The Court applied the “major questions doctrine” and held that the HEROES Act did not authorize the Biden Administration’s student loan forgiveness plan.
On June 30, 2023, the Supreme Court held that the Secretary of Education did not have the authority to implement the Biden Administration’s student loan forgiveness plan (“Biden Plan”). The decision will cancel the forgiveness of roughly $430 billion in debt principal and will affect nearly all borrowers.
The Biden Plan, unveiled in August 2022, was intended to provide debt relief to millions of borrowers. At the time of the plan’s announcement, student loan repayments had been suspended for nearly two years by then-Secretary of Education Betsy DeVos in consideration of the COVID-19 pandemic (“DeVos Suspension”).
The Biden Plan had three components:
- cancel up to $20,000 for Pell Grant recipients and up to $10,000 for non-Pell Grant recipients as long as the individual made less than $125,000 a year ($250,000 for married couples);
- implement a new income-driven repayment plan that caps monthly loan payments at 5% of a borrower’s discretionary income; and
- make permanent expansions to the Public Service Loan Forgiveness (PSLF) program to make more people eligible for PSLF.
Both the Biden Plan and the DeVos Suspension relied on the Higher Education Relief Opportunities for Students Act of 2003 (HEROES Act) for authority. The HEROES Act, passed in the wake of the Sept. 11 attacks, allowed the Secretary of Education to waive or modify provisions of student loan programs for students affected by the Sept. 11 attacks as deemed necessary. Congress made the Act permanent in 2007.
Within four weeks of releasing the Biden Plan, the Department of Education announced that 26 million borrowers had applied for relief or had already been deemed eligible under the Biden Plan. However, legal challenges quickly cropped up. Two of the lawsuits have ended up before the Supreme Court; Biden v. Nebraska and U.S. Department of Education v. Brown.
The first legal challenge, Biden v. Nebraska, was brought by attorneys general from six states—Nebraska, Missouri, Arkansas, Iowa, Kansas, and South Carolina (“State AGs”). The State AGs asserted that the Biden Plan violated the constitutional separation of powers framework and the Administrative Procedure Act. In particular, the State AGs argued that the Biden Plan violates the “major questions doctrine”—the principle that Congress must clearly authorize a federal agency to make decisions that have vast economic and political significance, and that the HEROES Act does not meet this standard.
The second legal challenge, U.S. Department of Education v. Brown, was brought by two individuals with student loans, Myra Brown and Alexander Taylor. Brown was ineligible for forgiveness under the loan forgiveness program because she has commercially held loans, which were excluded under the plan, while Taylor was eligible for $10,000 in loan forgiveness, but not the full $20,000 because he is not a Pell Grant recipient. Brown and Taylor argued that the Biden Plan violated the Administrative Procedure Act and Higher Education Act’s notice-and-comment requirements, improperly denying Brown and Taylor an opportunity to comment on the plan and urge a different approach. Like the State AGs, they also argued that the Secretary of Education had overstepped the authority provided by the HEROES Act.
In response, the Biden Administration argued that the HEROES Act specifically grants the Secretary of Education authority to “waive or modify any statutory or regulatory provision applicable to the student financial assistance programs” in response to a “national emergency” and that the Biden Plan fell within that purview because it responded to the economic consequences of the COVID-19 pandemic and targeted certain borrowers at higher risk of delinquency and default due to the pandemic.
A significant portion of the parties’ arguments focused on whether cancelling loans altogether constitutes a waiver or modification within the meaning of those terms as defined in the HEROES Act. The plaintiffs argued that the meaning of “waiver” and “modification” were narrow and that the Biden Plan to cancel the loans exceeded the scope of action allowed under the statute’s text.
Another important argument in both cases concerned the plaintiffs’ standing, or legal right to sue. In order for each lawsuit to proceed, at least one of the plaintiffs required standing. The State AGs argued that Missouri had standing because the state controls one of the largest federal student loan servicers, the Missouri Higher Education Loan Authority (MOHELA), which would be affected by the debt-forgiveness plan. The Department of Education responded that MOHELA was not a party to the lawsuit and Missouri is a separate and independent entity. Separately, Brown and Taylor argued that they had standing to sue because they were affected by the Biden Plan’s lack of comment period and stand to benefit from a new loan-forgiveness program should the current one be struck down. The government countered that Brown and Taylor’s requested relief of striking down the current loan forgiveness program would not redress their alleged injuries because they would not benefit in any way, and the possibility of a new plan was too speculative.
On June 30, the Supreme Court released both decisions for Nebraska and Brown. In Brown, the Court ruled unanimously that the plaintiffs had no standing to challenge the Biden Plan.
However, the Court ruled in Nebraska, 6-3, to invalidate the Biden Plan. Writing for five of the justices in the majority opinion, Chief Justice Roberts stated that the major questions doctrine applied to the HEROES Act and that Congress could not have intended to authorize the Biden Plan because the Plan could not be considered a “waiver” or “modification” of student loans. Justice Barrett concurred, agreeing with the result while questioning the majority’s framing of the major questions doctrine.
Justice Sotomayor filed a dissent, joined by Justices Kagan and Jackson, writing that the six states lacked standing to sue and criticized the majority’s interpretation of “waive or modify” in the statute as overly restrictive.
In the wake of the Supreme Court’s decision, it remains to be seen whether the Biden Administration will explore other tools or pathways to tackle the student debt crisis, or reconsider its plans to restart student loan payments in October as previously announced.
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