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The Biden administration on Thursday said military personnel should be allowed to pursue class actions accusing Citigroup Inc. and American Express Co. of overcharging them on loans, and not be forced to arbitrate their claims individually, Reuters reported. In "statements of interest" filed with a federal court in North Carolina, the Department of Justice said federal law gives service members an "unwaivable right" to pursue class-action claims even if they had agreed to arbitrate. The Justice Department weighed in on private lawsuits accusing Citibank and American Express National Bank of wrongly charging military personnel more than 6% interest on some loans. Citibank allegedly overcharged four named plaintiffs on credit cards, with Army Sergeant Jeremy Bell seeing his rate increase to 25.99%, while Amex overcharged Army National Guard veteran Nicholas Padao, who served in Iraq. According to the Justice Department, such charges violated the federal Servicemembers Civil Relief Act, whose roots date to the Civil War, and can be challenged in court via class actions. "The law's explicit purpose is to allow servicemembers to devote their entire energy to the defense needs of the nation, (and) must be read with an eye friendly to those who dropped their affairs to answer their country's call," the department said in both filings.

Neither of the two cases argued before the U.S. Supreme Court on Tuesday is guaranteed to settle whether the Biden administration is legally empowered to wipe out hundreds of billions of dollars in federal student loan debt, according to a YahooFinance.com commentary. The court could sidestep the question altogether if the justices decide that the parties challenging the debt relief plan lack standing, or the right to have their grievances heard. However, if the court does tackle the scope of the executive branch’s power, its decision could hinge on whether Biden’s debt relief plan, purported to alleviate financial hardships for more than 40 million American student loan borrowers, is actually tied to COVID-19. That’s because the HEROES Act — a law the administration taps as authority for forgiving student loans — empowers the U.S. Education Secretary to waive or modify laws or regulations concerning federal student loan programs for student loan recipients who “suffer direct economic hardship as a direct result of a war or other military operation or national emergency.” The law further specifies that the Secretary’s authority is meant to ensure that student loan borrowers experiencing an emergency-caused economic hardship “are not placed in a worse position financially” in relation to those loans. According to the administration, the COVID-19 pandemic is just the sort of national emergency contemplated by the HEROES Act because it directly caused economic hardship for certain student loan borrowers. U.S. Solicitor General Elizabeth Pregolar, who argued on behalf of the administration in both cases — Biden v. Nebraska and Department of Education v. Brown — said during Tuesday’s hearings that student loan borrowers in forbearance for long periods, including those who took advantage of COVID-19–related repayment pauses set to expire within months, are more likely to default on payments, particularly those with annual income of less than $125,000. Chief Justice John Roberts, Justice Elena Kagan, and Justice Amy Coney Barrett questioned whether the pandemic is directly responsible for degrading the indebtedness of all student loan borrowers entitled to forgiveness under the relief plan.

Conservative U.S. Supreme Court justices yesterday signaled skepticism over the legality of President Joe Biden's plan to cancel $430 billion in student debt for about 40 million borrowers, Reuters reported. The nine justices heard arguments in appeals by Biden's administration of two lower court rulings blocking the policy that he unveiled last August in legal challenges by six conservative-leaning states and two individual student loan borrowers opposed to the plan's eligibility requirements. Under the plan, the U.S. government would forgive up to $10,000 in federal student debt for Americans making under $125,000 who obtained loans to pay for college and other post-secondary education and $20,000 for recipients of Pell grants to students from lower-income families. U.S. Solicitor General Elizabeth Prelogar, arguing for Biden's administration, sparred with conservative justices including John Roberts, Samuel Alito, Clarence Thomas and Brett Kavanaugh over the policy's legal underpinning and fairness. Roberts, the chief justice, questioned whether the scale of the relief was a mere modification of an existing student loan program, as allowed under the law the administration cited as authorizing it. "We're talking about half a trillion dollars and 43 million Americans. How does that fit under the normal understanding of 'modify'?" Roberts asked. The policy, intended to ease financial burdens on debt-saddled borrowers, faced scrutiny by the court under the so-called major questions doctrine, a muscular judicial approach used by the conservative justices to invalidate major Biden policies deemed lacking clear congressional authorization. Read more.

