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Will student loan forgiveness pass the Supreme Court? Here's what we know so far

People rally in support of the Biden administration's student debt relief plan in front of the the U.S. Supreme Court on February 28, 2023 in Washington, DC.
Drew Angerer | Getty Images

This week, the Supreme Court heard oral arguments from both supporters and opponents of President Joe Biden's student debt forgiveness plan. 

Addressing two separate lawsuits, the nine justices questioned representatives from each side, aiming to determine whether the plaintiffs had the standing to sue and whether President Biden has the authority to grant relief in this way.

Student loan borrowers have the most immediately at stake, but the high court's ruling and rationale could have bigger implications for the government. 

It's unlikely we'll know how the justices will rule until June, but spectators on both sides of the issue found reasons to celebrate after Tuesday's arguments. Here's what to know.

Do the plaintiffs have standing?

Standing, or evidence that people will be harmed by an action, took center stage on Tuesday as the justices sought information as to why the plaintiffs don't want Biden's debt forgiveness to move forward

The justices could come to the conclusion that the parties do not have standing and dismiss the cases. But if they do find standing for at least one of the plaintiffs, the justices would then examine whether the Secretary of Education has the authority to forgive student debt in this manner.

Since the plaintiffs of each suit are so different — a group of states in one suit and a pair of borrowers in the other — they naturally have different arguments for standing.

Biden v. Nebraska

During questioning about the first case, the justices spent a significant amount of time trying to parse the relationship between Missouri and MOHELA, an acronym for Missouri Higher Education Loan Authority, which is one of servicers for federal student loans.

The suit, brought by six states including Missouri, argues that Biden's forgiveness would cut MOHELA's revenue and as a result, hurt the state of Missouri's bottom line.

"It's hard to imagine how the state of Missouri can claim an injury…when it's not responsible for the debts of MOHELA, it's not responsible for the contracts it enters into," Justice Sonia Sotomayor said. "How can you have injury if you, the state, have immunized yourself from any liability or any injury that MOHELA can experience?"

Nebraska solicitor general, James Campbell, who represented the state plaintiffs, responded that "the state speaks for MOHELA."

Department of Education v. Brown

In the other case, two plaintiffs who are not eligible for some or all of Biden's debt forgiveness argue that they should have been able to comment on the proposed plan before it was enacted, as would have been the case if debt forgiveness went through Congress. 

"Instead of figuring out, 'among this universe of student loan borrowers, who's going to get what, how much,' instead of doing that on the public record, they did it in secret first," J. Michael Connolly argued on behalf of the plaintiffs.

Chief Justice John Roberts suggested on that reasoning, there's nothing to stop anyone from suing the government when it creates benefits that don't apply to everyone.

"We certainly don't allow everybody to come in and say, 'just because I would have a right to comment, if this law were struck down, I therefore have a right to bring a suit,'" Roberts said.

Does the administration have the authority to forgive student debt?

Though the court didn't yet assert that either plaintiff has standing, it took the opportunity to explore questions around the Biden administration's legal authority to cancel student debt under the Heroes Act.

The Biden Administration has maintained from the start that the Heroes Act of 2003 — which says the Secretary of Education "may 'waive or modify any statutory or regulatory provision applicable to' federal student loan programs" in the event of a national emergency — gives it authority to grant student debt forgiveness in response to the Covid-19 pandemic.

The justices raised a number of questions, including whether the end of the national emergency — slated for May — matters, whether "waive" or "modify" can mean cancel a debt and whether the Heroes Act ever intended to go this far.

Regardless of which, if either, case the court may find to have standing, the price tag associated with the massive loan forgiveness move also piqued the justices' skepticism. Justice Roberts highlighted the "half a trillion-dollar" cost on several occasions. 

"We like to usually leave situations of that sort — when you're talking about spending the government's money, which is the taxpayers' money — to the people in charge of the money, which is Congress," Roberts said.

Critics of the debt forgiveness program have also highlighted the cost and questioned the precedent the court would be setting by making a decision on whether the government should pay for it.

"If the Secretary of Education can spend half a trillion dollars, then we've lost the power of the purse from Congress," Mark Chenoweth, president of the New Civil Liberties Alliance (NCLA), said in a webinar discussing the arguments. NCLA supported the challengers to Biden's debt forgiveness plan.

"We can't have a functioning government where the executive branch self-funds," Chenoweth said.

Should the Supreme Court intervene?

One factor everyone seems to agree on, however, is precedent. As with many Supreme Court cases, either outcome in this ruling could have far-reaching impacts in determining what the branches of government can do and how private citizens or companies can respond.

"I think most casual observers would say, if you're going to give up that much amount of money...on a subject that's of great controversy, they would think that's something for Congress to act on," Roberts said.

"And if they haven't acted on it, then maybe that's a good lesson to say for the President or the administrative bureaucracy that maybe that's not something they should undertake on their own."

Justice Ketanji Brown Jackson reiterated the point of political significance, adding, "If we look at our standing doctrine in cases like this and we find that even the most minor state interest…can be the basis for standing, I guess I'm concerned that we're going to have a problem in terms of the federal government's ability to operate."

Court-watchers similarly highlighted the question of the Supreme Court's authority. 

"As Justice Jackson highlighted, the fact that the plan has been the subject of such intense political debate should make the court more cautious, not less, about overstepping the separation of powers to enter into the political fray to impose its own views," Abby Shafroth, senior attorney and director of the Student Loan Borrower Assistance Project at the National Consumer Law Center, told CNBC Make it. Her organization has supported debt forgiveness.

 "It could further weaken the court's legitimacy, which is already under threat," Shafroth says.

Will student loan forgiveness pass?

The half-trillion dollar question: How will the court rule?

Unfortunately, we probably won't know until June. Oral arguments don't end with the justices giving an update on how they're thinking about voting, at least not publicly. That means all we have for now is speculation. Legal experts can comb through the arguments, evidence and relevant past decisions and still not know what's going to happen.

"Today was a good day for people with student debt," Persis Yu, executive director of the Student Borrower Protection Center, which supports forgiveness, told CNBC Make It on Tuesday. "When pressed, opponents of debt relief could not offer a credible story about why they have standing to block debt relief for 40 million people."

Opponents of debt forgiveness feel just as confident in their argument. 

"Jobs Creator Network Foundation (JCNF) is very happy with how the Supreme Court oral arguments went in our challenge to Biden's unlawful student loan bailout," JCNF president Elaine Parker told CNBC Make It in a statement. JCNF is the organization that filed suit on behalf of Brown and the other plaintiff in that case.

"The court seemed receptive to our arguments on standing and the merits," Parker says.

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