Republicans come after Biden’s student debt relief plan

On Tuesday, the libertarian Pacific Legal Foundation filed a lawsuit challenging the Biden administration’s plan to forgive student debt, calling the initiative “manifestly illegal.” And a host of other conservative actors, from Senator Ted Cruz to attorneys general to the Heritage Foundation, are strategizing how to do the same. “I think there’s a lot of people who celebrate prematurely,” said Arizona Attorney General Mark Brnovich, one of the potential challengers. However, the debt plan is on a much more solid legal footing than its critics would suggest.

Under the program, an individual who earned less than $125,000 in 2020 or 2021 is eligible for up to $10,000 in debt relief, and certain Pell Grant recipients could qualify for an additional $10,000 cancellation to qualify. (One of the authors of this article falls into the first category.)

A legal memo issued by the Justice Department alleges that the Department of Education’s ability to forgive student debt stems from the Higher Education Relief Opportunities for Students (HEROES) Act of 2003. This Act authorizes the Secretary “to waive or amend any statutory or regulatory provision “Under the Department’s financial assistance programs” as the Secretary deems necessary in connection with a … national emergency.” The Act provides this authority, to ensure that “recipients of student finance … are not financially disadvantaged as a result of a national crisis”. The White House has declared that the national emergency it says justifies the forgiveness policy is the coronavirus pandemic.

However, some commentators, including progressive law professor Jed Shugerman, predict the government will struggle to make a bona fide legal argument linking the student debt plan to the national COVID-19 emergency, as required by law. We do not agree.

The outbreak of the pandemic has plunged Americans into deep financial uncertainty. As a result, Congress approved three rounds of stimulus checks — two during the Trump administration — that expired at $99,000, $87,000 and $80,000 for individuals. Given that these thresholds reflect the $125,000 debt plan ceiling, President Joe Biden’s program is targeting the same groups of people who Congress believes have been hardest hit by the pandemic.

The loan forgiveness plan is based on the period of financial distress coinciding with the worst of the pandemic. Individuals may qualify for forgiveness based on their income in 2020 or 2021, when the pandemic’s employment distortions were at their peak. Indeed, the COVID disruptions continue to squeeze Americans’ finances, and in 2022 inflation has further eroded purchasing power. Debt relief, which Goldman Sachs predicts will have a marginal inflationary effect, is a logical and legally consistent means of easing borrowers’ budgets as they deal with the ongoing economic impact of the pandemic.

That the plan furthers the Biden administration’s broader political ambitions does not negate the program’s purpose, as Shugerman suggests. As long as the Department of Education provides a well-founded justification for its policy for reasons related to the pandemic, the administration is free to promote the initiative as part of its overall goals.

Other features of the HEROES Act also speak in favor of the administration. The law states that the Secretary of Education is “not required” to exercise a waiver power “on a case-by-case basis”. To ensure that borrowers “are not financially worse off” as a result of a national emergency, it should take a side of generosity. And the text of the law directing the secretary to act as he “seems necessary” should be given heed by the courts.

A few years ago, these arguments would have easily prevailed. Under the Supreme Court’s emerging “major questions doctrine,” adopted in an environmental case last June, West Virginia v. EPA, the judiciary is no longer willing to accommodate the government’s more ambitious regulatory measures. However, if the court isn’t as cynical as its harshest critics fear, Biden’s debt plan should stand a challenge even under the new doctrine.

in the West Virginia, Chief Justice John Roberts outlined a two-part test to determine whether ambitious regulatory policies are legitimate. First, a court determines whether the administrative measure can be subjected to an additional examination as an “important issue”. The judges make this rating based on the novelty (or lack thereof) of the action and the political and economic importance. If executive branch policy raises a “big question,” then the second step of the test shifts the burden of persuasion to the agency, which must indicate “clear congressional approval” for its actions.

In both phases of this investigation, Biden’s debt plan appears to have a solid legal footing. As noted in the DOJ memo, since the passage of the HEROES Act, both the Trump and Biden administrations have used the Act’s debt forgiveness powers to benefit student borrowers. At the beginning of the pandemic, Donald Trump’s Department of Education used the power of the HEROES Act to pause federal loan payments and suspend interest accrual. Congress upheld that landmark decision in the CARES Act of 2020 and directed the Department to continue its hiatus and suspension through September 2020. After that deadline, the Trump administration extended policies that the Biden administration has continued.

As the deficit hawks were quick to point out, the suspension of interest accrual can be characterized as debt forgiveness. The only difference between the previous and current departmental policy is the subject of cancellation – interest versus principal – a distinction of no legal relevance in the Act. If the interest rate pause was legitimate, as two ideologically divergent governments have noted, so is Biden’s forgiving policy.

Nor is it likely that the loan forgiveness program is “economically and politically significant” as defined by the West Virginia majority. Although the debt relief plan is financially meaningful to borrowers, its cost — between $25 billion and $50 billion a year for the next decade — represents a fraction of the annual federal budget, which exceeds $4 trillion, and an even smaller fraction of that GDP .

In addition, recognition of the secretary’s power of apology is not a “crooked” problem. The administration of federal loan programs is within the department’s purview. Debt relief triggered by a global pandemic that both Trump and Biden have declared a national emergency does not set the Department of Education on course to extend its authority across much of the economy. And instead of imposing costs in the billions Private Partisanship — a feature Judge Neil Gorsuch cited as indicating a policy could fail the key issues test — debt-forgiveness spending stems primarily from Publicity Middle.

Even if courts determine that debt relief is a “big question,” the plan should endure. At this stage of the investigation, the burden shifts to the government to demonstrate “clear congressional approval” for the program beyond “a merely plausible textual basis.” There we have it. That the Secretary’s HEROES Act authorization would include mass debt forgiveness is not “just plausible”; it’s probably her only plausible reading of the term waive.

Judge Elena Kagan’s objection West Virginia offered a strong critique of the Big Questions doctrine, implying that it had been developed to allow conservative judges to crush government policies they dislike. Should the Supreme Court invalidate the debt plan when it fits so closely with its legal authority, such cynicism would be well deserved.