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Will Biden's Student Loan Program Survive the Supreme Court?

By Steven Ellison, Esq. on March 23, 2023 | Last updated on March 24, 2023

On February 28, 2023, the Supreme Court heard arguments on President Biden's student debt relief plan, which stands to impact millions of borrowers who could see their loans eliminated or reduced. The debt forgiveness plan would cancel $10,000 of debt for those making less than $125,000 per year, or households making less than $250,000 per year. Pell grant recipients would see an additional $10,000 canceled. According to the Biden Administration, 43 million borrowers are eligible for relief, 20 million of whom would have their student debt erased entirely.

The HEROES Act

In granting student debt relief, the Department of Education relied on the Higher Education Relief Opportunities for Students Act of 2003, commonly known as the HEROES Act. This statute, passed by Congress, explicitly grants the Department the power to "waive or modify" federal loan parameters during any national emergency declared by the president, in order to make sure that borrowers aren't worse off than they were before the emergency. President Trump declared COVID-19 to be a national emergency in March 2020 (though President Biden has announced that the emergency will end on May 11 of this year). Now, the HEROES act forms the basis of the Biden Administration's loan forgiveness program, as well as the legal challenges against it.

The Two Cases Before the Court

Before the Supreme Court were two cases challenging the relief program. The first, Biden v. Nebraska, was brought by a number of states, namely Arkansas, Iowa, Kansas, Missouri, Nebraska, and South Carolina. The federal district court dismissed the challenge, reasoning that the states weren't hurt by the plan and therefore had no basis for bringing a lawsuit. The Eighth Circuit Court of Appeals put the ruling on hold pending further review.

Two students, Myra Brown and Alexander Taylor, brought the second case of Brown v. Department of Education. Brown complained that she was ineligible for the program because her loans were commercially held, rather than federal. Taylor opposed the plan on the ground that he didn't have a Pell grant, and therefore was ineligible for the full $20,000 relief. U.S. District Court Judge Mark Pittman struck down the debt relief plan, reasoning that Congress did not grant the executive branch the authority to cancel nearly $500 billion in student loans. A federal appeals court left this ruling in place, and the Supreme Court accepted review of the case along with the states' case.

Now it's up to the Supreme Court to decide whether the student debt relief plan survives.

Standing

The first issue is what's called standing. Standing is a constitutional doctrine that the parties before a court actually have concrete interests in the litigation. You cannot just sue someone because they upset you or because you disagree with their politics. You have to show that they actually hurt you, or will likely hurt you soon if the court doesn't intervene. If you cannot show this "harm" requirement, you lack standing to sue and the court must dismiss your case.

In Nebraska, several states collectively challenged the Biden Administration's loan forgiveness program. Attorneys for the U.S. government persuaded the lower court judge that the states weren't harmed by the student debt relief program, and that they therefore lacked standing to sue. In response, the states argued that they were harmed because the Missouri Higher Education Loan Authority (MOHELA), a student loan servicer incorporated in Missouri and a quasi-governmental entity, stood to lose money it would otherwise receive as interest on loans.

The standing argument there focused on MOHELA's relationship with the state. MOHELA is incorporated under state law. It is legally separate from the state and has the capacity to sue or be sued in its own right. But though MOHELA was conceivably "harmed" and could bring its own lawsuit, it chose not to join the suit. Rather, the states were attempting to bring suit on behalf of MOHELA; whether or not that was allowed formed the crux of the standing issue. Several justices questioned whether the states themselves (and not just MOHELA) sustained the harm required to bring a lawsuit.

The standing issue is a little different in the students' case in Brown. The students complain that the program they are challenging doesn't go far enough and could have expanded eligibility to include them. Their theory rests on what is called a "notice and comment" process that many agencies are required to undergo before they can enact a new law. Typically, there must be a 30-day period in which the public can "comment" on a proposed rulemaking.

The two students in this suit essentially argue that if the Department of Education had allowed for notice and comment, they might not have pursued this loan forgiveness program and instead might have enacted another statute that would include them. The "harm" they claim is that they should have gotten more, and that if the Department had followed proper procedure, it's possible that they would have. Justices seemed skeptical about whether this constituted the type of harm required for a party to bring a lawsuit in federal court.

However, the HEROES act explicitly exempts the Secretary of Education to go through the notice and comment process for purposes of the loans at issue here. Thus, regardless of whether or not the Justices are convinced of the "harm" element, the Brown plaintiffs' argument is theoretically weakened by the fact that procedure was followed according to the statute itself.

The Major Questions Doctrine

The second issue involved the recently-adopted major questions doctrine. This doctrine centers on the idea that, under principles of separation of powers, a federal agency can only exercise power that Congress has given to it. If an agency action constitutes a "major question" (i.e., one of "vast economic or political significance"), Congress better have clearly authorized it, or else the agency action will be struck down.

In the Supreme Court, the parties battled over whether the HEROES Act clearly granted the Department of Education the power to outright cancel nearly $500 billion in student loans. The U.S. government argued that the doctrine doesn't turn on the economic effect of the program alone, but that there were additional factors required to be considered a "major question." Thus, they argued that canceling student loans was a valid "modification" authorized by the statute.

Those challenging the program maintained that striking nearly half a trillion dollars off the books was definitely a "major question," requiring clear Congressional authorization, and that such authorization was lacking here. They also argued that if Congress had meant for the Department to have the power to cancel loans, it would have used the word "cancel" explicitly, and pointed out that the HEROES Act had never been used to cancel loans before.

What Will the Supreme Court Do?

Trying to predict what the Supreme Court will do is a fool's errand, and those who take a shot at it often end up with egg on their faces. But it doesn't hurt to be realistic.

Democrats largely support the relief program; republicans largely oppose it. The states that challenged the program are led by republicans. The federal judge who struck down the program was appointed by a republican. The Eighth Circuit judges who put the dismissal for lack of standing on hold were appointed by republicans. The Supreme Court is perceived to be split on ideological grounds, 6-3, with conservatives holding the majority. If you were placing bets, you might anticipate that the conservative court will strike down the program.

But to lawyers, standing is a significant hurdle. If the Supreme Court concludes that those challenging the program lack standing, it won't even reach the question of whether it is constitutional. And most conservative judges take standing very seriously, even if they don't like the outcome that results from throwing a case out for lack of standing.

A decision is expected by the end of June.

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