The U.S. Supreme Court is set to weigh in on a student loan debt forgiveness policy that allowed the Biden administration to forgive $17 billion, according to Politico.
Since taking office, President Joe Biden and his administration have made significant efforts toward student loan forgiveness. The Department of Education (DOE) approved approximately $180 billion in student loan debt forgiveness, impacting nearly 5 million Americans. Millions more benefited from lower monthly payments through Biden's income-driven repayment programs. However, these efforts have faced legal challenges, with the Supreme Court previously striking down broader forgiveness initiatives.
Now, the Court will consider a controversial Biden administration rule intended to simplify the process for student loan borrowers defrauded by their colleges to seek loan forgiveness. As of April 2024, the Biden administration had canceled over $17 billion in loans for borrowers defrauded by their institutions using the borrower defense to repayment rule. This rule, originally introduced in 1994, was updated in 2016, 2019, and most recently in 2022 under Biden’s leadership. The latest revision aimed to clarify criteria for filing claims and officially took effect in 2023.
The Supreme Court’s review follows a lower court decision that blocked the rule. In 2023, the Biden administration’s efforts encountered a major legal hurdle when Career Colleges and Schools of Texas (CCST) filed a lawsuit challenging the updated rule. CCST argued that the revised rule made it too easy for students to claim relief, potentially harming for-profit institutions.
Later that year, the 5th U.S. Circuit Court of Appeals sided with CCST, halting the rule’s implementation nationwide. The court’s decision restricted the DOE’s ability to grant relief, stating that forgiveness could only be awarded if a borrower had defaulted on their loan and the government had initiated legal action to collect on it.
The case has ignited a heated debate over federal authority in addressing student debt and could have lasting implications for borrowers and higher education institutions. The Supreme Court will decide whether the lower court erred in ruling that the Higher Education Act of 1965 does not allow borrowers to file for borrower defense before default.
This decision comes as President-elect Donald Trump prepares to take office on January 20, raising questions about the future of student loan policies. Historically, Trump has opposed widespread student loan forgiveness, favoring policies that emphasize personal financial responsibility. During his first term, the Trump administration sought to increase monthly payments from 10% to 12.5% of borrowers’ discretionary income and proposed consolidating all income-driven repayment plans into one simplified option. Similar policies may resurface during his second term.
Jason Altmire, president and CEO of Career Education Colleges and Universities, commented, “The Court’s decision does not validate the Biden administration’s arguments. It simply means that the Supreme Court will hear arguments about the Department of Education’s authority related to [the borrower defense rule].” Altmire added that he believes the facts will show the rule exceeded the agency’s authority.
Eileen Connor, president of the Project on Predatory Student Lending, expressed a contrasting view: “The administration wanted the Supreme Court to review the case because it’s fundamentally wrong and strips away a critical protection for students that Congress authorized. This is an opportunity to correct the 5th Circuit’s decision.”
Kevin Thompson, founder and CEO of 9i Capital Group, told Newsweek, “Borrowers shouldn’t expect much relief under Trump. He has never supported widespread debt forgiveness. His history suggests he views personal responsibility as central to financial obligations.”
What Happens Next
While Trump’s exact approach to student loan policy remains uncertain, the Supreme Court’s decision to review the borrower defense rule could jeopardize the Biden administration’s loan forgiveness efforts. A ruling against the rule would mark a significant setback for one of Biden’s key policy initiatives on student debt, potentially affecting millions of borrowers and the broader landscape of higher education financing.
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