Wiping out $400 billion in student debt rests in Supreme Court's hands
President Joe Biden faces a formidable obstacle in his bid to slash the student debt of more than 40 million people: a U.S. Supreme Court that has repeatedly thwarted his agenda.
The administration will defend the plan Tuesday before a court that has already stopped Biden from blocking evictions during the pandemic and requiring workers to get coronavirus vaccines or regular tests. The justices also have slashed the Environmental Protection Agency's power to address climate change.
Those rulings, all decided 6 to 3 along ideological lines, will be key precedents as the court considers Republican contentions that Biden is once again overstepping his authority. The three cases also foreshadow the skepticism the administration is likely to encounter as it argues for a potentially $400 billion program that Biden introduced only after failing to persuade Congress to act.
"I expect this to be overturned," said Ben Barton, a law professor at the University of Tennessee. He said the main question will be "how muscular they are in making the decision."
The trio of recent cases enshrined what had previously been a loosely defined legal concept known as the "major-questions doctrine." The court's six conservative justices said the executive branch needs clear congressional authorization before taking actions that have sweeping political and economic significance.
"A decision of such magnitude and consequence rests with Congress itself, or an agency acting pursuant to a clear delegation from that representative body," Chief Justice John Roberts wrote in the climate-change ruling, which preemptively limited the power of Biden's EPA to curb power-plant emissions. Roberts said the major-questions doctrine was driven by both "separation of powers principles and a practical understanding of legislative intent."
With student loans, the Biden administration says it has that clear authorization through a 2003 law that gives the education secretary special powers when responding to national emergencies. The law, known as the Heroes Act, says the secretary can "waive or modify" provisions to ensure that debtors "are not placed in a worse position financially" because of a national emergency.
The administration and its allies say it's doing exactly what former President Donald Trump's team did in 2020 when the Education Department suspended student-loan payment obligations after he declared the COVID pandemic a national emergency. The Biden administration has extended the pause several times, with the latest freeze set to expire 60 days after the legal fight ends, assuming the court rules by June 30.
The pandemic is "an unprecedented example of dire health and economic consequences that people and the country are still struggling to get out of," said Genevieve Bonadies Torres, a lawyer with the Lawyers' Committee for Civil Rights Under Law, which is backing Biden in the case. "It fits very squarely within both the spirit and the letter of the law."
Six Republican-led states - Nebraska, Missouri, Arkansas, Iowa, Kansas and South Carolina - and two borrowers are challenging the program in separate cases. They contend the major-questions doctrine dooms the plan - just like in the eviction, vaccine and climate-change cases. The challengers say the scale of Biden's plan goes well beyond anything Trump or previous presidents had tried to do under the law.
"This part of the Heroes Act had never been used on such a vast scale before, even though by the time Biden tried to use it, the act had been around for 19 years," said Ilya Somin, a law professor at George Mason University.
The plan would forgive as much as $20,000 in federal loans for certain borrowers making less than $125,000 per year or $250,000 for households. About 26 million people requested forgiveness before the Education Department stopped accepting applications, and the administration says more than 40 million Americans would be eligible.
The Congressional Budget Office estimates the cancellation would cost about $400 billion over 30 years.
"We feel very confident in our legal process," White House press secretary Karine Jean-Pierre told reporters last week. The plan is designed to "help tens of millions of Americans, give them a little breathing room, give them an opportunity as we're coming out of this once-in-a-generation pandemic."
Many legal experts say Biden's best shot to win the case is through a threshold question: the administration's contention that the challengers lack "standing" to sue because they aren't being directly harmed by the policy.
A federal appeals court said the states had standing because of the impact on the Missouri Higher Education Loan Authority, a nonprofit, state-created entity that by law must contribute to a fund Missouri uses to pay for projects at public colleges. MOHELA itself isn't involved in the suit.
The borrowers say they have standing because they have been unfairly excluded from the full scope of the program. One is ineligible for relief because her loans are held by commercial entities, rather than the Education Department, while the other could have $10,000 forgiven but not the $20,000 he would get if he had received a Pell Grant.
"What I'll be watching for is how much of the arguments in both cases are dominated by standing, how much are the justices, especially the more conservative justices, themselves pushing back," Steve Vladeck, a University of Texas law professor, said in a briefing organized by the White House.
Somin said the administration might win the standing battle with the individual borrowers but isn't likely to scuttle the states' lawsuit.
"That is their best chance," Somin said. "But at least in the Missouri case, I don't think it's a very good chance."
As if the court's recent track record weren't daunting enough for the administration, the justices may have already tipped their hand. When the justices agreed in December to hear the case, they simultaneously decided to keep the program on hold in the meantime. The court gave no explanation for that decision.
Bloomberg's Akayla Gardner, Ella Ceron and Kimberly Robinson contributed to this report.