Biden Admin's Weak Legal Defense of Student Loan Cancellation
The Biden Administration is arguing in front of the Supreme Court this week to defend their student loan forgiveness initiative. A lot of the coverage is focused on the potential consequence of the court striking down the policy and the popularity of transferring the debt to taxpayers but has mostly ignored the legal arguments involved. That’s because those arguments do not favor the administration’s program.
It was widely recognized in previous years, including by leading Democrats, that the President did not have the authority to do a widespread amnesty on student loans. In fact, back in 2021, the Department of Education’s legal counsel published a memo concluding that “the Secretary does not have statutory authority to provide blanket or mass cancellation, compromise, discharge, or forgiveness of student loan principal balances, and/or to materially modify the repayment amounts or terms thereof, whether due to the COVID-19 pandemic or for any other reason”. The legal concerns did not stop left-wing activists from pushing for the President to unilaterally act. Biden had been using the pandemic measures of pausing interest payments for borrowers to stave off pressure to take action right up until August of 2022. With the election coming up and Biden’s poll numbers struggling, he moved forward with the executive plan for debt transference despite previous reservations regarding legality.
The legal justification that the Biden administration cited for their loan forgiveness program was the Heroes Act of 2003. The same law that the Department of Education legal counsel had previously determined would not allow for mass discharge of student loans. While there are legitimately complex arguments over who has legal standing to challenge the Biden administration’s policy, the substantive defense of invoking the Heroes Act is very weak. That law was passed in the context of the Iraq War and was meant to provide flexibility to the Department of Education to help with loan obligations from those participating in the war effort or affected by it or other national emergencies.
The applicable portion of the law allows for the Secretary of Education to waive or modify any regulatory provision for those affected by a national emergency to ensure “affected individuals are not placed in a worse position financially in relation to that financial assistance because of their status as affected individuals.” The key elements for this law to justify Biden’s mass loan forgiveness would require:
For such debt cancellation to qualify as a modification of their student loan forgiveness.
Typically the modification has meant pausing payments and interest, but debt cancellation is not an unreasonable reading of the law.
For the benefactors to qualify as affected individuals, which the law defines as having “suffered direct economic hardship as a direct result of a war or other military operation or national emergency”
There is a real factual argument here given the amount of stimulus during the pandemic and the pause in student loan payments as to whether most of the group benefiting from Biden’s loan cancellation actually suffered direct economic hardship as a result of the pandemic.
The power for modification only applies to the extent that the Secretary of Education is taking the action to ensure the affected individual is not in a “worse position financially in relation to that financial assistance” due to the national emergency.
Even if you can debate the first two elements, I do not view any reasonable reading of this aspect of the law that would legally justify the Biden administration’s loan cancellation program. Cancelling tens of thousands of dollars in student loans that were obtained prior to the pandemic and which were not charged interest on during that pandemic clearly goes far beyond simply returning affected individuals to the same financial position they were in outside of the Covid-19 pandemic.
Biden cynically took this action understanding that any Supreme Court intervention would not occur until after the election, establishing standing would be difficult for any potential court case, and that, with the help of a sympathetic press, he could potentially blame the court and Republicans for taking away the debt relief he had illegally promised to borrowers. A respectable press would recognize this context and call out Biden for it, but instead much of the coverage has rewarded the approach.