Student Loan Forgiveness Program Fails to Survive Supreme Court Scrutiny

In Biden v. Nebraska, 600 U.S. ____ (2023), the U.S. Supreme Court struck down the Biden Administration’s student loan forgiveness program. Relying on “ordinary tools of statutory interpretation,” the six-member majority found that the Secretary of Education lacked authority under the HEROES Act to implement the loan cancellation plan.

Facts of the Case

The case centered onwhether the Secretary of Education (Secretary) has authority under the Higher Education Relief Opportunities for Students Act of 2003 (HEROES Act) to depart from the existing provisions of the Title IV of the Higher Education Act of 1965 (Education Act) and establish a student loan forgiveness program that will cancel approximately $430 billion in debt principal and affect nearly all borrowers.

Under the HEROES Act, the Secretary “may waive or modify any statutory or regulatory provision applicable to the student financial assistance programs under title IV of the [Education Act] as the Secretary deems necessary in connection with a war or other military operation or national emergency.” Of particular relevance to the case, the Secretary may issue such waivers or modifications only “as may be necessary to ensure” that “recipients of student financial assistance under title IV of the [Education Act affected by a national emergency] are not placed in a worse position financially in relation to that financial assistance because of [the national emergency].”

In 2022, as the COVID–19 pandemic came to its end, the Secretary invoked the HEROES Act to issue “waivers and modifications” reducing or eliminating the federal student debt of most borrowers. Borrowers with eligible federal student loans who had an income below $125,000 in either 2020 or 2021 qualified for a loan balance discharge of up to $10,000. Those who previously received Pell Grants qualified for a discharge of up to $20,000.

Six States challenged the plan as exceeding the Secretary’s statutory authority. The district court denied the States’ motion for a preliminary injunction and dismissed the case for lack of jurisdiction after determining none of the States had standing to bring the lawsuit. However, the Eighth Circuit Court of Appeals reversed and enjoined the debt relief plan.

Supreme Court’s Decision

By a vote of 6-3, the Supreme Court agreed with the states that the HEROES Act does not authorize the loan cancellation plan. “The HEROES Act allows the Secretary to ‘waive or modify’” provisions of the student aid laws, “but does not allow the Secretary to rewrite that statute to the extent of canceling $430 billion of student loan principal,” Chief Justice John Roberts wrote on behalf of the Court.

The Court first addressed the threshold issue of standing, concluding that at least Missouri had the right to challenge the student loan forgiveness program. According to the Court, the state of Missouri had standing to sue because the plan would cost MOHELA, a nonprofit government corporation created by Missouri to participate in the student loan market, an estimated $44 million a year in fees.

“Under the Secretary’s plan, roughly half of all federal borrowers would have their loans completely discharged,” Roberts wrote. “MOHELA could no longer service those closed accounts, costing it, by Missouri’s estimate, $44 million a year in fees…The plan’s harm to MOHELA is also a harm to Missouri.”

With regard to the legality of the loan forgiveness plan, the Court found that it was not authorized under the HEROES Act. “The question here is not whether something should be done; it is who has the authority to do it,” the Chief Justice wrote.

In reaching its decision, the majority emphasized that the Secretary’s power under the Act to “modify” does not permit “basic and fundamental changes in the scheme” designed by Congress. “The Secretary’s plan has ‘modified’ the cited provisions only in the same sense that ‘the French Revolution ‘modified’ the status of the French nobility’—it has abolished them and supplanted them with a new regime entirely,” Roberts wrote.

The majority also rejected the Biden Administration’s argument that the Act authorizes the Secretary to “waive” legal provisions as well as modify them—and that this additional term “grant[s] broader authority” than would “modify” alone. In support, the Court noted that the Secretary’s invocation of the waiver power here does not remotely resemble how it has been used on prior occasions, where it was simply used to nullify particular legal requirements.

“The Secretary has not truly waived or modified the provisions in the Education Act authorizing specific and limited forgiveness of student loans. Those provisions remain safely intact in the U. S. Code, where they continue to operate in full force,” Roberts wrote. “What the Secretary has actually done is draft a new section of the Education Act from scratch by ‘waiving’ provisions root and branch and then filling the empty space with radically new text.”

Dissent

Justice Elena Kagan authored a dissenting opinion, which was joined by Justices Sonia Sotomayor and Ketanji Brown Jackson. “In every respect, the Court today exceeds its proper, limited role in our Nation’s governance,” Justice Kagan wrote. “The result here is that the Court substitutes itself for Congress and the Executive Branch in making national policy about student-loan forgiveness.”