme Court doesn't allow this move to go forward.
The administration has taken other steps to help borrowers and fix what it sees as a broken system through updates to income-driven repayment and easier paths to forgiveness for public service workers. It has also offered relief to defrauded borrowers.
The payment pause was also extended to accommodate the legal proceedings on debt forgiveness, but as of now it's not contingent on a certain outcome. As it stands, payments are set to resume whether debt is forgiven or not.
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