U.S. defends Biden's student debt relief plan in Supreme Court brief

© Reuters. FILE PHOTO: A view of the U.S. Supreme Court building on the first day of the court's new term in Washington, U.S. October 3, 2022. REUTERS/Jonathan Ernst/File Photo

By Andrea Shalal and Kanishka Singh

WASHINGTON (Reuters) - The U.S. Justice Department late on Wednesday filed a brief with the Supreme Court defending President Joe Biden's plan to cancel billions of dollars in federal student loans, arguing that two cases lacked standing to challenge the debt relief.

Biden in August said the U.S. government would forgive up to $10,000 in student loan debt for borrowers making less than $125,000 a year, or $250,000 for married couples. Students who received Pell Grants to benefit lower-income college students would have up to $20,000 of their debt canceled under the plan.

Biden's centerpiece plan, which makes good his 2020 campaign pledge to help debt-strapped younger Americans, has been put on ice by two legal challenges - one from six mostly Republican-led states who say the Biden administration overstepped its authority, and a separate Texas-based case that argues the public should have been allowed to comment.

The Biden administration estimates that up to 40 million people are eligible for the relief, giving them resources to buy a car or a home or start a family. Republicans insist the plan, estimated to cost about $400 billion, will fuel inflation, which hit 9% last summer but has eased somewhat since then.

Biden in November said he was confident the plan is legal, and extended COVID-era temporary relief for borrowers until August, providing time for the court cases to be resolved.

In its brief, the Justice Department said Education Secretary Miguel Cardona had clear authority to provide debt relief to student borrowers under the Higher Education Relief Opportunities (HEROES) Act of 2003, and noted it had also been used by the former Trump administration, according to sources familiar with the filing.

The HEROES Act gave the secretary of education the authority to make changes to any provision of applicable student aid program laws after the Sept. 11, 2001, hijacking attacks to alleviate hardships caused by national emergencies.

"We believe the legal arguments are very strong and they should prevail before the court," said one of the sources, who was not authorized to speak publicly. Cardona had based his decision on data forecasting much higher rates of defaults on the loans as a result of the pandemic, as well as the "acute inflationary pressures" now facing households, the sources said.

The brief also rejected Missouri's ability to challenge the ruling on behalf of the Missouri Higher Education Loan Authority (MOHELA), since it is entirely separate from the state and any harm to it would not damage the state.

One of the sources said MOHELA itself had publicly distanced itself from the state’s lawsuit and expressed its independence from the state.

The Justice Department also rejected the standing of two borrowers in a separate Texas lawsuit, who argued that they could challenge the plan because the Education Department had not allowed public comment before finalizing the plan. In fact, the Justice Department said, the HEROES Act expressly exempted the department from notice and comment procedures.

The Supreme Court, which has a 6-3 conservative majority, has fast-tracked both cases for oral arguments in late February or early March, with a ruling due by the end of June.

Over 16 million borrowers have already been approved for debt relief and millions more have applied. Nearly 90% of the benefits will go to out-of-school borrowers making less than $75,000 a year, according to the White House.