In related news, tens of millions of borrowers face months of uncertainty as the Supreme Court decides the fate of President Biden’s student loan forgiveness program, the Wall Street Journal reported. During oral arguments on Tuesday, the court’s conservative majority expressed skepticism that the Biden administration had the legal authority to wipe away debt for the majority of the 43 million Americans with federal student loans. The court will likely not deliver its decision in the case until late June, leaving borrowers to wonder whether their loan balances will be slashed by as much as $20,000. No matter what the court does, its decision will mark the end of a roughly three-year pause on federal student loan payments, which was put in place by former President Donald Trump at the start of the COVID-19 pandemic and was extended twice under Mr. Trump and six times under Mr. Biden. Payments are scheduled to resume 60 days after litigation over the loan-forgiveness program is resolved or the program is implemented. Read more. (Subscription required.)

The Supreme Court will hear arguments today over the legality of one of the most ambitious and expensive executive actions in the nation’s history: the Biden administration’s plan to wipe out more than $400 billion in student debt because of the coronavirus pandemic, the New York Times reported. The administration faces a conservative court that has been hostile to other programs justified by the pandemic and insistent that government initiatives with major political and economic consequences be clearly authorized by Congress. The law the administration relies on, the Higher Education Relief Opportunities for Students Act of 2003, usually called the HEROES Act, gives the secretary of education the power to “waive or modify any statutory or regulatory provision” to protect borrowers affected by “a war or other military operation or national emergency.” In March 2020, President Donald J. Trump declared that the coronavirus pandemic was a national emergency, and his administration invoked the HEROES Act to pause student loan repayment requirements and to suspend the accrual of interest. The Biden administration followed suit. As of April, the payment pause has cost the government more than $100 billion, according to the Government Accountability Office. In August, the administration said it planned to switch gears, ending the repayment pause but forgiving $10,000 in debt for individuals earning less than $125,000 per year, or $250,000 per household, and $20,000 for those who received Pell grants for low-income families. The nonpartisan Congressional Budget Office has estimated the plan’s price tag at $400 billion. In separate cases, six Republican-led states — Nebraska, Missouri, Arkansas, Iowa, Kansas and South Carolina — and two individuals sued to stop the new plan.

The Supreme Court tomorrow will hear arguments about President Biden’s plan to eliminate up to $20,000 in federal student loan debt for most borrowers, at an estimated cost of $400 billion, the New York Times reported. Biden’s plan, announced in August, has been blocked by legal challenges, preventing the government from canceling any debt for the 26 million borrowers who have applied for relief. The White House insists its approach — which bypassed Congress and relies on a 2003 law, the HEROES Act, that allows the education secretary to grant relief in times of national emergency — is legally sound. The actions that Biden has directed Education Secretary Miguel Cardona to take “fall comfortably within the plain text of the act,” the administration argued in a legal filing to the court. Challengers, including six Republican-led states, call it an abuse of executive authority that seeks “breathtaking and transformative power” by relying on “a tenuous and pretextual connection to a national emergency,” according to their legal brief. Caught in limbo are millions of borrowers who have swung between hope and despair as Biden’s relief plan was started and then halted. Biden’s plan would cancel $20,000 in debt for those, like her, who received Pell grants, which aid students from low-income families. Biden has cast his debt relief plan as an essential step in restarting a student-loan collection system that has been frozen for nearly three years. The hiatus began as a two-month pause initiated by President Donald J. Trump’s administration when the pandemic was ravaging the economy. Congress and Mr. Trump extended the hiatus three times, and Mr. Biden six more times, most recently in November. The president announced then that borrowers’ bills would resume 60 days after the court challenges to his relief plan were resolved or Sept. 1, whichever came sooner.