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The Supreme Court will hear oral arguments today on the Biden administration’s student debt relief plan. Like many people interested in federal financial aid policy, I have been following the developments of this plan—and the lawsuits looking to block it—for more than six months. I plan to attend the Supreme Court hearing today and in preparation have pulled together what I see as important resources and background information—a viewer’s guide of sorts—to help follow along with some of the key issues at play. This guide also provides links to court records, legislation and other governmental materials, supplying a firsthand look at the original sources relevant to the hearing.
The hearing will include two different cases: Biden v. Nebraska and U.S. Department of Education v. Brown. Both cases stem from President Biden’s August 2022 announcement that the U.S. Department of Education will cancel up to $20,000 in debt for Pell Grant recipients and up to $10,000 for non–Pell Grant recipients, so long as their loans are held by ED and the individual has annual earnings below $125,000 (or $250,000 for married couples). The Biden administration began accepting applications for loan cancellation in October 2022 and, due to court orders, stopped in November 2022. To date, no cancellations have been made under this Biden administration plan.
In the Nebraska case, Republican attorneys general in six states (Arkansas, Iowa, Kansas, Missouri, Nebraska and South Carolina) brought a suit to the U.S. District Court for the Eastern District of Missouri alleging Biden’s “Mass Debt Cancellation violates the separation of powers established by the U.S. Constitution” and also violates the Administrative Procedure Act “because it is in excess of statutory authority, is arbitrary, capricious, an abuse of discretion, and otherwise not in accordance with law.”
The district court sided with the Biden administration and dismissed the case because the states “failed to establish Article III standing.” However, the states filed an appeal with the U.S. Court of Appeals for the Eighth Circuit. The appeals court agreed with the states and overruled the district court’s decision, saying Missouri “likely has legal standing to bring its claim.” This reversal caused the Biden administration to ask the U.S. Supreme Court to intervene, which it agreed to do in December.
The Brown case involves two individuals (Myra Brown and Alexander Taylor) who filed a suit in the U.S. District Court for the Northern District of Texas against the U.S. Department of Education. Brown and Taylor claim ED violated the APA by creating the debt-relief plan “behind closed doors” and “with an eye toward securing debt forgiveness in time for the November election.” Because ED did not go through a public notice-and-comment period, Brown and Taylor allege they were “deprived of ‘their procedural right to protect [their] concrete interests.’” They claim it is “irrational, arbitrary, and unfair” that Brown’s loans do not qualify for any forgiveness and Taylor’s do not qualify for more forgiveness. Brown’s loans are commercially held, and Taylor is not eligible for the maximum loan cancellation amount because he did not receive a Pell Grant.
The U.S. District Court judge sided with Brown and Taylor, concluding ED does not have “clear congressional authorization” to cancel loans and deeming the cancellation plan illegal. The U.S. Court of Appeals for the Fifth Circuit denied the Biden administration’s motion for a stay pending appeal, so the Biden administration asked the Supreme Court to intervene, which it agreed to do in December.
What Will the Supreme Court Hear?
At the Supreme Court, the states and Brown and Taylor are the respondents, while the U.S. Department of Education and the Biden administration are the petitioners. The court will be asking two questions:
- Whether the respondents have Article III standing, and
- Whether the plan (a) exceeds the education secretary’s statutory authority and was adopted in a procedurally proper manner or (b) is arbitrary and capricious.
Question 1: Do the respondents have standing?
Before weighing the merits of the case, the Supreme Court needs to decide whether the parties have standing. In other words, do the states and Brown/Taylor have a right to bring these lawsuits in the first place? If the answer is yes, then the Supreme Court will entertain Question No. 2. If not, then Question No. 2 is basically irrelevant.
In the Nebraska case, there was a fundamental disagreement in the lower courts: the U.S. District Court determined states did not have standing, while the U.S. Court of Appeals determined they did. To try to sort through the question of standing, I will be listening for the following two questions that probe a bit further.
- What specific injury does debt cancellation bring to the states and Brown/Taylor?
To establish standing, the respondents must prove the debt-relief plan causes them “concrete and particularized” harm. They also need to prove this harm is “actual or imminent,” meaning it can’t be speculative or hypothetical.
