Student loan forgiveness plan has a SCOTUS problem
President Joe Biden’s long-awaited student loan forgiveness plan might be dead on arrival after the Supreme Court effectively hobbled the administrative state this past June when it comes to making big political and economic action without congressional authorization.
“I think when we were all considering the legality of this kind of an action, we were doing it before the EPA decision in June, and so there's been a lot of back and forth over who thinks it's legal or not but that really changed the standard,” Lanae Erikson, senior vice president for social policy, education & politics at the think tank Third Way, said in a phone interview.
Erikson was referring to West Virginia v. EPA, a case that curbed the Environmental Protection Agency's authority to regulate greenhouse gas emissions at coal-fired power plants.
Split along party lines, the conservative majority leaned on the major questions doctrine to strike down the EPA’s regulatory scheme. This doctrine says that explicit authorization from Congress is necessary if executive agencies are taking “major” actions that will have large economic and political significance.
West Virginia created this new standard, but the justices did not lay out a specific test to apply it. Experts predict that the loan forgiveness plan Biden announced Wednesday may be the first application.
The Office of Legal Counsel at the Justice Department released a memo detailing what the administration thinks is Biden’s authority to carry out this plan. While legal experts agree it will most likely be challenged in court, they are divided over its rate of survival.
“The big issue is can this be done administratively or does this require legislation,” Frederick Lawrence, a distinguished lecturer at Georgetown Law, said in a phone interview. “Everybody knows it can be done with legislation, the question is can the administration do it without additional legislative support.”
Biden is using a post-9/11 law to justify this plan. The Higher Education Relief Opportunities for Students Act of 2003 — better known as the Heroes Act — was created to give the education secretary authority to waive rules related to student financial aid programs in times of war or national emergency. Since theCOVID-19 pandemic was declared a national emergency, the administration claims its student debt plan allows borrowers not to be placed in a worse position financially as a result of that emergency.
Legal experts agree that this action will have to satisfy the major questions doctrine, but they are divided on if the plan passes muster.
Some experts think the administration’s plan complies with the major questions doctrine. The Heroes Act was also used to justify pausing student loan payments. This action also paused interest on loans. Since that interest is not going to be added to loans after the national emergency, it could be seen to amount to some kind of loan forgiveness already. That action was not challenged.
“We're talking about degree not an actual change in kind,” Lawrence said. “I would understand a major question to be something that is totally different from anything that's been done before or that the legislation has provided for. So I think the administration set the better part of the argument here.”
There are other experts who question the administration’s decision to use this national emergency authorization so far into the pandemic.
“The use of the Heroes Act, which was passed after 9/11, creates the purpose in the context of what an emergency means, and I think it's a very big stretch to suggest that the world of very, very late COVID of August 2022 is anything like the world of post-9/11 or even even a couple of years after 9/11,” Jed Shugerman, a professor at Fordham Law School, said in a phone interview.
Even if the COVID-19 pandemic in August of 2022 fits the definition of an emergency, that might not be enough. The current Supreme Court has demonstrated that fitting the text of a statute is just the first hurdle.
“It may fit the text, but the text is not enough anymore,” Shugerman said. “The Roberts court, as I've indicated, has created a huge exception from the Scalia version of textualism and that's the major question doctrine. This OLC memo is remarkable in how it completely ignores some of the most important precedents from the Roberts court over the last six years.”
While it’s still unclear the exact test the court could use for the doctrine, it appears to court watchers that the purpose of the statute must also be taken into account alongside the text.
“The OLC memo not only ignores the major question doctrine cases from the Roberts court, it also gives very short attention — is dismissive — of the significance of purposes and legislative history, with less than one page and in an 18-page memo,” Shugerman said.
The major questions doctrine precedent is not the only precedent experts say the administration is ignoring here. The Biden administration has already lost multiple cases at the Supreme Court where they claimed to have emergency powers to justify policies.
“I am concerned about a pattern of bad lawyering in the Biden administration,” Shugerman said. “Why are they not learning the lesson from the eviction moratorium and the vaccine mandate already being struck down? … I am befuddled by why they thought that doubling down and tripling down on COVID after losing three other major cases in the past year.”
Legal experts also disagree over who could have the standing to challenge the plan. Lawsuits can only be brought if someone can prove they have been harmed, so some experts say courts are simply not the forum to challenge the policy.
“I think there are very serious standing questions,” Lawrence said. “I know there are people who oppose the policy, but the courts are not policy-debating forums. If you don't like a policy, you vote against the people who put it in place. You can only bring a lawsuit if you're harmed by it.”
Other experts see banks or loan servicers as an example of those who might be able to prove they are harmed by loan forgiveness.
“The Roberts court has been flexible, if not inconsistent, about standing,” Shugerman said. “I would be surprised if the Roberts court would not find a way to grant standing to some of the private banks that have direct and indirect relationships to these loans.”
There are also some experts who think the November elections might come into play here. If the Republicans win back the majority in the House of Representatives, these experts say they might be able to sue.
“Starting in January, if the House does flip, then the House itself will have standing to challenge this opinion,” Erikson said. “That's what John Boehner did with the ACA. And obviously, a Democratic House isn't going to do that, but as soon as they represent the House majority, they themselves can sue. So if it hasn't been struck down by then, I think there's no doubt that a Speaker Kevin McCarthy would bring a suit on the House Republicans' behalf.”
Any lawsuits brought against the policy could complicate the repayment pause end date that the administration has set for December 31. It’s possible that a court could grant an injunction against the policy. That would force the administration to either extend the repayment pause or have borrowers start repaying loans that may be canceled later on. Either way legal challenges will certainly leave millions of borrowers affected by the policy in limbo.
Before any lawsuits can be filed, however, the Biden administration has to announce the final policy. With all of these questions regarding how the policy may be challenged, some legal experts are urging the Biden administration to reconsider some aspects of the plan that may cause legal peril.
The administration could better explain how COVID fits the purpose of the Heroes Act and better detail the legislative history of the statute to justify the current plan. The other option would be to scrap the Heroes Act justification and go another route such as the Higher Education Act.
“There might be the basis for this in the Higher Education Act of 1965 that actually fits the broader long-term problems of education finance in America,” Shugerman said. “That's the real reason for this policy, not COVID. The real reason is for expanding education access. … There is still time for them to change horses from the Heroes Act as a 9/11 measure to the Higher Education Act, which is much more closely related to the real reasons for this policy.”
While many critics of the legal justification are conservatives who simply oppose the policy on its face, there are also many progressives who worry the weak justification may sink the proposal and want to save it before it’s too late.
“I hope the Biden administration is taking these critics seriously,” Shugerman said. “These are not all pro-bank conservatives who are raising these critiques. Some of these critiques are coming from progressives, like me, who want some form of student debt forgiveness to be sustainable through litigation, but are also worried about the exploitation of emergency powers by presidents.”