The U.S. Department of Education hit back at a lawsuit aiming to derail the Biden administration’s student loan forgiveness plan, arguing that it has the authority to clear debts for borrowers affected by national emergencies like the pandemic.
Court documents offer a deep look at the Education Department’s legal justification for setting up the program, which will forgive up to $10,000 for borrowers who earn up to $125,000 annually.
While some legal experts contend that the agency’s legal arguments are weak — and would be overwhelmingly struck down if the program ever reaches the Supreme Court — others doubt legal challenges will even get to that point.
A flurry of lawsuits have come over the past few weeks. Last month brought one of the most prominent legal challenges, in which six states sued the Biden administration. They argued that the Education Department is overstepping its authority by creating the debt relief plan and that it will harm their states’ finances.
They filed their lawsuit in Missouri federal court, where they are asking a judge to block the plan from being implemented. A hearing over the matter is scheduled for Wednesday.
In court documents filed last week, the Education Department contended that Congress has given the agency “extensive authority” to oversee and change student debt programs, especially during emergencies. Moreover, the department argued that the plan doesn’t imminently threaten the states’ income, and that they aren’t legally entitled to receive the revenue they are anticipating will be lost.
Inside the Department’s legal argument
The Biden administration’s student loan forgiveness plan wipes away up to $10,000 for individuals earning up to $125,000 annually, although the income limit rises to $250,000 for couples filing taxes together. It gives borrowers who received Pell Grants up to $20,000 in forgiveness.
The department argued it has the authority to create such a program because of the Higher Education Relief Opportunities for Students Act of 2003, or Heroes Act. The 9/11-era law — which was originally set up to help military members — gives the education secretary the ability to waive or change rules related to student financial aid during wars, military operations and national emergencies.
The Education Department argued that the coronavirus pandemic qualifies as such an emergency.
“While Plaintiffs may disagree with the Secretary’s decision as a policy matter, Congress vested the Secretary — not these Plaintiffs — with authority to determine when and how special relief measures should be provided to federal student loan borrowers affected by extraordinary circumstances such as the COVID-19 pandemic,” the administration argued.
But some legal scholars are doubtful, especially after President Joe Biden said the pandemic was over during an interview on CBS’ “60 Minutes.” (The World Health Organization has not declared the pandemic over.)
Jed Shugerman, a law professor at Fordham University, has been a vocal critic of the Education Department’s legal arguments for setting up the loan forgiveness program.
“I do not think they’re strong enough. It certainly was a problem before Biden got up on ‘60 Minutes,’” Shugerman said. “He made the problem a lot worse by saying that the pandemic was over.”
The Justice Department’s Office of Legal Counsel issued a memo this year that said the Biden administration would have to prove there is a link between the pandemic and people being worse off financially to justify the program. And while many people are, others have benefited during the health crisis.
Shugerman questions why the department is pursuing a “sweeping cancellation” rather than providing it to borrowers on a case-by-case basis, such as asking them what economic sector they work in.
“They’re not doing that,” Shugerman said, arguing that judges may believe the administration is actually pursuing the debt cancellation to address long-term issues instead of those rising out of an emergency.
Looking at past crises
To justify the debt cancellation, the Education Department looked at past natural disasters — including Hurricanes Maria, Harvey and Irma, as well as the 2017 California wildfires.
Those events led the department to pause payments for federal student loan borrowers. Those borrowers were nearly 12 times as likely to default on their payments in the year after the freeze ended, according to court documents. Pell Grant recipients were at even greater risk.
These findings are important because the coronavirus pandemic has led the Education Department to pause federal student loan payments and interest accrual for more than two years.
Under the debt relief plan, borrowers’ median monthly payments are expected to drop 38%, the Education Department said. That reduction could address the borrowers’ heightened delinquency risk because of the pandemic, the department concluded.
Still, judges may not be sympathetic to this argument — especially if it reaches the Supreme Court, which is led by Chief Justice John Roberts Jr.
“The Roberts Court has been very clear over the last few years about using the pandemic or relying on the pandemic emergency to announce a major policy,” Shugerman said.
For instance, in 2021, the Supreme Court struck down an eviction moratorium that prevented certain tenants from being pushed out of their homes who live in counties with high coronavirus transmission levels. This year, the court also struck down key parts of the Biden administration’s vaccine mandate.
The liberal justices may not even rule in Biden’s favor, Shugerman said.
“It’s so clear that the emergency is a pretext,” Shugerman said. “COVID is not the reason for this program. The program is not tethered to the emergency.”
Will lawsuits even reach that level?
But not all legal scholars agree that cases will even reach that level. That’s because anyone bringing a lawsuit must prove they have standing, which requires them to prove that the debt relief plan is causing them injury and that the courts could remedy that harm.
In the lawsuit brought by the six states, they contend their finances will be directly harmed because of the debt relief plan. They look to public agencies such as the Higher Education Loan Authority of the State of Missouri, which holds and services student loans. These agencies will suffer if they lose federal loans as assets because of debt relief, the states argue.
But the Education Department contends that these losses are purely speculative. The size of loan holders’ portfolios aren’t legally guaranteed, and they will fluctuate for a variety of reasons, such as students deferring or paying down their loans.
Anthony Moffa, a law professor at the University of Maine, contended that these are strong legal arguments.
“It’s going to be very difficult to demonstrate standing in these cases, if not impossible,” Moffa said.
One of the first major legal challenges to the Biden administration’s debt relief plan has already stalled over these issues.
An Indiana lawyer asked a federal court to block the plan, arguing that the forgiveness would force him to pay taxes on the cleared debt. But because the Education Department now allows borrowers to opt out, a judge denied his request, saying the lawyer could not be harmed by the plan.
If Biden’s plan survives lawsuits seeking to block it, it could become harder to oppose, Moffa said.
“Once a program like this starts functioning and people are starting to receive government benefits, it becomes increasingly less popular and less viable to stop those benefits from flowing,” Moffa said. “It is not surprising that these states and other political interests who don’t like the program are trying to stop it before it starts.”