The states will focus on three major harms: reduced tax revenue to the states, financial harm to the Missouri Higher Education Loan Authority (MOHELA) and loss of earnings from loan consolidation.
The respondents argue the first harm (reduced tax revenue) stems from a provision in the American Rescue Plan of 2021. This provision makes student loan forgiveness tax-free through the end of 2025, meaning discharged loans will not count as federal adjusted gross income (AGI). Four of the states (Iowa, Kansas, Nebraska and South Carolina) use federal AGI to determine state taxable income. These states claim debt cancellation will reduce AGI and therefore harm the states, “immediately causing $430 billion in non-taxable loan discharges that will reduce the amount of future discharges for the States to tax.” ED argues this “self-inflicted” harm is not caused by debt forgiveness, but by the states’ own tax codes, and does not give the states standing to sue.
The other two alleged harms deal with the role of student loan servicers and loan authorities located in these six states—mainly MOHELA (more on this below).
The U.S. District Court ruled Brown and Taylor have standing because, despite their “concrete interest” in having their loans forgiven, ED denied them of their “procedural rights under the APA to provide meaningful input” through a notice-and-comment period. The U.S. District Court also ruled the harm caused to Brown and Taylor was “traceable” to ED and there is “some possibility” ED could reconsider the eligibility criteria to allow Brown and Taylor to receive relief. As a result, the U.S. District Court ruled Brown and Taylor satisfy all Article III standing requirements. ED disagrees with this decision, arguing that Brown and Taylor do not have standing because the HEROES Act “provides an express exemption from notice-and-comment procedures.” Because of this exemption, ED argues it did not violate Brown and Taylor’s procedural rights under the APA.
If the Supreme Court grants Brown and Taylor standing, then the focus will likely be on procedural steps ED failed to take. If it grants the states standing, then the focus will likely be on the financial impact of debt cancellation on states. I will be listening to whether it sounds like the Supreme Court justices believe both sets of respondents have standing.
- What is MOHELA’s relationship to the state of Missouri?
Although the Nebraska case involves six states, Missouri and MOHELA have taken center stage in the standing debate. Missouri’s central argument is that debt cancellation will “inflict substantial financial losses on MOHELA” and those losses, in turn, will “harm Missouri by threatening to reduce, delay, or otherwise hinder MOHELA’s financial contributions to the State Treasury and the State’s financial-aid programs.” They also argue MOHELA (and others, including the Arkansas Student Loan Authority, for example) will face financial harm if Family Federal Education Loans (i.e., commercial loans) they service are consolidated into federal Direct Loans that are eligible for forgiveness. Consolidation, they argue, would “undermine” their investments in student loan securities and cause harm to the states.
Missouri’s attorney general describes MOHELA as an “arm of the state” that therefore has standing to sue “in the name and on the behalf of the state.” But ED disagrees, arguing MOHELA was “state created” but now runs independently of the state as a separate legal entity. As a result, ED rejects the proposition that “if A causes financial harm to B, and B owes money to C, C has standing to sue A.” The lower courts disagreed on whether the states had standing, so I will be listening closely to any clues as to whether the justices seem inclined to view MOHELA as “an arm of the state” or simply “state created.” The distinction will be a major factor in deciding whether the states (and Missouri in particular) have standing to sue in the first place.
Question 2: Does debt relief exceed the secretary of education’s authority?
Assuming the Supreme Court justices determine the respondents have standing, this second question will deal with the merits of the case. The answer to this question is obviously consequential for the Biden administration’s debt-relief plans. But the answer also speaks to much broader issues related to how much power—especially emergency power—federal agencies and presidents should wield.
- Does the HEROES Act give the secretary of education “clear congressional authorization” to provide debt relief?
The Biden administration claims the HEROES Act provides “unambiguous” and “clear” language regarding what the U.S. secretary of education is authorized—and “deems necessary”—to do during a national emergency. The HEROES Act says the secretary can “waive or modify any statutory or regulatory provision applicable to the student financial assistance programs under Title IV of the [Education] Act” to ensure borrowers are not left “in a worse position financially” as a result of a national emergency. They argue cancellation fits under its statutory authority to “waive or modify” student aid provisions and is necessary to help borrowers resume repayment (and avoid a spike in default and delinquency) when the COVID-19 repayment pause begun in March 2020 ends.
