Red States File Lawsuit Challenging New Biden Student Loan Forgiveness Plan
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 am not the only observer who had a strong sense of de ja vu, when they saw this filing. Kansas v. Biden has many obvious similarities to Biden v. Nebraska, the case in which the Supreme Court invalidated the administration’s previous massive student loan forgiveness plan (which would have discharged some $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 “major questions doctrine,” which requires Congress to “speak clearly” when authorizing an executive branch agency to make “decisions of vast economic and political significance.” And both cases involve similar procedural “standing” questions.
Because I believe the Supreme Court was right to rule against the administration in Biden v. Nebraska, I think courts should also rule against it here, 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 that Biden v. Nebraska involved an effort to forgive debt under the 2003 HEROES Act, while the current plan relies on the Higher Education Act of 1965 (HEA), as amended. When the previous case was being litigated, some suggested 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 “enforce, pay, compromise, waive, or release any right, title, claim, lien, or demand” related to federally backed student loans. I critiqued this theory here.
In the aftermath of the Supreme Court’s decision last June, the Biden administration announced they were indeed going to 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 U.S.C. Section 1087e), which gives the Department of Education the power to establish “Income contingent repayment schedules” that “shall require payments that vary in relation to the appropriate portion of the annual income of the borrower (and the borrower’s spouse, if applicable) as determined by the Secretary [of Education].” The administration claims this provision gives it the power to adopt repayment plans that essentially forgive at least $156 million in student debt. As the plaintiff states’ complaint summarizes it, the rule “(1) defines “discretionary income” to be income above 225% of the applicable Federal poverty guideline, (2) sets the monthly payment amount at $0 if the borrower’s income falls below that threshold, (3) caps the monthly payment amount at 5% of the borrower’s income that goes above that threshold for undergraduate 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 claims all this comes within the power to create “income contingent repayment schedules.” But this power is not broad
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