Minnesota graduates in limbo as they await U.S. Supreme Court ruling on student loan forgiveness

Matt Bourque has been juggling multiple jobs trying to cover $28,000 in student loans, but he's holding out hope they will be forgiven.

When the Biden administration presented a plan last year to cancel some student loan debt for millions of borrowers, Bourque began to imagine a future where he could soon buy a home or put money in a retirement account.

But now he finds himself among the hundreds of thousands of Minnesotans who are waiting to hear if their debt will actually be wiped out or if the U.S. Supreme Court will toss out the program. The justices will hear arguments Tuesday, though it could still be weeks or months before they issue a ruling.

"The limbo has been pretty stressful," said Bourque, 25, of Minneapolis, who has worked as a bartender, barista, teacher and childcare worker. "...Those future plans, they're just kind of put on hold until I can get those loans paid off."

The case is being watched by current students, graduates and lawmakers at the state and federal levels. The student debt crisis has them debating how to best provide relief for people already saddled with thousands of dollars in debt and how to lower costs in the future.

"We can also prevent future students from falling into that trap as well," said Minnesota Sen. Omar Fateh, DFL-Minneapolis, who chairs the Higher Education Committee and is pushing a bill aimed at providing free tuition at public colleges.

About 43 million Americans have federal student loans that combined total about $1.6 trillion, according to an analysis produced by the Congressional Budget Office last year.

Court challenge to pandemic promise

President Joe Biden, a Democrat, unveiled the plan last summer to forgive up to $20,000 in federal student loan debt for borrowers making less than $125,000 per year. As of last month, more than a half million Minnesota borrowers had applied for loan forgiveness or been deemed automatically eligible for it, according to data released by the White House.

But opponents almost immediately challenged it in court.

To create the program, the Biden administration relied on the Higher Education Relief Opportunities for Students (HEROES) Act, a law passed in 2003 as part of an effort to provide financial relief to soldiers deploying after the Sept. 11, 2001, terrorist attacks. The law allows the U.S. Secretary of Education to waive regulations on student financial assistance programs "in connection with a war or other military operation or national emergency."

The White House said the new program would "provide more breathing room to America's working families as they continue to recover from the strains associated with the COVID-19 pandemic."

Two Texas borrowers who didn't qualify for the full amount of loan forgiveness filed a lawsuit arguing officials had inappropriately bypassed normal rulemaking procedures, denying them a chance to advocate for a program that could have provided more relief.

Republican attorneys general in six states — Missouri, Nebraska, Arkansas, Iowa, Kansas and South Carolina — also sued, arguing that the Biden administration had overstepped the bounds of the HEROES Act.

"The Act requires a real connection to a national emergency," the group wrote in a document filed with the U.S. Supreme Court. "But the Department's reliance on the COVID-19 pandemic is a pretext to mask the President's true goal of fulfilling his campaign promise to erase student-loan debt."

Federal officials defended the program. They said the COVID-19 pandemic had caused layoffs, inflation and other "severe economic harms," leading to lower projected lifetime earnings for students who left school amid the emergency. The Secretary of Education found that when the pandemic-related pause on student loan payments ends, "lower-income borrowers will be at heightened risk of delinquency and default because of the continuing economic consequences of the COVID-19 pandemic," according to court filings.

People who default on student loans lose access to some federal benefits. Their wages could be garnished and their tax refunds deducted. Often, their credit is damaged as well. That can make it more difficult to obtain jobs and housing. The effects can be multi-generational.

Kristin Dosan, of Eveleth, and her husband have been taking on extra work on top of their full-time jobs as they try to help their oldest son with his loans. When he applied for financial aid, their family fell in "no man's land" — making too much money to qualify for some aid but not enough to easily cover the costs of college. They co-signed more than $100,000 in student loans for his undergraduate degree.

"We've drained our resources trying to help our son make these payments, and we just can't do it," Dosan said.

She frequently hears from lenders. Her son might be able to earn a higher salary or pause his payments if he went to graduate school.

"But that's just kind of a Catch-22, because then we're just adding to our debt," she said.

A fix for the future?

As some students and graduates are anxiously awaiting the court ruling, others are trying to push state and federal lawmakers to go further.

"While debt relief is important to me as well, I don't believe that it alone addresses the structural problems that we're having and why this is happening," said Fateh, the state senator.

He introduced a bill that would provide free tuition for students attending Minnesota's public colleges and universities, if they meet income requirements. Other proposals would limit tuition increases or provide aid to people preparing for careers in fields with worker shortages. Some advocates are calling on federal lawmakers to forgive as much as $50,000 in student debt.

Bourque, meanwhile, is putting the money that would normally go toward his student loans into a separate account — and telling himself not to touch it.

The pause on student loan payments during the pandemic gave him a glimpse of a life where "it wouldn't be the end of the world" if his car broke down or he needed to see a doctor.

If the student loan forgiveness program holds up in court, Bourque estimates he'll have about $6,000 left to pay — and notes he's "totally OK doing that."

"This loan forgiveness could be such a huge boost to building wealth in our generation," Bourque said. "These are people that are well-educated but have been saddled with this large amount of debt, and if they were freed from that debt, there is so much we could do."