Student Loan Forgiveness Program Appears Headed for Defeat in the Supreme Court

Part of the Series

Human Rights and Global Wrongs

A right-wing majority of the Supreme Court is on the verge of denying student debt relief to more than 40 million borrowers. On February 28, the high court heard oral arguments in a pair of cases challenging President Joe Biden’s student loan forgiveness program. Instituted to ameliorate the effects of the COVID pandemic, the program could provide up to $20,000 of debt relief to people with federally held loans.

The first case heard by the court was Biden v. Nebraska, brought by Republican state attorneys general from Nebraska, Missouri, Arkansas, Iowa, Kansas and South Carolina against Biden, his Secretary of Education Miguel Cardona and the Department of Education.

The other case, Department of Education v. Brown, was filed by two student debtors backed by the right-wing Job Creators Network Foundation.

Conservatives John Roberts, Clarence Thomas, Neil Gorsuch, Samuel Alito and Brett Kavanaugh appeared impervious to the economic plight of the tens of millions of people who carry debilitating student loan debt. These “justices” bent over backwards to find a way to deny the borrowers debt relief.

Sonia Sotomayor, Elena Kagan and Ketanji Brown Jackson, the liberals on the court, seemed motivated to uphold the debt relief program. Amy Coney Barrett, a conservative, was skeptical of a key argument advanced by those challenging the program. But even if Barrett sides with the liberals, it will not be sufficient to overcome the votes of the five right-wingers who will likely strike down the program.

“There’s 50 million students who will benefit from [the program], who today will struggle. Many of them don’t have assets sufficient to bail them out after the pandemic. They don’t have friends or families or others who can help them make these payments. The evidence is clear that many of them will have to default,” Sotomayor told James Campbell, attorney for the six GOP-led states. “Their financial situation will be even worse, because once you default, the hardship on you is exponentially greater. You can’t get credit. You’re going to pay higher prices for things. They are going to continue to suffer from this pandemic in a way that the general population doesn’t.”

Roughly one in six adults in the United States has federal student loan debt. Many undergraduates graduate with almost $25,000 of debt, which takes, on average, 20 years to repay. More than 98 percent of those who applied for debt relief make an average of less than $75,000 a year. Nearly two-thirds of applicants live in neighborhoods in which the average income is under $40,000 per person. According to estimates by the White House, almost 90 percent of the 45 million student loan borrowers would qualify for relief under the program and the debts of 18 million people would be fully canceled.

Trump and Biden Administrations Paused Loan Repayments Due to Pandemic “National Emergency”

Both the Trump and Biden administrations declared a “national emergency” due to the COVID pandemic and imposed a pause on student loan repayment obligations under the Higher Education Relief Opportunities for Students Act of 2003 (HEROES Act).

In August 2022, Cardona ordered that loan repayments resume at the end of the year. But after concluding that low-income borrowers would be at greater risk of delinquency and default because of ongoing economic hardships caused by the pandemic, he authorized $10,000 in student debt relief for borrowers whose annual income was less than $125,000 per year ($250,00 for couples) and $20,000 of relief for recipients of Pell Grants.

The six states went to federal district court on September 29, seeking an injunction against the loan forgiveness program and arguing that the HEROES Act didn’t authorize the secretary to implement the program. After determining that the states didn’t have “standing” to bring the lawsuit because they couldn’t demonstrate that they suffered particularized, concrete and actual or imminent injury, the U.S. district judge dismissed their suit.

On November 14, the Eighth Circuit Court of Appeals overruled the district court, found that the states did have standing, and issued a nationwide injunction suspending the program while the case moved through the courts.

A Trump-appointed district court judge in Texas also issued an injunction halting the program in the suit filed by Myra Brown and Alexander Taylor, who claimed they were excluded from the program and didn’t have a chance to comment on it before it was instituted.

On November 22, Cardona extended the repayment pause until August 2023 if the program hadn’t been implemented and the cases resolved by June 30, 2023 (when the Supreme Court’s term usually ends).

The court heard arguments about two legal issues in these cases: whether the parties opposing the loan forgiveness plan had standing to challenge it, and if they did, whether the education secretary exceeded his authority under the HEROES Act. If the court finds that the plaintiffs in both cases don’t have standing, they will not reach the merits of the legal claims.

