student loans

Why the Supreme Court Might Uphold Student-Debt Relief

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Last summer, the Biden administration announced plans to wipe no less than $10,000 off the student-loan balances of roughly 40 million Americans. Seven months later, Uncle Sam has yet to pay up, and there’s a decent chance he never will.

A federal appeals court halted the student-loan-forgiveness plan with an injunction in November. This week, the fight over the policy’s legality finally reached the Supreme Court, as two separate sets of plaintiffs presented their disparate arguments for why the administration’s policy exceeded its legitimate authorities.

In both cases, the plaintiffs must win two separate disputes: First, they must establish that they were harmed by the policy and therefore have standing to challenge it in court. Second, they must show that President Biden’s forgiveness plan violated existing law and/or constitutional principles.

In Department of Education v. Brown, the case against the policy’s legality centers on the fact that Biden’s student-debt-forgiveness proposal was not subjected to a “notice and comment” period. Under the Administrative Procedure Act (APA), federal agencies are required to provide the public with an opportunity to register its views on a proposed change in administrative policy before that policy takes effect. The case’s two plaintiffs, a pair of student-loan borrowers who were ineligible for maximum forgiveness under Biden’s plan, argue that they have standing to oppose it because the program denied them their right to formally register their disapproval.

In Biden v. Nebraska, meanwhile, six Republican-led states argue that the debt-relief program violates both the APA and the Constitution’s separation of powers. The states argue that they have standing to challenge the law because they have only a limited ability to tax the forgiven loans as income. More coherently, the state of Missouri is home to a semi-public loan servicer called the Higher Education Loan Authority of the State of Missouri (MOHELA), which would lose revenue if mass debt forgiveness goes into effect.

Most analysts believe that the first case won’t pass muster, even with the Supreme Court’s ideologically sympathetic conservative majority. Biden’s policy is founded on a 2003 law called the Higher Education Relief Opportunities for Students (HEROES) Act, which gives the Department of Education the authority to cancel student loans en masse in the event of “a national emergency,” such as the COVID pandemic. That law also explicitly exempts such acts of cancellation from the “notice and comment” process.

So, the substantive argument in ED v. Brown looks weak. And the case for standing is even weaker. One of its two plaintiffs would actually receive $10,000 in forgiveness, were Biden’s plan to take effect. The litigant’s complaint is that he does not qualify for $20,000 worth of forgiveness under the policy. This is because Biden’s programs restricts that higher level of debt forgiveness to Pell Grant recipients, which is to say, borrowers who had demonstrated a high level of financial need when they applied for loans. Suffice to say, it is not obvious how an individual is injured by a program that slashes $10,000 off their debt burden merely because that program also denied them a right to formally complain about it (a right that, according to most legal analysts, the person did not actually have).

The outcome of Biden v. Nebraska appears less certain. The HEROES Act does give the secretary of education the authority to “waive or modify” student-loan obligations in response to a national emergency. And the COVID pandemic would seem to qualify as such an event. A strict textual interpretation of the law would, therefore, seem to leave the Biden administration in the clear.

Nevertheless, the Supreme Court’s conservative justices are probably right to suspect that Biden’s program — which could provide nearly a half-trillion dollars in debt relief to more than 40 million Americans — is a far more ambitious modification of student-loan obligations than many of the HEROES Act’s congressional supporters had in mind.

There was a time when conservatives argued that the judiciary should prioritize the literal text of Congress’s laws over subjective interpretations of their true meaning. But the current conservative majority is less fond of strict textualism than it is of the so-called “major questions” doctrine. This jurisprudential theory officially aims to prevent the federal bureaucracy from implementing sweeping policy changes on the basis of tendentious interpretations of existing law. Specifically, the Court’s conservative majority has repeatedly argued that “we expect Congress to speak clearly if it wishes to assign to an agency decisions of vast ‘economic and political significance.’”

In other words, unless a law explicitly empowers a federal agency to set policies of great significance, the Court will assume that an agency that proposes such policies is overstepping its authority.

“Vast significance” may be in the eye of the beholder. But the Roberts Court has nevertheless established many precedents for striking down administrative policies on the grounds that they tackled “major questions” without Congress’s explicit authority. This provides the Court’s six-justice conservative majority with a ready-made rationale for killing Biden’s student-debt policy. And in oral arguments Tuesday, the justices evinced an eagerness to use it.

Chief Justice John Roberts, conventionally considered the most “moderate” of the Court’s right-wingers, made no secret of his contempt for Biden’s policy. At one point, Roberts delivered a broadside against the debt-forgiveness program that had little obvious connection to the legal argument in either case. Arguing that the administration’s policy was fundamentally unfair, Roberts asked the Court to consider the plight of two Americans, one who took on debt to attend college, the other who did so to start a lawn-care service. The government is now effectively telling the college graduate, in Robert’s telling, that they don’t need to pay their loan. And yet “nobody’s telling the person who is trying to set up the lawn service business that he doesn’t have to pay his loan. He still does, even though his tax dollars are going to support the forgiveness of the loan for the college graduate, who’s now going to make a lot more than him over the course of his lifetime.”

