The Supreme Court heard arguments on February 28, 2023 in two cases that will decide the future of President Biden's student loan forgiveness plan. The cases, Biden v. Nebraska and U.S. Department of Education v. Brown, center on two legal queries: (1) Do the petitioners have standing? and (2) Does the Department of Education have the authority to forgive student loan debt at this scale?
The Biden-Harris administration has argued that it derives its authority for the initiative from the Higher Education Relief Opportunities for Students (HEROES) Act of 2003, which gives the secretary of education the power to "waive or modify any statutory or regulatory provision" to protect loan borrowers affected by national emergency, such as, in this instance, the COVID-19 pandemic. We discussed the details of President Biden's plan, including eligible loan types, in a previous alert. Nearly 26 million borrowers have already applied for forgiveness and need a favorable decision from the Court to receive their anticipated loan discharge.
At oral argument, a majority of the Court's justices suggested that loan relief of this size and scope should have express congressional approval rather than being promulgated by a federal agency decision. This, the justices reasoned, is required under the "major questions doctrine," which states that government initiatives that have "major political and economic consequences" must be clearly authorized by Congress. The Congressional Budget Office (CBO) estimates the present value cost of debt cancellation under the President's plan is approximately $400 billion, which some argue rises to that level. Additionally, four justices questioned the intent of the HEROES Act and whether it contemplated student loan forgiveness to this extent.
Many observers believe the Court's majority appears inclined to find the plan illegal under the major questions doctrine or the HEROES Act; however, there are at least four justices that may agree with the Biden-Harris administration on the issue of standing, or lack thereof. It may be that Biden's plan will survive if the Court finds the six plaintiff states in Nebraska and two individual borrowers in Brown lack standing to sue in the first place. In order to meet the legal threshold of standing, the plaintiffs must show injury, and some justices expressed skepticism that the plaintiffs were harmed by the plan.
If the Court rules against the Biden-Harris administration and determines the loan forgiveness plan to be prohibited, institutions of higher education (IHEs) may receive inquiries from concerned current students and alumni. Financial aid departments for IHEs should be prepared to discuss loan obligations and repayment options with students for existing and future loans, as well as any alternative resources available, such as scholarship and grant opportunities. IHEs may want to consider drafting messaging to students and other written materials in anticipation of the Court's decision, to ensure students and alumni understand their obligations, should loan discharge under the plan become moot.
If your IHE has any questions regarding policies, procedures, or student messaging, please contact the authors of this article or any lawyer in Venable's Labor and Employment Group.