SCOTUS Hears Lengthy Oral Arguments on Biden’s Student Loan Cancellation Program

By Hugh T. Ferguson, NASFAA Senior Staff Reporter

The United States Supreme Court on Tuesday heard heavily anticipated legal arguments in which the Biden administration laid out its justification of the president’s student loan debt cancellation program while the opposing parties in two cases questioned whether the president has the authority to carry out the program, and whether it would cause harm to borrowers and other entities. While the final decision likely will not be revealed for several more months, conservative justices on the court — including Chief Justice John Roberts — expressed scrutiny over the program in their questioning.

The two critical issues in the arguments centered around the administration’s use of executive authority and whether either of the legal challenges — brought by a group of six states and a pair of student loan borrowers — have legal standing to dispute the program.

At question was the administration’s authority under the Higher Education Relief Opportunities For Students (HEROES) Act of 2003, which according to the Department of Education (ED) “provides the Secretary broad authority to grant relief from student loan requirements during specific periods (a war, other military operation, or national emergency, such as the present COVID-19 pandemic).”

“From a practical standpoint for borrowers, they are unfortunately stuck in the same limbo today that they were yesterday. The checks and balances of the republic grind forward, which does little to alleviate the stress of millions of borrowers whose loan balances hang in the balance,” said NASFAA President and CEO Justin Draeger. “What’s more, it’s difficult to see — now that we’ve reached this political precipice — how the administration and Republicans in Congress can come together to find common ground to work together on student loan issues. Even if this one-time forgiveness happens, it will be a one-time victory that does nothing to help future student loan borrowers.”

U.S. Solicitor General Elizabeth B. Prelogar defended the administration’s program by linking the Education Secretary’s authority to implement the program to the same powers that enabled the previous administration to continue to extend the moratorium placed on federal student loans repayments and the accrual of interest.

Conservative justices questioned the administration’s authority under the HEROES Act to implement certain “waivers and modifications” to the student loan program and throughout the arguments raised concern over the financial implications of the cancellation, which Roberts said would cost half a trillion dollars.

The program has been estimated to cost within the range of $400 billion over the course of 30 years and Prelogar argued that the ongoing payment pause also brought substantial costs to the government, but that the executive authority to implement the pause has not faced a legal challenge, and the pause has in effect offered student loan discharge through the cancellation of accrued interest.

Roberts also raised the issue of separation of powers and cited the court’s previous ruling that prohibited the Trump administration from rescinding the Deferred Action for Childhood Arrivals (DACA) program, in part due to Congress' ongoing debate on the issue. This interpretation, known as the “major questions doctrine,” comes into question when agencies act on issues of political or economic significance without explicit congressional authorization.

There was also significant back and forth over the interpretation of the HEROES Act of 2003 and what Congress’ intention of authority was given to the executive branch during national emergencies that the legislative branch could not anticipate.

Liberal justices argued that the text was clear in offering a broad interpretation of authority, and conservatives pushed back.

During the arguments the plaintiffs were mainly pressed on their legal standing to challenge the program, with liberal justices questioning whether an expansion of standing could cause a flood of lawsuits that might paralyze the federal government from implementing new programs. 

Throughout the litigation process other cases have been unable to garner legal standing and have had their challenges to the program tossed out.

Nebraska Solicitor General James Campbell represented six states suing the administration and primarily focused on potential financial harm to Missouri's Higher Education Loan Authority (MOHELA), claiming the organization’s operating revenue would be significantly reduced due to the debt cancellation program.

But a significant point of contention centered on the fact that MOHELA itself was not a part of the lawsuit.  Justice Amy Coney Barrett pressed Campbell on how the financial relationship between the state and MOHELA was structured.

Throughout his arguments, Campbell maintained that the administration is seeking to bypass congressional authority, by asserting “breathtaking power,” and needs clear congressional authorization that he said does not exist within the HEROES Act.

“The Act permits the Secretary to waive or modify existing provisions because of a national emergency,” Campbell said. “It does not permit him to rewrite existing provisions to create a new program that covers 95% of borrowers and applies to them regardless of how the pandemic affected them.”

Campbell went on to argue that the cancellation program would go “far beyond” ensuring borrowers are not worse off than they were before the pandemic.

In the second case before the court, J. Michael Connolly, an attorney at the firm Consovoy McCarthy, represented a pair of borrowers who sought to prove that they will be harmed by the administration’s program due to eligibility limitations that have prohibited them from having their loans discharged.

Connolly revisited some of the issues raised in the first case, specifically whether the HEROES Act allows debt cancellation, arguing that such an interpretation was beyond the scope of what Congress intended, that ED’s implementation of the program was procedurally improper and needed to undergo the negotiated rulemaking process, and that the $400 billion price tag associated with the program needed congressional approval.

Some of the more liberal justices, like Justice Sonia Sotomayor, took issue with the legal challenges which she said sought to impose the justices’ opinion on the student loan system instead of federal experts.

“What you're saying is now we're going to give judges the right to decide how much aid to give [borrowers] instead of the person with the expertise and the experience, the Secretary of Education, who's been dealing with educational issues and the problems surrounding student loans,” Sotomayor said. “We're going to take it upon ourselves, instead of leaving that decision in the hands of the person who has experience with these questions.”

Some of the more conservative justices raised issues surrounding the fairness of the program. Justice Neil Gorsuch, for example, questioned whether there was an analysis detailing the program’s fairness for people who have either paid off their loans, did not take out loans in the first place, or who are not eligible for loans to be forgiven.

Reaction to the Oral Arguments

Prior to the court’s hearing, advocacy groups, policymakers, and higher education experts expressed their thoughts on the issue.