Of course, neither the Constitution nor any U.S. law mandates that our government’s fiscal policies cannot benefit affluent college graduates at blue-collar workers’ expense (if they did, the conservative movement would need to find a new economic agenda). But Roberts also made clear that the scope of forgiveness offered by the Biden program rendered it a policy of vast significance in his estimation. We’re talking about “half a trillion” dollars in debt and 43 million borrowers, Roberts said, arguing that if the government is going to “give up” that much revenue and “affect the obligations of that many Americans on a subject that’s of great controversy, they would think that’s something for Congress to act on.”

The liberal justices countered that when a law says the Department of Education can “waive” student-loan obligations as it sees fit in a national emergency, it means that the the Department of Education can “waive” student-loan obligations as it sees fit in a national emergency.

At one point, Justice Brett Kavanaugh evinced sympathy for the idea that “waive” signified the authority to cancel a student loan in its entirety. But the bulk of his remarks indicated that he will side with Roberts. In addition to noting the Biden forgiveness plan’s extraordinary scale, and the fact that the HEROES Act did not “authorize the specific action” taken by the Biden administration, Kavanaugh observed that “some of the biggest mistakes in the Court’s history were deferring to assertions of executive or emergency power,” while “some of the finest moments in the Court’s history were pushing back against presidential assertions of emergency power.”

With six conservative justices, even if one were to unexpectedly side with the liberals, Biden’s policy would still be overturned. Thus, if all that was at stake in Biden v. Nebraska were whether the DOE lacked authority to cancel student debt en masse, borrowers could probably kiss forgiveness good-bye.

But that wasn’t the only question before the Court. The other was whether any of the case’s plaintiffs actually had standing to bring their suit. Only Missouri had a halfway plausible claim to suffering an injury as a result of Biden’s measure. As noted above, Missouri is home to MOHELA, a quasi-governmental entity that operates as a corporate loan servicer but is contractually obligated to contribute to public scholarship funds for low-income Missouri students. The less student debt held by the public, the less money that loan servicers will make. Therefore, MOHELA was injured by the Biden administration’s policy, and thus, by extension, so was the state of Missouri.

But there are two big flaws in this argument. One is that MOHELA has not actually contributed very much to Missouri’s scholarship funds. Indeed, one of those funds, the Lewis and Clark Discovery Fund, has not received a payment from MOHELA in over 12 years. Further, MOHELA itself could have brought a suit but chose not to. As conservative justice Amy Coney Barrett noted at Tuesday’s hearing, the fact that Missouri could not compel MOHELA to bring a suit calls into question the idea that MOHELA is fundamentally an arm of the Missouri government, whose financial injuries are therefore also those of the state.

It’s conceivable, then, that two conservative justices could join the Court’s three liberals in finding that Missouri and its co-plaintiffs lack standing.

To be sure, the Court’s conservative majority has rarely allowed technicalities to thwart ideologically congenial rulings. The Supreme Court is fundamentally a political institution. Under Roberts’s leadership, the Court has sometimes functioned as a de facto legislature, with justices trading concessions like senators haggling over a bill. If five conservative justices adamantly wish to kill student-debt relief, they will do so.

But there is some reason to wonder whether they do. If Roberts & Co. could undo Biden’s policy without suffering any political backlash, they surely would. Yet the student-debt case threatens to politicize the Supreme Court to an exceptional degree, and in service of a cause that is peripheral to the conservative movement’s main aims.

The Roberts Court has managed to affect many sweeping policy changes without attracting the public’s scrutiny. If the Court unilaterally takes hundreds of billions of dollars from 43 million Americans, however, those Americans will surely notice.

Unlike the executive branch, the Supreme Court commands no army. Its power rests entirely on public perceptions of its legitimacy. At various points in the past, Roberts has demonstrated a concern for guarding that legitimacy. Turning the Court into the financial enemy of 13 percent of the U.S. population — and a disproportionately influential 13 percent at that — would come with real political liabilities.

Of course, the Court’s decision to overturn Roe v. Wade was also politically explosive. But outlawing abortion is one of the conservative legal movement’s core ambitions. Thwarting a one-off act of debt forgiveness is not. Yes, Roberts and his allies want to curb the administrative state’s power. But they could avoid legitimizing the Biden administration’s policy, without blocking forgiveness, by throwing out the case on the technicality of standing. They will, after all, have plenty of future opportunities to entrench the major questions doctrine.

Further, by making such a salient demonstration of its willingness to subordinate ideology to procedural niceties, throwing out the case against student-loan forgiveness would function as a useful PR exercise for a Supreme Court that’s lost face with much of America as a result of its abortion ruling.

None of this means that student-debt forgiveness is safe. But it would be premature to declare it dead. The state of Missouri would not be meaningfully injured by Biden’s policy. And, more important, neither would the conservative movement’s core ambitions. That just might be enough to let Uncle Sam pay up.

Why the Supreme Court Might Uphold Student-Debt Relief