Biden v. Nebraska: The President Has No Power to Forgive Student Loans

 

Title IV of the Higher Education Act of 1965 governs student loans.  The Act authorizes the Secretary of Education to cancel or reduce loans in certain limited circumstances, including certain public servants, those who die or are disabled, bankrupt, or borrow from a school that closes, fails to pay lenders, or falsely certifies its borrowers.

The Biden Administration sought to use a later act, a law enacted just over a year after the 9/11 Trade Center bombing, to allow it to cancel approximately $430 billion in student loan debt.  The Higher Education Relief Opportunities for Students Act of 2003 (HEROES Act) allowed the Secretary of Education to waive or modify the student loan provisions of Title IV “as the Secretary deems necessary in connection with a war or other military operation or national emergency.” However, the Secretary may issue such waivers or modifications only “as may be necessary to ensure” that such financial aid recipients are not placed in a worse position financially in relation to that financial assistance because of the national emergency.

The Supreme Court, in this decision, held that the Biden Administration was not modifying a provision of Title IV; by changing the rules to cancel $430 billion of debt it was creating an entirely new law.  As the Court explained, a “modification” anticipates minor tweaking of a bill here and there.  The cancellation of such a large sum involves a modification far beyond anything that was contemplated by Congress in 2003.

The Biden Administration replied to this by stating it was also given the power to “waive” requirements of the Student Loan Act, and this would be a waiver of the obligation to repay the amount borrowed.

The Supreme Court disagreed.  The “waiver” provision only applied to nullify certain legal requirements to obtain aid under the act.  What the Secretary did, in this case, was to create an entirely new law, a law that was not passed by Congress.

The Biden Administration responded to this by claiming the Covid pandemic was precisely the kind of “emergency” power Congress envisioned when it gave sweeping “waive and modify” power to the Secretary of Education.

The Supreme Court replied that perhaps there was a national emergency that required student loan forgiveness.  However, the executive branch, that is to say, the President, does not have the power to respond in this way.   It is a separation of powers problem for the Biden Administration.  The statute in question did not give him the power to respond in this way, and the U.S. Constitution does not give him this power, either. 

The bottom line is that there are so many massive issues that arise in a program that will cancel $430 billion in debt that the Supreme Court cannot assume Congress intended to give those powers to the Executive branch of government under the terms of the 2003 Act.

A word about the Court’s decision.  The Supreme Court never decides an issue not before it.  In any discussion in which it may appear the Court is hinting how it will decide a future issue not addressed in the case before it, such a discussion is called “dicta” and has no authoritative power and creates no precedent.  It amounts to the Court just brainstorming or thinking out loud. 

In this case, the Court did not say it would find an Act of Congress that forgave $430 billion in student loan debt as compatible with restrictions of power found in the Constitution. Maybe it would, maybe it would not.  This is a hand-slapping by the Court, which is saying “if this is so important, run it through the legislative process.  This method of addressing a national emergency is illegal.”