Supreme Court Strikes Down Student Loan Forgiveness Program

In a pair of recent cases, the U.S. Supreme Court ruled on the Biden administration’s student loan forgiveness program.

In Biden v. Nebraska, which was decided 6-3, the court struck down the administration’s student loan forgiveness program and agreed with the six challenging states that they had standing to sue. Chief Justice John Roberts wrote the opinion for the majority. He was joined by Justices Neil Gorsuch, Clarence Thomas, Samuel Alito, Amy Coney Barrett and Brett Kavanaugh. Justice Elena Kagan wrote the dissent and was joined by Justices Sonia Sotomayor and Ketanji Brown Jackson.

In the second case, Department of Education v. Brown, the court ruled that individual borrowers who challenged the plan lacked standing to bring their case. A unanimous court held that these challengers were unable to show that any injury they suffer from not having their loans forgiven is traceable to the loan forgiveness plan.

The court held that the HEROES Act does not authorize the administration’s student loan forgiveness plan.

The court held that the Higher Education Relief Opportunities for Students Act, or HEROES Act, does not authorize the administration’s student loan forgiveness plan. The HEROES Act permits the secretary of education to waive or modify provisions for loan forgiveness under the Higher Education Act in the event of a war or other military action, or a national emergency. The court noted that the loan forgiveness plan would have erased about $430 billion in student debt and lower the median amount of non-forgiven loan repayments from $29,400 to $13,600

During the COVID-19 pandemic, which was declared to be a national emergency, the Department of Education suspended student loan repayments. In August 2022, a few weeks before President Joe Biden declared the pandemic over, the education secretary received a memorandum from the Office of the General Counsel determining that the HEROES Act “grants the Secretary authority that could be used to effectuate a program of targeted loan cancellation directed at addressing the financial harms of the COVID-19 pandemic.”

A few months later, the secretary invoked the HEROES Act to reduce or eliminate student loan debt of most borrowers nationwide. Six states—Missouri, Nebraska, Kansas, South Carolina, Iowa and Arkansas—argued that the loan forgiveness plan exceeded the education secretary’s statutory authority. The 8th U.S. Circuit Court of Appeals issued a nationwide preliminary injunction, which the federal government appealed.

The court held that at least one state, Missouri, had standing to challenge the loan forgiveness plan. Missouri had created a loan servicing entity, the Missouri Higher Education Loan Authority, or MOHELA. The court determined that MOHELA was an instrumentality of the state, subject to state supervision, and stood to lose $44 million yearly if the loan forgiveness plan went forward. Therefore, Missouri would suffer an actual “injury,” satisfying Article 3 standing requirements of the U.S. Constitution. Once standing is established, the court can move on to the merits of the case.

The court rejected the administration’s argument that the secretary had authority under the HEROES Act to cancel student loan debt on the grounds that the statute permits only a waiver or modification of financial assistance, not a rewriting of the statute. The court explained that “statutory permission to ‘modify’ does not authorize basic and fundamental changes in the scheme designed by Congress.” Modifications imply modest adjustments to a statute, not a complete overhaul, the court said. The court also rejected the idea that the loan forgiveness plan was a waiver of provisions under the HEROES Act because the “plan specifies particular sums to be forgiven and income-based eligibility requirements. The addition of these new and substantially different provisions cannot be said to be a ‘waiver’ of the old in any meaningful sense.”

The court also addressed the limitations of executive authority and invoked the so-called major questions doctrine, which holds that if Congress wants to give an administrative agency the power to make “decisions of vast economic and political significance,” it must say so clearly. The court rejected the government’s position that the education secretary would have such power to rewrite the statute and erase $430 billion in student debt, stating “the ‘economic and political significance’ of the Secretary’s action is staggering by any measure.” The court reasoned that the Congress that enacted the HEROES Act did not grant such power to the education secretary.

Kagan, writing for the dissent, argued that the court should not have heard this case at all because the states lacked standing. Article 3 standing requires an injury in fact, not a theoretical injury; she said the majority overstepped its own authority by hearing the case. The challenging states “have no personal stake in the Secretary’s loan forgiveness plan. They are classic ideological plaintiffs: They think the plan a very bad idea, but they are no worse off because the Secretary differs.” In her view, the text of the HEROES Act makes clear that the plan is legal. “The statute provides the Secretary with broad authority to give emergency relief to student-loan borrowers, including by altering usual discharge rules. What the Secretary did fits comfortably within that delegation. But the Court forbids him to proceed. As in other cases, the rules of the game change when Congress enacts broad delegations allowing agencies to take substantial regulatory measures.”

Susan Frederick is NCSL’s senior federal affairs counsel.

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