President Biden’s student loan forgiveness program stuck down

On June 30, 2023, in its final decision before going into recess for the summer, the Supreme Court of the United States struck down President Joseph Biden’s student loan forgiveness program (“Program”).[1] Last year, President Biden announced the wide-sweeping Program to eliminate student loan debt for millions of Americans. Under the Program, President Biden would have canceled $10,000 in debt for those earning less than $125,000 a year (or households earning less than $250,000 a year) and $20,000 in debt for low-income families who previously received Pell Grants. Before the Program was set to take effect, various plaintiffs filed lawsuits against it. Two of these lawsuits, Department of Education v. Brown (2023) and Biden v. Nebraska (2023), reached the Supreme Court. 

In Department of Education v. Brown (2023), Myra Brown and Alexander Taylor, two individuals who both have student loans, filed a lawsuit against the Program because neither of them met the eligibility requirements to receive any debt relief. Brown and Taylor filed a motion for summary judgment and sought vacatur of the Program and a nationwide injunction. District Judge Mark T. Pittman of the United States District Court for the Northern District of Texas granted the motion for summary judgment. After finding that the Program was an “unconstitutional exercise of Congress’s legislative power” by the executive branch, Judge Pittman declared the Program unlawful and vacated it in its entirety.[2] While the Department of Education’s appeal was pending before the United States Court of Appeals for the Fifth Circuit, the Supreme Court granted certiorari before judgment to consider the case alongside Biden v. Nebraska (2023), which presented a similar challenge to the Program. Ultimately, in Department of Education v. Brown (2023) Justice Samuel Alito, writing for a unanimous court, concluded that both Brown and Taylor lacked standing to challenge the Program and did not resolve their claims.[3] Accordingly, Judge Pittman’s judgment was vacated and the case was dismissed. 

However in Biden v. Nebraska (2023), the state of Missouri met the threshold question of standing in the lawsuit it filed with five other states—Nebraska, Arkansas, Iowa, Kansas, and South Carolina—allowing the challenge to the Program to be considered by the Supreme Court. Missouri had standing because the Missouri Higher Education Loan Authority (“MOHELA”), which is a major servicer and participator in the student loan market, is controlled by the State and would be harmed by the Program. Because the Program would cost MOHELA an estimated $44 million a year in fees, this constituted a direct injury to Missouri itself and standing for the other five states did not need to be addressed.[4]

The primary question at issue was whether the Secretary of Education had authority under the Higher Education Relief Opportunities for Students Act of 2003 (“HEROES Act”) to enact the Program. The HEROES Act authorizes the Secretary of Education to “waive or modify any statutory or regulatory provision applicable to the student financial assistance programs under title IV of the Higher Education Act of 1965 (Education Act) as the Secretary deems necessary in connection with a war or other military operation or national emergency.”[5] Citing the “national emergency” previously declared for the COVID-19 pandemic, President Biden sought to invoke this provision of the HEROES Act for his Program.

Chief Justice John Roberts, writing for a six-to-three majority, determined that the HEROES Act did not authorize the Program.[6] Chief Justice Roberts relied on the major questions doctrine that the Court formally contextualized last year in West Virginia v. Environmental Protection Agency (2022). Under the major questions doctrine, courts “expect Congress to speak clearly if it wishes to assign to an agency decisions of vast economic and political significance.”[7] The doctrine combines an inquiry of both separation of powers principles and a practical understanding of legislative intent, and requires an agency to point to “clear congressional authorization” for the authority it claims.[8] Chief Justice Roberts reasoned that the Secretary of Education’s power to “modify” under the HEROES Act does not permit “basic and fundamental changes in the scheme” designed by Congress.[9] Chief Justice Roberts also said that this power, even when looking at “waive or modify” combined, certainly does not authorize the Secretary of Education to “rewrite [the HEROES Act] to the extent of canceling $430 billion of student loan principal.”[10]

Justice Elena Kagan, joined by Justices Sonia Sotomayor and Ketanji Brown Jackson, wrote a blistering dissent. Justice Kagan asserted “the plaintiffs in this case are six States that have no personal stake in the Secretary’s loan forgiveness plan” and are merely filing a lawsuit against a policy they oppose.[11] According to Justice Kagan, this does not rise to the standing requirement under Article III of the United States Constitution, and by hearing this case “in every respect, the Court today exceeds its proper, limited role in our Nation’s governance.”[12] Because the Court’s precedents do not allow “plaintiffs to rely on injuries suffered by others,” and that is exactly what Missouri is doing with MOHELA, Justice Kagan would have dismissed the lawsuit in its entirety for a lack of standing.[13] And without standing, Justice Kagan goes as far as to declare “the Court, by deciding this case, exercises authority it does not have. It violates the Constitution.”[14]

Following the Court’s decision in Nebraska, President Biden announced that he would be creating a new student loan forgiveness plan that is rooted in the “compromise and settlement authority” of the Higher Education Act.[15] But this plan may face additional regulatory hurdles as it must go through negotiated rulemaking, which is a process that requires representatives from the Department of Education and affected interest groups to negotiate the terms of a new proposed student loan forgiveness program. While this regulatory process plays out, any new student loan forgiveness program is certain to face legal scrutiny, and like its predecessor is unlikely to survive an inquiry under the major questions doctrine formalized in West Virginia.

Under the major questions doctrine, President Biden’s Program was dead on arrival at the high court, and unjustly so. The COVID-19 pandemic was an unprecedented “national emergency,” in both its scope and impact. President Biden, in exercise of the national emergency provision of the HEROES Act, sought to enact the Program to address the economic hardships faced by millions of Americans that were exacerbated following the pandemic. The Program advances the primary goal of the HEROES Act which is to ensure that “recipients of student financial assistance…are not placed in a worse position financially in relation to that financial assistance because of” a national emergency.[16] As such, the broad nature of a “national emergency” under the HEROES Act was precisely Congress’s intent:

“A key reason Congress makes broad delegations…is so an agency can respond, appropriately and commensurately, to new and big problems. Congress knows what it doesn’t and can’t know when it drafts a statute; and Congress therefore gives an expert agency the power to address issues—even significant ones—as and when they arise.”[17]

The administrative state is built on broad congressional delegations because Congress relies on the expertise of agencies to make policy decisions on complex and evolving issues as they arise. The Court has appointed itself the final decider of what constitutes a “major question” and a decision of “vast economic and political significance.”[18] But Congress has never provided the Court with a statutory mandate to assume this role. To the contrary, Congress has its own statutory tools to override agency decisions, especially ones that constitute “major rule[s].”[19] 

Congress could not have predicted the COVID-19 pandemic, so its “clear congressional authorization” was already in the HEROES Act which vests the Secretary of Education with the power to “waive or modify” student-loan programs “as the Secretary deems necessary in connection with a…national emergency.”[20] In addition, “[t]he Secretary is not required to exercise the waiver or modification authority…on a case-by-case basis,” and the Secretary is exempt from otherwise-applicable procedural requirements that would delay the implementation of waivers and modifications.[21] The Secretary’s power to waive “means eliminate,” and modify means “alter…to the extent [the Secretary] think[s] appropriate.”[22] In the context of student-loan programs, the power to waive or modify “extends from minor changes all the way up to major ones.”[23] So if the Secretary of Education deemed it necessary to cancel a substantial portion of student loans for millions of Americans, as they did with President Biden’s Program, that would comport with the text of the statute. In a ruling that misconstrues this text, the Court’s decision in Nebraska further erodes the authority of the executive branch, instills its own ideas about congressional delegations, and “overrides [a] legislative choice.”[24]