The respondents argue the HEROES Act, which was created in response to the Sept. 11 terror attacks and made permanent in 2007, was designed to help active-duty military personnel and has never been used to cancel loans. They describe a “novel use of a 20-year-old statute, and a breathtaking and transformative assertion of power beyond the Secretary’s institutional and policy expertise.” They further claim the language of the HEROES Act does not provide “plausible” or “colorable textual basis” for the secretary’s broad cancellation authority. The respondents argue the lack of “clear congressional authorization” in combination with the size and significance of the proposed cancellation (which the Congressional Budget Office estimates to cost $400 billion) make this a “major-questions” case.
This part of the debate will likely tap into bigger issues about how much discretion or power agencies should have when interpreting ambiguous legislative language. On the one hand, there is the Chevron framework, where courts might defer to an agency’s “reasonable interpretation” of vague statutes. On the other hand, there is the major-questions doctrine, where courts might deem an agency’s actions so significant they require clear congressional authorization. The Supreme Court has invoked the major-questions doctrine when (1) a federal agency’s interpretation of a statute is of “vast economic and political significance” and (2) Congress “has not clearly empowered the agency” to take action.
The Biden administration argues the Supreme Court has only invoked the major-questions doctrine when federal agencies “imposed regulatory burdens, rather than … offering additional benefits,” so it should not apply in the current case. Respondents disagree and frame debt relief as a “textbook case for the major questions doctrine.” They claim the political significance is “undeniable,” ED’s assertion of power “unheralded” and the amount of debt to be cancelled “dwarfs” that of past federal policies.
The Supreme Court does not appear to have a clear line in the sand when applying the major-questions doctrine, so I will be listening to see whether any of those lines start to get drawn in the hearing.
- How close is the nexus between the COVID-19 emergency and debt relief?
The National Emergencies Act (NEA) is the federal law presidents Trump and Biden used to declare the COVID-19 pandemic a national emergency. The HEROES Act provides the secretary of education with “specific waiver authority to respond to a war or other military operation or national emergency.”
The Biden administration claims debt cancellation is necessary “to protect student-loan borrowers affected by a national emergency from student-debt-related financial harm.” They argue borrowers will face several financial challenges (e.g., delinquency, default, difficulty making payments) when the payment pause ends; they also argue “pandemic-connected loan discharge will reduce these harms.” As a result, the Biden administration needs to convincingly link debt cancellation directly to the COVID-19 national emergency.
Respondents argue debt cancellation is arbitrary and has only a “tenuous and pretextual connection to a national emergency.” They point to political efforts predating or unrelated to the COVID-19 pandemic, including President Biden’s campaign promise of $10,000 in loan cancellation and failed congressional efforts to cancel student debt dating to 2019, as evidence the Biden administration is using the national emergency as an excuse to deliver on a political wedge issue and campaign promise. Respondents further claim the Biden administration “failed to consider” factors other than the interests of borrowers, including the cost of loan cancellation and the department’s obligations to recover debts, and did not “reasonably explain” the eligibility criteria behind the cancellation plan.
This part of the debate will likely focus on whether cancellation is “arbitrary and capricious,” and I will be listening for examples of what data, analysis and research evidence informed the Biden administration’s plans. The court may also wade into the political debates and proposals for debt cancellation that predate the pandemic. This part of the debate may also steer into larger conversations the Supreme Court will be hearing about the appropriate use of emergency powers.
Over the past six months, I have been scrambling to keep up with all the news around the Biden administration’s debt-cancellation plan. Writing this guide helped me synthesize the key issues I think are interesting and relevant to the case and that I will be watching most closely during oral arguments today. There are certainly more issues at play than what’s outlined above, and I hope this guide will also help me look back and see whether the issues that seem most pressing now are what the justices ultimately focus on in their decision, which will likely come out by the end of June.