To find the authority to cancel billions of dollars in student loans, President Biden turned to two words in a 2003 law: “national emergency.”
When Congress approved the Higher Education Relief Opportunities For Students Act 2003, President George W. Bush was present in Afghanistan and Iraq. The bill, also known as the HEROES Act of 2003, gives the Secretary of Education authority to change student financial assistance programs during a war, military operation, or “national emergency.”
The Biden administration, nineteen years after the law was passed, announced this month a plan for student loan forgiveness of up to $10,000 (or $20,000 for Pell Grant recipients). This will be available to all those with a household income below $125,000. It cited the COVID-19 epidemic and its economic consequences as the national emergency.
It is very likely that this reasoning will be challenged in court. It is not clear who has the legal right to challenge this order. As soon as Biden announced his order, various conservative legal groups began exploring who would have legal standing to sue, which would require proving they would be harmed by Biden’s order. If Republicans gain enough seats in the fall, the House may sue the House over the order.
“It’s on shaky legal ground at best,” says Lanae Erickson, the senior vice president for social policy, education and politics at Third Way, a Washington think tank that looks for non-partisan policy solutions. Erickson is concerned that Biden’s action overreaches in its reliance on the national emergency of the pandemic and that the courts will determine such a step requires congressional action. “The connection to the pandemic is pretty exaggerated, I think.”
Biden’s order followed his promise on the campaign trail to take action to help some of the 44 million Americans with a collective $1.7 trillion in education debt hanging over their heads. Just after taking office last year, Biden himself said he wasn’t sure he could use executive action alone to forgive a large tranche of student debt. “I don’t think I have the authority to do it by signing with a pen,” he said in February 2021.
The administration dispelled any doubts that he was authorized to announce the loan debt forgiveness measures. The HEROES Act, White House Press Secretary Karine Jean-Pierre said on Aug. 25, “authorizes the Secretary of Education to take certain actions he believes they are necessary to ensure a borrower is not placed in a worse position financially due to a national emergency like the COVID-19 pandemic.”
In the midst of the pandemic, federal officials temporarily stopped student loan payments. Biden last week announced that the suspension would be lifted on December 31. Biden announced last week that the loan forgiveness program would be in effect by tomorrow.
“Part of what the legal authority is being used to do here, in a targeted way, is to make sure that those borrowers who are at highest risk of distress after the restart happens, those are the people who are going to get the relief,” says Bharat Ramamurti, the deputy director of Biden’s National Economic Council.
Biden’s Aug. 24 order was announced by legal experts and groups. Companies that service the student loans may attempt to prove they’ve been harmed. One person could claim standing if they earn less than the $125,000 income threshold.
Or one of the chambers of Congress could try to take the Biden Administration to court, arguing that Biden’s loan action steps on congressional power over the nation’s finances. This could happen only if Republicans are able to win sufficient seats to control the Senate or House.
This suit is not unusual. In 2014, the Republican-controlled House voted to sue the Obama administration over its application of the Affordable Care Act. Although House Republicans ultimately were granted the right to sue, it had no effect on how the law was implemented. The Trump administration’s spending on the construction of a wall at its border was the subject of a lawsuit brought by House Democrats in 2019.
Keven McCarthy (Minority Leader) is likely to become the next Speaker if Republicans regain control of the House. McCarthy’s office would not comment on Monday on whether House Republicans would sue the Biden Administration over the student loan action if they gained control of the chamber. If the House Republicans do decide to sue, they may only after the debt has been paid off.
Legal groups are closely studying the 25-page opinion the Department of Justice’s Office of Legal Counsel released last week telling Biden he had the authority to reduce or cancel principal balances of student loans for a broad class of borrowers in order to address the financial hardship arising out of the pandemic.
“I would expect there would be challenges—this is such a slap in the face to everybody who did what they were supposed to do,” says Reed Rubinstein, the director of oversight and investigations for the America First Legal Foundation, which was founded by Stephen Miller, a former senior adviser to former President Donald Trump.
Rubinstein states that it’s too soon to tell if his group, which has criticized multiple Biden administration policy in the past year would be involved in challenging the loan forgiveness. His belief was that Congress would be able to file a lawsuit to preserve its institutional interests and overtake the power to the purse.
Rubinstein, a former lawyer who worked at the Department of Education in the Trump Administration was Rubinstein. He says he wrote a memo in January 2021 about the limits of loan forgiveness that Biden’s Justice Department dismissed. “The Biden administration and the Democrats have had multiple opportunities to address what they perceive to be inequities in the system or problems with the system, the proper way through legislation in Congress, and they haven’t done it,” Rubinstein says. “Within that backdrop it sure looks like a pretty nakedly political giveaway to a favorite constituency.”
The Job Creators Network Foundation Legal Action Fund, which successfully sued the Biden administration in 2021 over vaccine mandates on behalf of small business owners, is “actively weighting its legal options,” says President and CEO Alfredo Ortiz in a statement.
“A student loan bailout will further exacerbate inflation, increase the deficit, and lead to higher taxes,” Ortiz continues. “It’s not fair to the untold number of Americans who paid back their college loans or never went to college and it doesn’t address the root causes of why college loans have become so expensive.”
Adding fuel to the debate over the legality of Biden’s order is a Supreme Court decision last month involving the so-called major questions doctrine, which says that agencies can’t make decisions of national significance without congressional input. Justices found that the Environmental Protection Agency went too far in controlling natural gas and coal plant emissions. They ruled that Congress must pass legislation to make such drastic steps legal. Erickson believes Biden’s student loan action will face a similar rebuke.
“I’m very concerned this is going to fall under the major questions doctrine,” Erickson says. “The question there was whether it has economic and political significance and I think there is no way that you can say this does not have economic and political significance.”
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