While there’s no clear legal justification for the order, opponents of it may have trouble finding a group that has the standing to sue.
The Biden administration’s proposal to cancel an estimated half-trillion dollars in student-loan debt under the guise of Covid-19 pandemic relief is on shaky legal ground and could be susceptible to court challenges, according to some legal experts.
Lawyers and an education researcher who spoke to National Review said they believe Biden-administration officials are assuming powers from the Higher Education Relief Opportunities for Students (HEROES) Act of 2003 — legislation initially passed to protect active-duty military members from defaulting on loans in the early years of the War on Terror — that Congress never clearly authorized. And they argue the administration has done little to tailor student debt relief to borrowers most negatively impacted by the pandemic.
But there may be few plaintiffs, if any, with the ability to sue, in part because the people facing the most direct harm — taxpayers — generally don’t have standing.
The plan laid out by the Biden administration on Wednesday would wipe out $10,000 in student-loan debt for most borrowers, and up to $20,000 for Pell Grant recipients. It rests on a broad reading of the HEROES Act, and assumes “expansive authority to alleviate hardship that federal student loan recipients may suffer as a result of national emergencies,” according to a recently released Department of Justice analysis.
Reed Rubinstein, a former Trump-administration Department of Education lawyer, told National Review that in his view there’s no reason to believe the HEROES Act provides authority for the large-scale cancellation of loan balances. In fact, in 2021, Rubinstein authored a Department of Education memo that concluded just the opposite: that the secretary of education does not have statutory authority to blanket cancel or forgive student loans or to materially modify repayment amounts. He described the Biden administration’s efforts as “unlawful.”
“After 18 months of effort to try to circumvent the law, the Biden administration’s best result is what they’ve rolled out there,” Rubinstein said. “They don’t have the authority for this. If they want to provide a benefit for people with student loans that’s underwritten, subsidized by the rest of the country, then they should go to Congress and get it enacted. What they are doing here is so destructive of the rule of law, and so corrosive to the body politic, that I only hope states will step up to sue, and Congress will vigorously defend its institutional authority.”
Biden has long said he was prepared to write off up to $10,000 in student debt, but hasn’t always expressed confidence he could do it on his own. “I don’t think I have the authority to do it by signing the pen,” he said at a CNN townhall in February 2021.
Neal McCluskey, director of the Cato Institute’s Center for Educational Freedom, said the Biden administration appears to be relying on a tortured reading of the HEROES Act for authority.
“I don’t think the Biden administration actually thinks they’re on firm legal ground,” McCluskey said. “When you look at how then-candidate Biden talked about student debt, . . . he’s almost always talking about cancellation in the context of legislation.”
Taking Liberties with the HEROES Act?
Enacted in the months after the September 11 terrorist attacks, the HEROES Act was initially authored to provide the secretary of education with authority to respond to the national emergency involving the War on Terror.
“That act was really about people in the military,” McCluskey said. “In other words, you have been called up to serve and you can’t repay your loans while you’re serving, or you don’t have the money for it, you can’t be harmed because you’ve gone into this military service post-9/11. And so it wasn’t really for some sort of national emergency that affects everybody.”
In 2003, Congress extended and broadened the act to include “affected individuals” in all presidentially declared national emergencies, not just those associated with terrorism. In March 2020, at the beginning of the pandemic, the Department of Education invoked the HEROES Act to allow borrowers to delay payments and to pause the accrual of interest.
“I think you’d be hard pressed to find more than a handful of people who said that wasn’t reasonable,” McCluskey said.
In his 2021 memo, Rubinstein concluded that while those hardship waivers and payment deferrals were legal and appropriate, the secretary of education did not have authority under either the Higher Education Act of 1965 or the HEROES Act to provide blanket student-debt cancellation. “Plain HEA language and context strongly suggest Congress never intended the HEROES Act as authority for mass cancellation, compromise, discharge, or forgiveness of student loan principal balances, and/or to materially modify repayment amounts or terms,” the memo read.
A new Department of Education memo from August 23 attempts to justify the Biden administration’s plan, declaring Rubinstein’s inconvenient memo “substantively incorrect in its conclusions,” and calling on Education Secretary Miguel Cardona to formally rescind it. To broadly cancel student debt, the administration is relying on language in the HEROES Act that authorizes the education secretary to “waive or modify any statutory or regulatory provision applicable to the student financial assistance programs” that the secretary deems necessary to ensure that borrowers are “not placed in a worse position financially because of a national emergency,” according to the new memo.
In a Fox News interview on Wednesday, Cardona said, “To those who are saying it’s not fair, look, the aim of this is really to address the effects of the pandemic. It’s my responsibility to make sure people aren’t coming out of the pandemic worse off than they were at the beginning.”
But McCluskey said the economic danger of the pandemic has “long since passed,” and Biden himself argues that the economy is strong. In general, he said, people with college degrees had a significantly lower unemployment rate during the worst of the pandemic than people without and were more likely to be able to work remotely.
