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President Biden Forgives Some Student Loans Without Congress

President Biden Forgives Some Student Loans Without Congress

 The White House released a statement on August 24, 2022 announcing “Student Loan Relief for Borrowers Who Need It Most”.[1] The statement discussed the problem cost of college education costs having skyrocketed, but federal support having “not kept up”. According to the Department of Education, there are more than 45 million borrowers and $1.6 trillion of cumulative student loan debt. According to the White House’s statement, “Middle-class borrowers struggle with high monthly payments and ballooning balances that make it harder for them to build wealth, like buying homes, putting away money for retirement, and starting small businesses.”[2]

                 Thus, the President announced that the Department of Education will provide up to $20,000 in debt cancellation of loans held by the Department of Education.”[3] The cost of the program is projected to be as much as $500 Billion.[4]

   The New York Times reported that President Biden’s plan “could face a protracted legal fight” and that “widespread debt relief could be ripe for challenges.” Prophylactically, the Biden administration issued a memo from the Department of Justice in which it asserted that the student loan debt could be canceled under the authority of the Higher Education Relief Opportunities for Students Act of 2003.

 The Act grants the education secretary the power to “alleviate hardship” that federal student loan borrowers experience due to a “national emergency.” The Administration previously invoked this law to suspend student loan repayments in 2020 in response to the Covid-19 pandemic.[5] The Act, the department wrote, grants the “authority that could be used to effectuate a program of targeted loan cancellation directed at addressing the financial harms of the COVID-19 pandemic.”[6]

 Professor Jonathan Turley of George Washington University Law School notes that the Act ties the relief “to an inability to cover such costs due to the war or emergency” and, in this case, “the Biden plan would use the law to benefit individuals without such a showing. In fact, “many of the 40 million beneficiaries who are relatively wealthy and could pay off the loans.”[7] 

 According to Harvard Law professor Ryan Doerfler, a “key unknown” in the case is the Constitutional issue of “standing.”[8] A federal lawsuit cannot be heard unless a plaintiff has “standing” to sue, meaning that he or she must show personally suffered injury or imminent injury caused by Defendant, and which is redressable.”[9]

 In other words, a federal court may only allow one with a personal stake in the outcome of the case to bring suit. In Lujan v. Defenders of Wildlife,[10] the US Supreme Court developed a three-part test to determine whether someone has standing:

 First, the plaintiff must suffer an “injury-in-fact.” The injury must be concrete and particular and actual or imminent. The case must be dismissed if the injury is too abstract or is generalized to a broad population of people. Second, the plaintiff must show a causal connection between the injury and the conduct. Finally, it must be likely that a favorable decision by the court will redress the injury.[11]

 According to Professor Doefler, standing could be difficult to prove in this case. He observed: “It’s not clear that people who already paid off their loans could sue, any more than people could sue for a retroactive tax refund if the government changes tax laws.” However, University of Virginia law professor Richard Re told The Hill that “if someone can show that this measure will cost them something financially, that would probably be the strongest way to have a challenge be heard on the merits.”[12]

 Assuming a plaintiff could establish standing, the court would evaluate whether the President’s actions fall within his Constitutional powers, as Article 1 of the Constitution gives Congress – not the President – the “power of the purse.” Only Congress gets to pass laws regarding taxing and spending public money. Congress has not authorized the President’s debt release plan. In fact, on July 28, 2021, Speaker of the House Nancy Pelosi was asked if the President can cancel student loan debt by Executive Order instead of with Congress. She answered: “the President can't do it.  So that's not even a discussion … the President can only postpone, delay, but not forgive.”[13]

 Former Harvard Law School professor Toby Merrill, who currently serves as President Biden’s Deputy General Counsel for the U.S. Department of Education, claims: “The Constitution gave Congress the authority to control property of the government, like debts owed to it.” Congress, she claims, granted the Secretary of Education, who works for the president, “unrestricted authority to create and to cancel or modify debt owed under federal student loan programs.”[14]

 However, two recently decided US Supreme Court may call into question the President’s position.

 In September 2020, the CDC ordered a nationwide eviction moratorium, deeming this measure necessary to achieve its goal of limiting the spread of the Coronavirus.[15] It was renewed a year later.[16] In Alabama Association of Realtors v. Department of Health and Human Services, the Supreme Court held that the CDC lacked the authority to issue the eviction moratorium without congressional approval.[17] According to the Court: “It is up to Congress, not the CDC, to decide whether the public interest merits further action here.”[18]

Similarly, the Environmental Protection Agency promulgated the Affordable Clean Energy Rule, which established emission guidelines to address greenhouse gas emissions from existing coal-fired power plants.[19] The North American Coal Corporation challenged the EPA’s authority to so broadly regulate greenhouse gas emissions. In West Virginia v. EPA, the Supreme Court struck down the climate control regulations, ruling that the Constitution does not allow the President to evade Congress in taking major action with large political and economic and significance.[20] As the Court explained, Congress did not grant the EPA the authority to devise emissions caps the way it did under the Clean Power Plan.[21]

 While neither case was strictly about spending power, both cases limited agency action because the Court rules that they were supposed to be left to Congress.

 While we don’t know exactly how the courts will rule, these recent trends seem to indicate that the President’s loan forgiveness initiative may be ruled beyond the scope of the President’s power; that is, if anyone manages to show standing to challenge it.

[2] Id.

[3] Id.

[15] See 42 U.S.C. § 264(a) (sometimes referred to as § 361(a)).

[16] 86 Fed. Reg. 43,244.

[18] Id.

[21] Id.