Sen. Elizabeth Warren (D-Mass.), attending a rally outside the Supreme Court, raised arguments similar to the administration’s, and called into question the Trump administration’s cancellation of Paycheck Protection Program (PPP) loans without objection or legal challenge.

“Not one Republican, not one, raised an objection,” Warren said. “It is time for the Supreme Court to stop playing politics, and just apply the law and let us cancel this debt.”

Other congressional Democrats joined Warren in her calls for the court to allow Biden’s program to take effect.

“The people demand and deserve student debt cancellation. Student debt cancellation will change and save lives. That is why President Biden took action,” said Rep. Ayanna Pressley (D-Mass.). ”He heeded the cause of all those gathered here today. He was responsive to the needs of this movement, mobilizing on behalf of the needs of the people burdened by unjust and egregious student loan debt.”

Other members of the Democratic party said that the program would serve as a needed lifeline for those carrying student loan debt trying to meet their basic needs.

“We have 45 million Americans, young people drowning in student debt. And I have talked to people all over this country who literally delay having a family, can't have any kids, they can't afford a car, they can't afford to have a middle class life because they're drowning in their student debt,” said Sen. Bernie Sanders (I-Vt.). “In America, you should not have to face financial ruin, because you want a damn education.”

In an interview earlier Tuesday morning, Rep. Virginia Foxx (R-N.C.), chairwoman of the House Committee on Education and the Workforce, largely reiterated her stance that the administration does not have the authority to carry out cancellation.

"The COVID emergency is over ... but [Biden] is using that as an excuse hoping that he can get some of this loan money forgiven [as] he calls it. ... He's just transferring the debt,” Foxx said. “This is totally illegal and totally unfair."

Beth Akers, a resident fellow at the American Enterprise Institute, in a similar argument against the program, said the administration has some authority to modify loan terms, but that there is a fine line between continually citing the national emergency as justification for the continuation of the payment pause, and implementing debt cancellation.

There’s also the question of whether borrowers have been made financially “better off” due to the ongoing payment pause, and whether the stalled debt cancellation program would provide more benefits to borrowers who may not be at risk of defaulting when payments resume.

Yet the case could have larger implications outside of the student loan portfolio, which some have argued need to be taken into consideration when formulating a ruling on the case.

Ben Ritz, director of the Progressive Policy Institute’s Center for Funding America's Future, argues that the court should consider the merits of the case and that dismissing it based on a lack of standing could allow future administrations to further push the boundaries of their fiscal authority.

“Regardless of whether one supports the student debt cancellation as a matter of policy or not, it is unquestionably good news that courts are finding some plaintiffs have standing to sue,” Ritz argues. “The Supreme Court should back them up. A finding that nobody has standing to challenge such a sweeping executive action would open a fiscal pandora’s box that in many ways would be a greater setback to progressive priorities than overturning this one executive action.”

What’s Next

A decision from the justices on the program’s future is expected to be made before the end of the court’s term, potentially in May or late June when most controversial opinions tend to be issued.

While ED has enabled borrowers to apply for the opportunity to receive up to $20,000 in student loan debt cancellation, it has not been able to process those applications and has also had to pause the application due to the legal challenges.

Prior to the hearing, the Biden administration announced that the ongoing student loan payment pause would expire 60 days after the litigation has concluded or, if there is not a decision by June 30, payments would then resume at the end of August.

Prelogar, in defending the administration’s efforts, reminded the justices that the ongoing payment pause cannot go on indefinitely and that millions of borrowers will be at serious risk of default should payments resume without debt cancellation.

“Already 26 million people have applied for this relief and 16 million people have been approved to receive it. For those Americans, this is a critical lifeline to ensure that they are not subject to the severe negative consequences of delinquency and default on student loan debt,” Prelogar said. “And the relief for these Americans has been held up by two student loan borrowers who don't even have standing and whose claims fail on the merits. So we'd urge you to reject their claims.”

Stay tuned to Today’s News for more developments on the student loan debt cancellation program and utilize NASFAA’s debt cancellation center for more information.


Publication Date: 3/1/2023

David S | 3/1/2023 8:52:17 AM

I don't know what the greatest day in financial aid history was, but I know what the ugliest day will be. It'll be the day, after the inevitable (and entirely political) SCOTUS decision to overturn student loan cancellation, that millions of Americans who have already been told in writing by the United States government that their loan has been entirely or partially forgiven, get their first bill for repayment. My guess is that millions will refuse to pay, some will sue, and the whole federal student loan system will be thrown into complete turmoil.

And one side of the aisle will use that as a rationale to abandon the federal student loan program as it currently exists, or perhaps in its entirety, claiming that it belongs with the private sector. That will make college less affordable for middle and low income students and their families, and we will be right back to where we were prior to the very existence of the HEA. Actually, even worse, because at least in 1965 public colleges were affordable for many working class families and in some cases free. Now they're neither.

Ben R | 3/1/2023 8:46:51 AM

Not to be too wonky, but due to how loans are accounted for in the federal budget, there's a misunderstanding about the cost to the government from loan cancellation. Student loans are not expensed when originated, but are put on the books as "assets" with an assumed collection value - i.e. amount owed to the federal treasury. The expense is recognized all at once if and when the loan is cancelled, forgiven or written off. Therefore, if the department cancels $400 billion this year, it increases the deficit by that amount this year, not "over 30 years" as we often read. The 30 year reference is based on an assumed cash flow model and it's impact to the overall federal debt during that time, but that is not how the cost recognition works. The impact to both is the same $400 billion.

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