Legal scholars and borrowers will undoubtedly take issue with the decision. The court granting standing to Missouri despite MOHELA’s choice not to get involved is questionable. Congress granted the President broad authority over student debt during a national emergency, but the court still decided against the forgiveness.

It’s hard to put a positive spin on a day when the news is terrible, so I won’t try.

Instead, I think it’s worth discussing the many options available for the Biden administration to move forward on student loan forgiveness.

For starters, the Supreme Court’s ruling today opens the door for another attempt at loan cancellation. Additionally, smaller-scale programs in development and recently implemented provide new forgiveness options for borrowers.

Student Loan Forgiveness Under the Higher Education Act

During the 2020 election cycle, candidates Elizabeth Warren and Bernie Sanders claimed that as President, they could cancel federal student debt for all borrowers. Both candidates proposed plans more ambitious than the Biden plan that was just struck down.

Interestingly, these plans relied upon the authority of the Higher Education Act. A team of Harvard attorneys laid out the argument.

If this option were realistic, why didn’t the Biden administration use it? Lawyers make arguments in the alternative all the time. The Solicitor General, Biden’s top attorney at the Supreme Court, could have argued that the HEROES Act and the HEA gave the authority to forgive the debt. The plan would have been upheld as long as the Supreme Court agreed with one of the arguments.

Instead, the HEA authority wasn’t mentioned. That could have been a really smart strategy in light of today’s ruling.

Axing MOHELA and Changing the Standing Argument

There was a noteworthy student loan decision that was released at the same time as Nebraska v. Biden. In Department of Education v. Brown, the court ruled by unanimous decision that borrowers didn’t have standing to challenge the one-time forgiveness program.

Even the conservative justices on the court were careful not to fundamentally change the rules of standing. Altering the standard could open the floodgates to potential lawsuits over government programs.

In Nebraska v. Biden, the court ruled that MOHELA, as an instrumentality of the state of Missouri, had standing and that Missouri could challenge the law on its behalf.

If the Department of Education terminates its contract with MOHELA, the Missouri standing argument disappears. By carefully selecting servicers with no connection to state governments, the Department of Education could create a situation where no party has standing.

In that instance, a judicial review of a new forgiveness policy under the HEA wouldn’t face judgment on the merits. It would get thrown out for lack of standing.

Limitations on the HEA Authority to Forgive Student Loans

On paper, the HEA argument is probably weaker than the HEROES Act argument. That was clearly the opinion of the Biden Administration when they chose to move forward under the authority of the HEROES Act.

Undoubtedly, if the administration wanted another bite at the forgiveness apple, there would be more lawsuits, and it would probably make its way back to the Supreme Court.

This approach would not be a quick fix for borrowers.

However, by severing ties with MOHELA, the Biden administration could change the standing analysis and find a path forward for forgiveness.

Afternoon Update: Biden Announces Plan to Seek Forgiveness Under HEA

That was fast.

Biden has already announced plans to seek forgiveness for all under the HEA.

Sherpa Note: Rulemaking under the HEA takes time, and more litigation is inevitable.

Borrowers still need to prepare for payments to resume on September 1st as planned.

Forgiveness Options in Development

The Biden administration has been developing a new Income-Driven Repayment plan for over a year.

We’ve gotten many details on the final plan, and things look promising.

The Department of Education is proposing three massive changes to the REPAYE plan that would dramatically lower borrowers’ monthly bills. The new plan is called the SAVE plan (Saving on A Valuable Education).

• Changing the discretionary income calculation from 150% of the federal poverty level to 225% – Without jumping into the math, it means borrowers keep a larger percentage of their income before they have to start contributing a portion toward their student loan payments.
• Lowering the monthly payment to as low as 5% of discretionary income – Currently, borrowers pay at least 10%. This tweak cuts payments substantially.
• Improving the REPAYE subsidy – At present, the REPAYE subsidy covers up to half of the interest that accrues each month on a borrower’s federal loans. The SAVE plan would cover as much as 100% of the borrower’s interest.

The new repayment plan would also forgive debt sooner for borrowers with smaller balances.

Digging Deeper: Based on the publicly released details, I’ve created a simple calculator to help borrowers estimate their monthly payments on the New SAVE plan.

Complete Loan Forgiveness Currently Available

Last winter, the Department of Justice released new guidelines that dramatically altered how the government handled federal student loans in bankruptcy proceedings.

Before the changes, bankruptcy petitioners with student loans had their debt discharged approximately .1% of the time.

I’m told that under the new policy, the Department of Education expects to stipulate to a student loan discharge approximately 80% of the time. If the numbers come out as planned, it would turn the tide on the cruel history of student loans in bankruptcy.

This change won’t help all borrowers who would have benefited from the one-time cancellation. However, for the borrowers struggling financially, it’s an opportunity to erase all their federal debt.

