The fate of President Joe Biden’s controversial student loan forgiveness plan is up in the air after Supreme Court justices questioned whether his administration has the authority to broadly cancel federal student loans.
But in hearing two cases challenging the plan, the Republican-appointed majority on the Supreme Court seemed likely to block it.
Already, about 26 million people have applied for debt forgiveness, and 16 million applications have been approved. However, because of court rulings, all the government payments are on hold. The Education Department stopped taking applications in November because of legal challenges to the plan.
The Supreme Court will have the ultimate say on whether Biden can pay off student loan debt.
Here’s what to know:
WHEN WILL THE SUPREME COURT DECIDE THE STUDENT LOANS CASES?
The Supreme Court heard arguments Tuesday, but there won’t be a decision for months. The court usually issues all of its decisions by the end of June.
The plan Biden announced last August would cancel $10,000 in federal student loan debt for those earning less than $125,000 or households with less than $250,000 in income. Pell Grant recipients, who typically come from lower-income households, would receive an additional $10,000 in debt forgiveness, for a total of $20,000.
Federal student loans for both undergraduate and graduate school, including Graduate PLUS loans, can qualify for forgiveness under the plan.
Borrowers would qualify if their federal student loans were disbursed before July 1.
Under the plan, if you paid off your loans during the pandemic, you can request a refund and then apply for forgiveness.
HOW IS THE SUPREME COURT EXPECTED TO RULE ON STUDENT LOANS?
The Supreme Court is dominated 6-3 by Republican appointees, and those justices’ questions in oral arguments Tuesday showed skepticism about the legality of Biden’s student loans plan.
The court seemed likely to rule in a way that would doom the controversial and expensive plan.
Several conservative justices suggested the administration had far exceeded its authority with the program. Chief Justice John Roberts mentioned the program’s cost — an estimated $400 billion— and its wide impact on millions of Americans. Most observers, he said, would think “that’s something for Congress to act on.”
Conservative Justice Brett Kavanaugh pointed out Congress had declined to pass student loan relief, so Biden did it himself. That, he said, “seems problematic.”
The only hope for Biden’s plan appeared to be a legal technicality. The oral arguments left a slim possibility that the court finds the states and people challenging Biden’s plan lacked the legal right to sue.
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It won’t be known for sure how the court is going to rule until the decision is announced.
WHO WOULD PAY FOR BIDEN’S STUDENT LOAN FORGIVENESS?
Ultimately, the cost would become part of the equation used to figure the federal deficit. Biden’s plan for student debt cancellation would cost taxpayers about $400 billion, according to the latest estimates from the Congressional Budget Office.
The office cautioned that its estimates are “highly uncertain” because it’s hard to know exactly how much borrowers would have paid in the future without Biden’s action.
Biden has said those costs would be offset by other measures to reduce the federal deficit. He has pointed to a bill signed into law in August that’s estimated to raise around $740 billion over a decade, from a combination of government savings from lower drug prices, higher taxes on large corporations, levies on companies that repurchase their own stock and stronger IRS tax collections.
WILL THE PAUSE IN STUDENT LOAN PAYMENTS CONTINUE?
During the pandemic, two presidential administrations paused payments for those holding federal student loans. The pause has been extended to as late as this summer.
Payments are set to resume, along with the accrual of interest, 60 days after the court cases are resolved. For example, if legal issues remain at the end of June, payments would restart at the end of August. If the court issues a ruling in March, repayment could restart as early as May or June.
If the cases haven’t been resolved by June 30, payments will start 60 days after that.
IS IT POSSIBLE BIDEN’S STUDENT LOAN FORGIVENESS WON’T HAPPEN AT ALL?
Yes. Biden’s student loan payoff plan might not happen, period.
“We’re focused on ‘Plan A’ because we’re confident in our legal authority to carry out this program,” White House spokeswoman Olivia Dalton told reporters aboard Air Force One on Tuesday.
The administration has not given insight into a Plan B if it loses the Supreme Court cases.
The Associated Press contributed to this article.