Five Right-Wingers Strain to Find Standing for the Plan’s Challengers

In Biden v. Nebraska, five of the six states didn’t even try to show they had standing to sue. But if just one plaintiff has standing, they can still maintain their lawsuit. The states based their standing argument on MOHELA, a corporation created by Missouri to service student loans, which periodically pays a certain amount of money into the state treasury although it hasn’t made a payment in 15 years.

Without presenting any evidence, Missouri speculated that student loan relief would interfere with MOHELA’s ability to pay into the state treasury. MOHELA, which itself would have standing to sue, isn’t a party to the lawsuit and has refused to participate in it. In fact, MOHELA told the government that it favors loan relief. And yet the six states base their entire standing argument on speculation about MOHELA.

Jackson said that MOHELA’s “financial interests are totally disentangled from the state, it stands alone, it’s incorporated separately, the state is not liable for anything that happens to MOHELA, I don’t know how that could possibly be a reason to say that an injury to MOHELA should count as an injury to the state.”

Sotomayor pointed out, “It would be odd for us to have a state say we’re creating a corporation, we’re not going to be responsible for its debts, we’re not going to be responsible for any of its contracts, we’re not going to be responsible for anything it does financially, and the state itself says this is not the state, it’s an independent corporation, and we’re going to say instead that it is the state, correct?”

“Do you want to address why MOHELA’s not here?” Barrett, doubtful that the states had standing, asked Campbell. “If MOHELA’s an arm of the state, why didn’t you just strong-arm MOHELA and say you’ve got to pursue this suit?” Campbell responded vaguely that it was “a question of state politics.”

Kagan added, “You couldn’t even get documents from MOHELA without filing the state equivalent of a FOIA [Freedom of Information Act] request.”

In Department of Education v. Brown, Brown alleged she was excluded from the debt relief program because her loan was privately held. Taylor, the other plaintiff, who would be eligible for $10,000 in debt cancellation, asserted that he was not eligible for $20,000 because he didn’t have a Pell Grant. The two borrowers sought to cancel the entire program for everyone rather than trying to expand it.

But, noted Solicitor General Elizabeth Prelogar, who represented the Biden administration, Brown’s and Taylor’s “asserted injury is a complete mismatch for the relief they seek. They claim to want greater loan forgiveness than the plan provides, but they ask this Court to hold that the HEROES Act doesn’t authorize loan forgiveness at all. A win on that theory would mean that no one could get any HEROES Act relief.”

The three liberal justices and Barrett will probably find that neither set of plaintiffs had standing so they wouldn’t even reach the merits of the case.

But Roberts, Thomas, Alito, Gorsuch and Kavanaugh strongly indicated that they bought the states’ argument that MOHELA gave them standing. When the court wants to decide a case on the merits, it invariably finds the parties have standing.

Even if a majority doesn’t conclude that Brown and/or Taylor have standing, both cases raise the same legal issue of whether the HEROES Act gave Secretary Cardona the authority to create the loan forgiveness program. Brown and Taylor also claim that the program should fall because it was inaugurated without a notice and comment period even though the act doesn’t have a notice and comment requirement because it’s an emergency statute.

Did the HEROES Act Empower the Secretary to Create the Program?

If a majority of the court determines that MOHELA gives the states standing, it will then analyze the legal merits of the program.

The HEROES Act authorizes the secretary of education to respond to a national emergency by “waiv[ing] or modify[ing] any statutory or regulatory provision” that governs student loan programs so borrowers are “not placed in a worse position financially” due to the national emergency.

Roberts was unconvinced that the program was a modification of existing student loan programs. “We’re talking about half a trillion dollars and 43 million Americans. How does that fit under the normal understanding of ‘modifying’?”

After Prelogar indicated that Cardona had both waived and modified existing programs, Thomas asked her, “How does a waiver or modification become a cancellation?” Kavanaugh appeared more sympathetic to the administration’s argument, telling Campbell that although “modify” may not allow the Department of Education to cancel student loans, “waive” is “an extremely broad word.”