If your monthly bills match or exceed your monthly income, it could be an excellent time to find an attorney to help with your student loans.

Loan Cancellation and Management Moving Forward

Nebraska v. Biden was a heartbreaker for borrowers.

If nothing else, it means a simple, comprehensive fix to the federal student loan system isn’t happening anytime soon.

In the immediate future, we can expect smaller, less ambitious programs aimed at fixing specific student loan issues.

For borrowers, this means a more complicated system to navigate. It also means staying on top of the latest news and developments will be critical.

To help with that endeavor, I’ve created a mailing list that will go out at most once per month to update borrowers on any noteworthy student loan changes or programs.

The post The Future of One-Time Forgiveness: The Path Forward for Student Loan Cancellation appeared first on The Student Loan Sherpa.

In all likelihood, the case will be either a complete win for borrowers or a total loss. There isn’t much of a chance that the Supreme Court will approve some but not all loan cancellations.

While it might be fun for the political types to discuss what comes next, the question is essential for student loan borrowers. Changes expected in the next year, or even the next five years, are critical in determining how we manage our debt today.

The Future of Student Loan Forgiveness if Biden Loses in Court

The obvious result of a loss in the Supreme Court is that borrowers won’t benefit from the $10,000 or $20,000 of forgiveness.

The long-term outlook on student loan cancellation or forgiveness-for-all also looks bleak in the event of a loss at the Supreme Court.

Many borrowers have been excited by the possibility of total federal student loan cancellation or larger amounts of forgiveness. Elizabeth Warren, Chuck Schumer, and other Democrats have called for a plan to forgive $50,000 per borrower. Bernie Sanders wanted to cancel all student debt for all borrowers. Both plans depended upon the President’s ability to cancel debt through an executive order.

If Biden loses in the Supreme Court, it will mean that the President doesn’t have the authority to cancel student debt for all borrowers. Thus, even in a Sanders or Warren presidency, forgiveness for all wouldn’t be an option.

Could Congress Pass Student Loan Cancellation Legislation?

Biden’s original plan for $10,000 of forgiveness was to have Congress pass a bill authorizing it. This route would have avoided the Supreme Court challenge.

Unfortunately for borrowers, debt cancellation didn’t receive a warm welcome in the halls of Congress. Republicans were uniformly opposed, and Democratic support was mixed.

If forgiveness were to pass in the foreseeable future, it would likely require a filibuster-proof Democratic majority in the Senate — and the odds of that happening look slim.

Targeted Relief for Federal Borrowers

Even though a loss at the Supreme Court would be a considerable setback for borrowers, hope would remain.

The first couple years of the Biden Administration are a good blueprint for how life for borrowers could improve in the coming years.

Forgiving up to $20,000 per borrower ate up most of the headlines, but other changes to student loan policy made a huge difference for many borrowers.

These changes included temporarily expanding the Public Service Loan Forgiveness Program to help borrowers who would have otherwise missed out on the program. Additionally, the administration made it easier for borrowers to get their loans discharged under the borrower defense to repayment, disability discharge, and closed school forgiveness programs.

Most recently, the administration dramatically altered the Department of Justice policy for federal borrowers seeking bankruptcy relief. In the past, bankruptcy was a long shot for federal borrowers. Under the new rules, the path to bankruptcy should be significantly more accessible and affordable.

Individually, these programs only impacted a small portion of borrowers. Collectively, they show a clear pattern of targeted relief that could continue.

Backdoor Forgiveness Options

Even if the Supreme Court rules that the President can’t forgive some debt for all borrowers, the President may be able to forgive all debt for some borrowers.

This could play out by expanding the Income-Driven Repayment Plans. Biden has already announced a new IDR plan that would lower monthly payments and provide a quicker path to forgiveness for borrowers with smaller balances.

Further expansion to IDR and tweaking the rules to allow more borrowers to qualify for forgiveness sooner could be the best-case scenario for borrowers.

Sherpa Thought: The targeted relief and expanded IDR routes both appear to be chasing the same goal: helping the borrowers who are struggling the most.

If a borrower has paid a portion of their income towards their student debt for many years, there is an inherent fairness in forgiving the remaining debt.

Fixing the Big Problem

We can’t discuss the future of student loan forgiveness without addressing the big problem.

College is too expensive. The price of college continues to rise at a rate far greater than inflation.

The student loan crisis is a byproduct of high college prices. If the cost of college gets addressed by Congress, fixing the student loan crisis becomes more manageable.

A one-time permanent student loan fix is far more palatable than a temporary band-aid for an ongoing issue.

The post What’s Next for Student Loan Borrowers if the Supreme Court Cancels Forgiveness? appeared first on The Student Loan Sherpa.