Yesterday, a coalition of eleven red states led by the state of Kansas filed a lawsuit challenging the legality of President Biden’s new loan forgiveness plan, which would forgive at least $156 billion in federal student loan debt. I suspect I’m not the only observer to have a strong sense of de ja vu when they saw this document. Kansas vs. Biden has many obvious similarities with Biden v. Nebraska, the case in which the Supreme Court invalidated the administration’s previous massive student loan forgiveness plan (which would have eliminated approximately $430 billion in student debt). Both involve efforts to forgive large amounts of student debt by exploiting vaguely worded statutes. Both plans are vulnerable under the “big questions doctrine,” which requires Congress to “speak clearly” when authorizing an executive branch agency to make “decisions of broad economic and political significance.” And both cases involve similar “permanent” procedural issues.
Because I believe the Supreme Court was right to rule against the administration Biden v. Nebraska, I think the courts should rule against something like that in this case too. There may be ways to distinguish the two cases. But, so far, it looks like it’s going to be an uphill battle for the administration.
The biggest potential difference between the cases is this Biden v. Nebraska involved an effort to forgive debt under the HEROES Act of 2003, while the current plan is based on the Higher Education Act of 1965 (HEA), as amended. When the previous case was being argued, some suggested that the Administration should rely on Section 432a of the HEA instead of or in addition to the HEROES Act. Section 432a gives the Secretary of Education the power to do so “enforce, pay, compromise, waive, or release any right, title, claim, lien, or demand” relating to federally guaranteed student loans. I criticized this theory here.
In the aftermath of the Supreme Court decision last June, the Biden administration announced that it would indeed try to put together a new loan forgiveness plan using the HEA. But instead of relying on Section 432a, the administration adopted a rule that relies on Section 455 (codified as 20 USC Section 1087e), which gives the Department of Education the power to establish “income-contingent repayment programs.” that “will require payments that vary in proportion to the appropriate portion of the borrower’s (and the borrower’s spouse, if applicable) annual income as determined by the Secretary [of Education].” The administration argues that this provision gives it the power to adopt repayment plans that essentially forgive at least $156 million in student debt. As the plaintiff’s complaint summarizes, the rule “(1) defines “discretionary income” as income greater than 225% of the applicable federal poverty guidelines, (2) caps the monthly payment amount at $0 if the borrower’s income falls below that threshold, (3) caps the monthly payment amount at 5 % of borrower’s income that exceeds this threshold for college student loans and (4) cancels all loans where the original principal balance was $12,000 or less after the borrower has made 120 monthly payments or the equivalent.”
The administration argues that this is all within the power to create “income-contingent repayment plans.” But this power is not broad enough to allow for massive loan forgiveness, instead simply offering some flexibility in repayment times, based on income. As the states rightly point out, the administration’s Section 455 theory would allow it to use this power to forgive virtually all federally backed student debt: “there is nothing in the Secretary’s interpretation of the HEA that would prevent him to limit debt repayment to income-driven repayment plans from 1% of income above $1,000,000 for a single year, with all remaining debt, typically 100%, canceled by the federal government.
At the very least, it is not at all clear that Section 455 gives the Department of Education such broad authority. And if it is unclear whether Congress has delegated such broad power, then the agency’s claim to authority must be rejected under the big questions doctrine, as was the case in Biden v. Nebraska. In that case, the Court ruled that canceling $430 billion in student debt qualifies as a matter of “broad” economic and political significance. The same goes for the current plan.
To be sure, $156 billion is less than $430 billion. But, as the states point out, the first figure almost certainly understates the true cost of the new plan, because it was calculated under the assumption that the administration’s HEROES Act plan would be upheld by the courts and implemented, thereby forgiving much of the debt that may otherwise be covered by the new HEA plan. Since the Administration lost Biden v. Nebraskathe HEROES Act plan has not been implemented and so the new HEA plan would likely cover much more debt than was included in the $156 billion figure.
The line between major and minor questions under the doctrine of major questions is certainly blurry. But hundreds of billions of dollars of loan forgiveness seems like a big deal to me by any plausible standard. The scope of this plan is at least in the same general dimension as that of the one shot down Biden v. Nebraska.
Big deal in Biden v. Nebraska it was whether anyone had standing to sue to challenge the plan. Most observers thought that remaining standing was the administration’s best chance of winning the case, because it could not be that any of the plaintiffs challenging the plan had suffered the “injury” necessary to remain standing. Ultimately, the coalition of state governments challenging the plan resisted because one of them (Missouri) had a state agency (MOHELA) that provided federally backed student loans, and the agency’s revenue would be reduced if some of these loans had been forgiven.
The plaintiff makes a similar argument in the present case. One of them (Louisiana) also has a state agency that services federal student loans and services its own student loans. The plaintiffs argue that, like MOHELA, they would lose income if some of these loans (or portions of them) were forgiven.
I have not researched the Louisiana agency in detail (which, although the complaint does not name it, is likely the Louisiana Office of Student Financial Assistance). Perhaps there are differences between this and MOHELA that I overlooked (e.g., perhaps they don’t provide as many federal loans and instead focus primarily on providing their own loans; the latter could still be a path to hold out if demand for state funds loans declines following federal student loan forgiveness). But if LOSFA and MOHELA are relatively similar, Louisiana can remain standing in this case in much the same way that Missouri did in the other.
As this case progresses, we would like to learn more about LOSFA, how it works, and its connections to federal student loans. For now, I welcome correction on the topic from people who know more about Louisiana’s student loan system than I do.
The plaintiff claims that in this case (like those in Biden v. Nebraska) also have many other valid theories. I think some of them deserve to prevail too. But all are at least a little more questionable than the MOHELA/LOSFA theory, an approach already validated by the Supreme Court.
As with the previous plan, the courts would be wise to strike down this one because it is dangerous to allow the executive branch to plunder the treasury to use it for purposes not authorized by Congress. For those keeping track, I too, for similar reasons, opposed Donald Trump’s attempt to divert military funds to build his border wall.
While not directly relevant to the merits of the case, I should note that the new lawsuit is being led by Kansas Attorney General Kris Kobach. He is a highly dubious figure who has been sanctioned by federal courts for various types of misconduct, on multiple occasions. I certainly understand if some people view any Kobach-led lawsuit with healthy suspicion. Personally, I’m not a fan of Kobach.
But bad people sometimes file meritorious lawsuits. This appears to be just such a case.