Can the Biden administration cancel student debt pursuant to the Congressional HEROES Act?
That’s the question the Supreme Court considered at an oral argument on Tuesday, February 28, in two cases challenging the legality of the President’s plan to forgive over $400 billion worth of student loans.
The first case, Biden v. Nebraska, was brought by six state attorneys general, with Missouri claiming the plan disrupted and harmed its loan-servicing agency and the other states claiming lost tax revenues. The second case, Department of Education v. Brown, was brought by graduates who claimed the plan harmed them because the forgiveness excluded their debts.
The Biden administration announced in August 2022 its intention to forgive $10,000 of student debt for borrowers whose individual incomes were less than $125,000 annually and for those whose household incomes were less than $250,000 annually. Additionally, recipients of Pell grants, financial aid for low-income students, were to receive an additional $10,000 in debt cancellation.
The Biden administration claims authority to do this under the Congressional HEROES Act, a federal law passed after 9/11 allowing the Education Secretary to waive or modify student loan payments during national emergencies. The administration cites the coronavirus pandemic as the national emergency.
The cases present distinct legal and policy issues: The legal issue is whether the executive branch has the authority to make such large changes under federal law; the policy issue is whether student loan forgiveness is a sound way to handle the problems of higher education finance—specifically, ever-escalating tuition and, correspondingly, ever-growing amounts of debt for college graduates.
The National Association of Scholars (NAS) opposes the Biden administration’s debt forgiveness plan on both legal and policy grounds. The NAS sees such action as unlawful executive overreach.
The NAS also opposes student loan forgiveness as a matter of policy. Debt cancellation is a band-aid measure that treats the symptoms of higher ed’s financial disease rather than the underlying cause—the easy money of federal student loans which fuels tuition hikes, and then increased debt, in a destructive upward spiral. Blanket forgiveness is therefore bad policy; any relief must be tied to real, profound, and permanent reform.
The American taxpayer should neither bail out nor continue to subsidize this sick system, enriching the higher education industrial complex while everyone else takes a hit.
About the Lawsuits
Biden v. Nebraska: Six Republican state attorneys general say that the Biden loan forgiveness plan is unconstitutional executive action, violating the separation of powers and constituting administrative overreach into a “major question” of policy that only Congress can address.
Department of Education v. Brown: Two student loan borrowers claim Biden’s loan forgiveness plan is too narrow and unlawfully excludes them. One borrower wouldn’t qualify for forgiveness because her loans were held by commercial lenders; the other wouldn’t receive the maximum $20,000 of forgiveness. Both borrowers claim they would not have been harmed in this way if the administration had gone through the proper procedures allowing for more public input.
What needs to happen to strike down loan forgiveness?
As a threshold matter, the claimants must show they have legal standing. This means they must prove that they were directly and concretely harmed by the administration’s actions and that those harms can be remedied by the courts. Much of the oral arguments focused on this issue.
Second, the claimants must show that the administration’s actions are unlawful under the Constitution or other federal law.
NOTE: If the claimants fail to show standing, the Supreme Court need not address the underlying issue of lawfulness.
What did the Supreme Court justices think?
In both cases, the three liberal justices appeared skeptical that any of the cases had legal standing. There appears to be more variation of thought among the conservative justices.
In Biden v. Nebraska, plaintiff state Missouri argued that revenue loss for its student loan servicer, the Missouri Higher Education Loan Authority (MOHELA) was proof of injury to prove standing. The justices mulled over whether MOHELA even counts as a public entity, which determines whether the state of Missouri can sue on its behalf. Justice Barrett questioned if MOHELA was “really an arm of the state,” for example.
Justice Alito, meanwhile, wasn’t convinced that a formal distinction between a state and a private entity mattered if MOHELA would still incur injury under the Biden plan.
In Department of Education v. Brown, Justice Barrett, again, appeared skeptical of whether the plaintiffs had the right to sue.
On the underlying legal question of whether the plan is lawful, Justices Alito, Thomas, and Roberts all appeared concerned that the Biden administration misapplied the HEROES Act and that loan forgiveness is an instance of executive overreach because the policy would have significant economic results. Justice Kavanaugh, on the other hand, appeared more sympathetic to the application of the HEROES Act, stating that the term “waive” could widely encompass student loan cancellations. Many of the justices also considered the fairness of debt cancellation. As Justice Roberts said:
“We know statistically that the person with the college degree is going to do significantly financially better over the course of life than the person without, and then along comes the government and tells that person, you don’t have to pay your loan.”
What happens next?
We should hear a decision on the two cases by June.
Biden v. Nebraska
Dept. of Education v. Brown
Image by Ian Hutchinson on Unsplash