Student loan debtors nationwide will know by next year whether they can count on the U.S. government to cancel up to $20,000 of their student loan debt.
The Supreme Court of the United States (SCOTUS) granted the petition for writ of certiorari submitted by a coalition of Attorneys General that includes Missouri's Senator-elect, Eric Schmitt.
Schmitt, along with AGs from Nebraska, Arkansas, Iowa, Kansas, and South Carolina allege in their original complaint filed in the U.S. District Court for the Eastern District of Missouri in St. Louis that the debt cancellation program violates the Administrative Procedure Act (APA).
“The obstacle is going to be the question of separation of powers and does the Biden administration have the authority to supersede Congress,” said Israel Klein, an attorney with the Pardalis & Nohavicka law firm in New York. “The Administrative Procedure Act requires a notice and comment period prior to any rulemaking so that other students or other individuals who may be aggrieved by this policy would have the opportunity to oppose it.”
As previously reported in the St. Louis Record, Schmitt and the other Republican Generals believe the program exceeds Secretary of Education Miguel Cardona’s statutory authority and is arbitrary and capricious.
“Certainly, the sentiment is they at least should have the opportunity to comment on the policy before it's approved and they were deprived of that here,” Klein told the St. Louis Record.
SCOTUS justices have vowed to hear arguments in February 2023 and will likely issue a decision at the end of the term in June 2023, according to media reports.
“If the U.S. Supreme Court green lights the debt forgiveness program, the precedent, at least in a limited sense, would be one example of where the president was able to circumvent Congress and forgive a significant amount of debt,” Klein said. “We're talking about billions of dollars in debt here.”
The AGs argue that interest income on more than $400 billion in federal student loan debt will be lost to states nationwide if the perk for debtors is allowed to proceed.
“Money for the state goes into allocations they have like infrastructure or education and so states would have to re-shift their resources accordingly,” Klein said.
Although the cancellation would free up money for students who want to pursue higher education or provide others with the financial freedom to incur more debt than they otherwise might have initially planned to do, the program could also impact the amount of money lenders make available to students in the long run.
“It would make lenders more cautious because even though they're going through the right steps and have the right legal documentation in place, there's some uncertainty that perhaps these loans can be forgiven in the future,” Klein added.