“So this is not a group that suffered, either relative to others or on an absolute basis within six to nine months of the start of lockdown,” he said. “It just stretches credulity to think that people really believe this is justified specifically because the impact of Covid was so terrible on people with student debt.”
Broad and Imprecise Language
Jack Fitzhenry, a senior legal policy analyst with the Heritage Foundation, said he also doesn’t believe that Biden is on solid legal ground. “That doesn’t mean that action is going to fail in court,” he said. “But I think it’s vulnerable to multiple kinds of legal challenges.”
The HEROES Act language is broad and imprecise, he said, which is an advantage to the Biden administration. But other than limit relief to borrowers with an annual income of less than $125,000 — the vast majority of borrowers — the administration has not targeted its debt-cancellation plan to the “affected individuals” who really have been negatively impacted by the pandemic and who are struggling to meet their loan obligations because of it.
“You can conceive of student-loan borrowers out there for whom that’s the case — the pandemic has cost them their job, or salary declines. And that has materially lessened their ability to meet their student-loan obligations,” Fitzhenry said. “The problem is the administration really hasn’t made an effort to tailor this executive action to meet that allowed statutory purpose. It’s done this so broadly that it’s inevitably going to sweep in lots and lots of borrowers who weren’t materially or directly impacted by the pandemic.”
Rather, Fitzhenry said, the administration seems to have instead “made a political calculation about what income threshold is going to be tolerable to the voter. How high can we set this? How many borrowers can we sweep under this without incurring major electoral backlash?”
Rubinstein was more blunt. “One way to view this is as a cynical ploy by the Biden administration to try to motivate some of its potential voters to turn out in the midterms,” he said.
Abby Shafroth, an attorney with the National Consumer Law Centers, told the Associated Press this week that challenges to the law could falter, in part because both the Biden and the Trump administrations relied on the HEROES Act to pause loan repayments during the pandemic, and Biden used it to overhaul a student-debt-forgiveness program for public workers.
This week’s action, she said, “is significant, but not different in kind.”
Rubinstein disagrees. There is a “fundamental distinction,” he said, between delaying loan payments and issuing a blanket cancellation of debt. The Biden administration, he said appears to be taking the position that because the HEROES Act didn’t specifically prohibit the secretary of education from cancelling student debt, it’s therefore permitted.
“This is a major, major step. Unprecedented,” Rubenstein said. “There is no clear grant of authority for the department to do this.”
Another potential hurdle for the Biden administration: the recent Supreme Court decision in the West Virginia v. EPA, and the newly established “major questions doctrine,” which lessens court deference for federal agencies regarding issues of significant political or economic significance. Fitzhenry noted that the HEROES Act is almost two decades old, and “it’s been used multiple times, but never for an action like this.”
“When an agency relies on an old statute to do brand-new tricks that accomplish massive administrative priorities they couldn’t get through the legislature, then courts are going to look askance,” he said, “and they’re going to ask for the agency to point to some clear, binding authority in congressional legislation that lets the agency do this.”
Establishing Standing
While the legal authority for Biden’s debt-cancellation plan is questionable, it’s unclear at this point who would have standing to sue the administration.
McCluskey questioned if that might have been part of the administration’s calculus. “Yes, it’s legally dubious, it’s going to make a lot of people angry, but nobody would have standing for a suit, and so the hope is it will get done, lots of people who have student loans will be grateful to the Biden administration, and we won’t continue to debate it,” he said.
The people most directly harmed by the debt-cancellation plan are taxpayers on the hook for paying the bill. But there’s little precedent for taxpayers as a class having standing in court. Former borrowers who paid off their loans could also argue that the debt-cancellation plan isn’t fair to them. “The problem it seems to me is establishing harm,” McCluskey said. “You basically just followed the rules you agreed to, so you’re not really harmed if other people get a change.”
Student-loan companies could have legal standing if they can show that the effort is likely to impact their revenues, reduce the number of loans they serve, and harm their business model.
“They’re not the most sympathetic plaintiffs in the court of public opinion, but in terms of a party that’s going to have a real legal injury here, a particular one that a court’s going to listen to and recognize, I think they’re a likely bunch,” Fitzhenry said.
Rubinstein suggested that individual states could sue on behalf of their citizens, citing a seemingly arbitrary cut-off income level for eligibility. Congress also could have legal standing, and could take action if Republicans win back control in November.
“Congress authorized student-loan programs with the expectation that the money would be paid back,” Rubinstein said. “And the HEROES Act does not, anywhere on its face, authorize the relief and forgiveness and the payouts that the Biden administration is proposing.”
“The Democrats in Congress had the opportunity to do this on multiple occasions as part of the coronavirus-relief act, or otherwise, to forgive student loans. And they never did.”