Tomorrow, the Supreme Court hears oral arguments in two cases challenging President Joe Biden’s student-loan-forgiveness plan. Because of the vast sums at stake—at least $400 billion—the case has enormous practical consequences. But the legal issues are even more important. Both the Eighth Circuit in Biden v. Nebraska and the district court in Department of Education v. Brown (which the Fifth Circuit effectively affirmed) put the program on hold, signaling serious constitutional issues that the justices agreed to consider on an expedited basis.
In effect, the plan combines the dubious legal mechanisms that Donald Trump asserted in diverting military funds to pay for border wall construction (which Congress had rejected) with those Biden invoked in attempting to extend the Centers for Disease Control’s eviction moratorium and impose a vaccine mandate through the Occupational Safety and Health Administration (without attempting to get Congress to legislate either). If Biden succeeds in reversing the lower courts, it would set a dangerous precedent for presidential abuse of emergency powers and usurpation of Congress’s power of the purse. That’s unlikely to happen, given how a majority of the Court have previously handled claims of expansive executive power, but nothing is guaranteed. (That’s why the Manhattan Institute got together with the Cato Institute, my former employer, to file an amicus brief urging the Court to block the loan forgiveness.)
The cases focus on the Higher Education Relief Opportunities for Students (HEROES) Act of 2003, in which Congress gave the Secretary of Education limited authority to waive or modify federal student-loan provisions “as may be necessary to ensure” that certain defined goals are achieved. One of those defined goals is that “recipients of student financial assistance” affected by a military operation or national emergency—the law was enacted in the wake of 9/11—“are not placed in a worse position financially in relation to that financial assistance because of their status as affected individuals.”
In following through on a promise he made during the presidential campaign, Biden claims that the government has authority to forgive billions of dollars in loans across millions of borrowers. Specifically, his plan would cancel up to $10,000 in federal student-loan debt for borrowers earning up to $125,000 per year ($250,000 for married couples), and up to $20,000 for those with Pell Grants.
The government’s lawyers now make the following assertions before the Supreme Court: the Covid-19 pandemic is a national emergency (or at least was at the time the plan was announced); every federal student loan borrower either lives in a Covid disaster area or has otherwise been financially affected by that emergency; as a result of that emergency, some borrowers will default on their loans once payments finally resume after a multiyear pause; and forgiving some (or all) of the borrowers’ principal balances will ensure their overall risk of default is no worse than it was before the pandemic.
That last assertion runs headlong into a key limiting word in the text of the HEROES Act: “necessary.” Most of the steps in this Rube Goldberg device of a financial plan are far from necessary to achieve their final aim, because a simpler and more direct method is available. If the government’s purpose were truly to reduce the harm of more defaults, it could put borrowers on income-based repayment plans and, even more simply, waive some of the legal consequences of missed payments. Forgiving $400 billion of debt so that fewer people will suffer penalties for missed payments is like cutting $400 billion in income taxes so fewer people will suffer IRS underpayment penalties.
The “major questions doctrine,” which the Court has increasingly applied, makes this an easy case. Since Biden’s executive action was not “necessary” to achieve the government’s aim, the statutory text lacks a clear statement granting the secretary such power. And because the loan-forgiveness plan is a matter of “vast economic and political significance”—to quote last June’s West Virginia v. EPA ruling, which rejected regulatory authority not found in statutory text—Congress has to have spoken clearly to grant such awesome power. Put another way, whether to grant nationwide debt relief is undoubtedly a “major question,” one that Congress debated as it considered bills that would explicitly make that choice. It’s a big policy decision that must be made by Congress—and Congress has declined to make it.
Indeed, the Court within the last couple of years stayed or invalidated three executive actions based on novel and expansive readings of longstanding laws: OSHA’s “vaccine or test” mandate, the CDC’s eviction moratorium, and the Environmental Protection Agency’s greenhouse-gas-emission restrictions. One common theme of these rulings is particularly relevant here: the Court’s justified skepticism of an agency’s suddenly discovering novel and sweeping powers that it had never claimed before. The justices should continue running with that theme.
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