On Wednesday, President Joe Biden unveiled his long-awaited plan for student loan forgiveness. For borrowers making under $125,000 a year, the program will cancel $10,000 in student loan debt (and $20,000 for Pell Grant recipients). It will provide relief to 43 million Americans—if five justices on the Supreme Court let it take effect. Will they? The short answer is: probably not. But there’s good news for beneficiaries: The administration may have already identified another way to enact relief if the judiciary stands in the way of Plan A.
To understand where this is going in the courts as well as the likely workaround, recall a basic fact that many critics of Biden’s program do not appear to understand: The federal government forgives student loans all the time. Multiple statutes give the Department of Education sweeping authority to cancel loans for a broad range of reasons. Before Wednesday, the administration had already approved $32 billion in student loan relief for more than 1.6 million borrowers.* These actions did not provoke substantial controversy or litigation. Nobody raised a legal challenge when Biden canceled $5.8 billion in student loans for more than 323,000 disabled borrowers. Nobody raised a legal challenge when Biden announced rolling loan forgiveness for borrowers who entered public service—a plan that has already granted $10 billion in debt relief to more than 175,000 borrowers.
The Department of Education has tackled so much student debt already because Congress gave it a number of tools to do so. One of those tools is the Heroes Act, passed in the wake of 9/11. This law gives the secretary of education authority to “waive or modify” any provision of the law applicable to student aid programs “in connection with a war or other military operation or national emergency.” (Emphasis mine.) The secretary may exercise this power to “ensure” that borrowers “are not placed in a worse position financially” in relation to their loans because they were “affected” by the emergency. A “national emergency” is defined as any national emergency declared by the president. The ongoing COVID-19 pandemic surely qualifies, since Donald Trump declared it a national emergency and Biden has extended that declaration.
Congress intended the Heroes Act to apply swiftly and widely. It waived a number of procedural requirements that would slow down the education secretary’s efforts to grant relief. And it clarified that the secretary “is not required” to act “on a case-by-case basis,” allowing him to provide relief to an entire class of borrowers at once. The Trump and Biden administrations both used this law to freeze student loan payments during the pandemic.
Biden’s secretary of education, Miguel Cardona, already relied upon the Heroes Act to forgive $10 billion for public service borrowers. Now the administration is using the law as its basis for a much bigger, less targeted student debt relief program. This idea is not new: At the end of her tenure, Trump’s education secretary Betsy Devos tried to stop Biden from embracing it. She solicited a memo arguing that the Heroes Act does not permit “mass cancellation” of student debt. (In a twist, the memo was issued four days after DeVos resigned in protest of Jan. 6, and it violated basic procedural requirements.)
Under Biden, the Department of Education concluded that DeVos’ eleventh-hour memo was wrong, and that the agency can provide mass student loan cancellation because of the ongoing pandemic. The Justice Department’s Office of Legal Counsel agreed. It pointed out that under the Heroes Act, the secretary gets to decide when relief “may be necessary,” deferring to his view of who, exactly, needs financial help because of the emergency. And because this help need not be provided “on a case-by-case basis,” OLC found that the secretary can “proceed by categorical rules.”
Going by the plain language of the law alone, Biden’s plan is likely legal. Sure, it’s probably not how Congress envisioned the Heroes Act functioning. But the program fits into the text that Congress actually passed. These days, however, the Supreme Court no longer uses textualism to assess administrative actions. Instead, it asks whether a federal program involves a “major question”—which just means anything five justices deem a big deal. When handling a “major question,” the court demands an explicit grant of authority from Congress, even if existing law appears to permit the program already. As Justice Elena Kagan put it, the “major questions doctrine” serves as a “get-out-of-text-free” card that can “magically appear” whenever it serves the conservative majority’s “broader goals.” (Specifically, the dismantlement of the administrative state.)
There are at least three “major questions” that the Supreme Court could identify here. First, the majority might say that the ability to “waive or modify” aspects of the law does not allow the secretary to cancel payments. Second, the majority could say that COVID is not the kind of “national emergency” envisioned by the law. Third, the majority could say that an “affected” group must be smaller and more targeted than every low or middle-income American who lived through the pandemic.
This first line of attack would be very weak: Both Congress and the Department of Education have operated for years on the assumption that the secretary can permanently cancel some loans; SCOTUS could not abolish this power without wreaking havoc on the entire system. The second would be feeble, too: Whatever the court thinks about COVID, the Heroes Act is very clear that a presidential declaration of a national emergency triggers the law. What’s more debatable is the third potential line of attack. Can the secretary really just decide that COVID put 43 million non-wealthy Americans “in a worse position financially” in relation to their loans? It’s easy to imagine the Supreme Court ruling that the secretary must identify a more specific class of borrowers whose ability to pay off loans was demonstrably harmed by the pandemic.
If the court chooses this route, though, there’s a straightforward fix: Biden can simply announce that any borrower affected by the pandemic can apply for relief; if they can prove hardship, their debts get canceled. The Heroes Act, of course, says such “case-by-case” adjudication is unnecessary. And this method would increase administrative burdens while shrinking the pool of beneficiaries, since some eligible borrowers will fail to apply. But it would still help millions of people who will be in dire need to support when student loan payments resume in 2023. (There’s a direct analogy to Virginia Gov. Terry McAuliffe restoring felon voting rights one person at a time after the Virginia Supreme Court wouldn’t let him do it all at once.)
One last thing: It’s an open question whether anyone can sue against Biden’s program in the first place. In a persuasive and prescient analysis published this year in the Virginia Law Review, Jack V. Hoover argued that no one has standing to file suit against sweeping loan cancellation. To prove standing, a party would have to demonstrate concrete harm to them, and show how blocking cancellation would remedy that harm. Republicans complain that Biden’s program hurts taxpayers, but under Supreme Court precedent, taxpayers don’t have standing to sue. Former borrowers aren’t directly injured, nor can they show that forcing everybody else to pay off their loans would somehow benefit them. Congress is not allowed to sue just because it disagrees with a president’s interpretation of a statute. State governments aren’t injured, since forgiving federal loans imposes no burden on their finances or sovereignty.
Loan servicers, who are federal contractors, have the best case for standing because they profit from processing repayment and will therefore lose money under Biden’s plan. As Hoover noted, courts have generally refused to let contractors sue against federal regulations that hurt their bottom line. Contractors’ duty, after all, is to administer federal programs, and it’s debatable whether a new rule falls within their “zone of interest” solely because it hurts their profits. Moreover, the government spent more than $655 billion on federal contracts in fiscal year 2020 alone. If they could all sue “to protect their fiefdoms from regulatory change,” in Hoover’s words, they would guarantee “ossification” of the entire government.
In truth, though, certain key circuit courts and the Supreme Court seem to follow one standing rule: When a majority wants to decide a case on the merits, they find some justification to grant standing; when it doesn’t, they don’t. The Biden administration should proceed on the assumption that the conservative jurists, and ultimately the justices themselves, will be eager to shred the new program, and will therefore find that somebody, somewhere has standing. It should also consider its response when a Trump judge inevitably issues a nationwide injunction against debt cancellation and the Supreme Court’s conservatives uphold it. There are several paths to student debt relief, and even this partisan judiciary cannot block them all.
Correction, Aug. 25, 2022: This post originally misstated that the Biden administration’s previous loan relief affected 1.6 billion borrowers.