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Supreme Court to Hear Case on Student Loan Forgiveness

By Susan Frederick  |  December 2, 2022

The Supreme Court has granted review of the president’s plan to provide up to $20,000 in one-time student loan forgiveness.

The U.S. Court of Appeals for the 8th Circuit issued a nationwide injunction halting the program. The Supreme Court will not lift the injunction until it rules on the issue. In a separate proceeding on Nov. 30, the Court of Appeals for the 5th Circuit denied to revive the program pending appeal. In a brief order, the court set oral argument for February 2023.

In its motion to vacate the 8th Circuit’s injunction, the federal government argues that it will likely prevail on the merits of the case because respondent states have not shown the loan forgiveness program would cause actual financial harm by diminishing their tax revenues. The government further argues that just because the states chose to incorporate the federal Internal Revenue Code definition of “gross income” into their own state laws, their alleged harm “results from their own choice to tie their tax laws to the Code,” and they are free to depart from the federal gross income definition.

If the states don’t choose to do that, “any resulting reduction in their tax revenues is traceable to that choice, not the plan.”

Finally, the government argues that the states lack standing to challenge the loan forgiveness plan because incidental effects of federal policy on state tax revenues are not judicially cognizable injuries under prior caselaw, (Florida v. Mellon, 273 U.S. 12 (1927), and the 8th Circuit’s finding of “substantial questions of law” without elaboration is not grounds for a nationwide injunction.

The respondent states argue that they have standing due to the “special solicitude” doctrine of Article III of the Constitution established in the case of Massachusetts v. EPA, 549 U.S. 497, 520 (2007). The special solicitude doctrine accords states special favor when determining standing.

The states refute the tax revenue argument positing that “forcing States to upend their preferred system for calculating state taxable income is itself an injury, and the possibility that a plaintiff could avoid [one] injury by incurring [another] does not negate standing.”

The states also argue that the president declared the COVID-19 pandemic over, but the Secretary of Education invoked the Higher Education Relief Opportunities for Students Act (HEROES Act) which doesn’t permit this loan forgiveness program because it is not connected to a real national emergency.

They state that the Department of Education “can point to no emergency or imminent harm because … the agency extended the payment pause on student loans until the summer of 2023,” and that President Biden is simply seeking to make good on a campaign promise to forgive a portion of student loan debt through the loan forgiveness plan.

Susan Frederick is senior federal affairs counsel in NCSL's State-Federal Relations Program.

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