In her rebuttal, Prelogar explained how Cardona waived and modified the provisions of the HEROES Act, stating, “The Secretary took the provisions that deal with discharge and cancellation and he waived the existing eligibility requirements and modified those provisions to add an additional basis for relief.”

Kagan told Campbell that the act is “quite clear.” Congress empowered the secretary to waive or modify existing provisions and substitute new ones. “This is a bill about what happens when you have an emergency,” she said. “Congress doesn’t get much clearer than that.”

The Major Questions Doctrine

The conservative members of the court signaled they will apply the “major questions doctrine,” which requires that Congress spell out clearly the authority of an agency to make “decisions of vast economic and political significance.” At the end of last term, the 6-3 right-wing majority of the court explicitly used the major questions doctrine for the first time in West Virginia v. EPA to limit the power of the Environmental Protection Agency (EPA) to regulate carbon emissions.

Although it hadn’t used the words “major questions doctrine” before the EPA case, the court utilized the same rationale to strike down a rule promulgated by the Occupational Safety and Health Administration (OSHA) to mandate vaccines or periodic testing of employees in large companies. It also rejected the authority of the Centers for Disease Control and Prevention to stop evictions, stating, “We expect Congress to speak clearly when authorizing an agency to exercise powers of vast economic and political significance.”

Prelogar argued that the major questions doctrine doesn’t apply in this case because the Department of Education isn’t “claiming extravagant regulatory authority that it doesn’t actually have.” She said that the program doesn’t implicate the department’s regulatory authority, but rather Congress granted broad power to the department to confer benefits on borrowers.

Alito didn’t buy Prelogar’s distinction between programs that are regulatory and those that provide benefits, cynically stating, “Drawing a distinction between benefits programs and other programs seems to presume that when it comes to the administration of benefits programs, a trillion dollars here, a trillion dollars there, it doesn’t really make that much difference to Congress.”

Roberts is firmly convinced that the loan forgiveness program implicates the major questions doctrine. “I think most casual observers would say, if you’re going to give up that much amount of money, if you’re going to affect the obligations of that many Americans on a subject that’s of great controversy, they would think that’s something for Congress to act on,” he said, and noted that there “was no role for Congress to play in this.”

Kagan said that Congress “doesn’t get much clearer” about the department’s authority in the HEROES Act. “We deal with congressional statutes every day that are really confusing,” she noted. “This one is not.”

Repeatedly, Roberts, Alito, Gorsuch and Kavanaugh raised a “fairness” issue. Roberts threw out a hypothetical involving two high school friends, one who took a loan for college and the other who took a loan for a lawn care service. He asked, how is it fair for the college graduate to have his loan forgiven but not the other?

Kagan responded, “Congress passed a statute that dealt with loan repayment for colleges, and it didn’t pass a statute that dealt with loan repayment for lawn businesses,” she said. “And so Congress made a choice, and that may have been the right choice or it may have been the wrong choice, but that’s Congress’s choice.”

Corporations Get Bailed Out, Student Borrowers Should Get Debt Relief

“We’ve sat here and we’ve watched as corporations get bailed out and get debt canceled year after year, every time we have any sort of economic downturn,” said Kristin McGuire, executive director of Young Invincibles, a young adult economic advocacy organization that helped organize the rally on the steps of the Supreme Court during the oral arguments. “I really believe it’s time for the people to be able to access that type of benefit as well,” McGuire, who defaulted on her student loans in 2005, added.

Since Biden has said he will end the pandemic emergency in May, the court may say that the HEROES Act no longer applies. That would ignore the fact that even if the pandemic is “over,” student borrowers who must begin making loan payments again will suffer economically due to residual effects from the pandemic, including job loss.

As the court heard arguments, hundreds of borrowers, lawmakers and advocates rallied in front of the Supreme Court. “You should not have to face financial ruin because you want a damn education!” Sen. Bernie Sanders declared. “Education, from child care to graduate school, is a human right. It should be free to all.” Sanders stated, “Today we say to the Supreme Court, listen to the needs of millions of struggling people,” adding, “Do the right thing. Support Biden’s proposal to cancel student debt.”

The court will issue its decision by the end of June or the beginning of July.