June 30, 2023

Supreme Court Decides Biden v. Nebraska

On June 30, 2023, the U.S. Supreme Court decided Biden v. Nebraska, No. 22-506, holding that the Higher Education Relief Opportunities for Students Act of 2003 (HEROES Act) did not authorize the Secretary of Education to cancel approximately $430 billion in federal student loan principal.

The Higher Education Act of 1965 (HEA) sets the terms of federal student loans and authorizes the Secretary of Education to cancel or reduce federal student loan repayment obligations in certain circumstances and to a particular extent. In September 2003, Congress passed the HEROES Act, which allows the Secretary of Education to “waive or modify any statutory or regulatory provision applicable to the student financial assistance programs” under the HEA “as the Secretary deems necessary in connection with a . . . national emergency.” 20 U.S.C. § 1098bb(a)(1).

On March 13, 2020, the President declared the COVID-19 pandemic a national emergency. Shortly thereafter, the Secretary of Education suspended repayments and interest accrual for all federal student loans, which continued into the current administration. In August 2022, the Department of Education announced that it would reduce and eliminate student debts directly under the HEROES Act, the details of which were subsequently set forth in a comprehensive student loan forgiveness plan. The Department of Education estimated that about 43 million borrowers qualified for relief under the plan and that the plan would cancel about $430 billion in debt principal.

Six states moved for a preliminary injunction, claiming that the plan exceeded the Secretary’s statutory authority. The district court dismissed the case for lack of standing, and the states appealed. On appeal, the Eighth Circuit determined that Missouri likely had standing and issued a preliminary injunction to maintain the status quo pending further review. The Supreme Court granted the Secretary’s petition for certiorari.

The Supreme Court ruled that the Secretary did not have authority to adopt the student loan forgiveness program under the HEROES Act. The Court first addressed whether Missouri had standing to sue and held that it did. On the merits, the Court held that the Secretary’s student loan forgiveness plan exceeded the authority granted under the HEROES Act to “waive or modify” the provisions of the HEA. The Court began with the statutory text. The HEA expressly allows the Secretary to forgive student loans under a few narrowly delineated situations. And the ordinary meaning of “modify” allows only modest adjustments and additions. Under that meaning, the Secretary’s proposed student loan forgiveness plan was not a modification because it expanded student loan forgiveness to nearly every borrower in the country. The Court found that it was highly unlikely that Congress authorized a sweeping loan cancellation program through the language giving the Secretary the power to “modify.”

Similarly, the Court found that the Secretary did not have authority through its waiver power because the Secretary did not identify any provision he was waiving. Instead, the Secretary was drafting “a new section of the [HEA] from scratch by ‘waiving’ provisions root and branch and then filling the empty space with radically new text.” Lastly, the Court rejected the argument that a “humdrum reporting requirement” could support the student loan forgiveness plan.

The Court next applied the major questions doctrine and concluded that Congress had not intended to give the Secretary the degree of discretion he claimed. The Court noted that the Secretary’s reading would give the Secretary authority to exercise control over a significant portion of the American economy. Cancellation of federal student loans is the subject of fierce debate, and the Court held that such decisions should rest with Congress itself or an agency acting pursuant to a clear delegation from Congress.

Chief Justice Roberts delivered the opinion of the Court, in which Justices Thomas, Alito, Gorsuch, Kavanaugh, and Barrett joined. Justice Barrett filed a concurring opinion. Justice Kagan filed a dissenting opinion, in which Justices Sotomayor and Jackson joined.

In a companion case related to the same loan forgiveness program and also decided on June 30, 2023, Department of Education v. Brown, No. 22-535, the Court unanimously held that two individual borrowers did not have standing to challenge the program.

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