Is Biden’s Student Loan Forgiveness Plan Legal? Competing DOE Memos Highlight the Legal Fight Ahead

Biden and Secretary of Education Miguel Cardona, announce plans to forgive federal student loan debt at the White House, August 24, 2022.

Specifically, the HEROES Act 20 U.S.C. § 1098bb(a)(1), (2)(A) authorizes the Secretary to “waive or modify any statutory or regulatory provision applicable to the student financial assistance programs” if the Secretary “deems” such waivers or modifications “necessary to ensure” at least one of several enumerated purposes, including that borrowers are “not placed in a worse position financially” because of a national emergency.

Which conclusion is correct? The following is a summary of the reasoning in each memo. I’m leaving out references and quotes from Court opinions to keep if brief but they are provided in the memos linked above.

January 12, 2021 Memo Summary

The January 12, 2021 memo holds that the Constitution provides “No money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law.” Congressional intent and judgement trumps the opinion of individual government agents. The law requires the appropriate government agents to aggressively collect on debts owed to the United States and limits their authority to compromise or settle. Also, the Exective Branch does not have a dispensing authority of its own. When considering authority on a specific policy, it must be considered as a part of the whole harmonious regulatory scheme and interpretation cannot give more effect to some parts and render others of no consequence. Interpretation cannot create inherent contradictions. Broad policy such as loan forgiveness cannot be construed from ambiguous rules on delegation authority. When there is such a debate over potential constitutional problems, the statute should be construed to avoid such problems. Student loan programs are funded through annual appropriations from Congress. Congress has the authority to provide for student loan cancellation or other modifications and has not done so on a general basis but only for rather specific instances. It defies common sense to assume the Secretary is authorized to enact blanket forgiveness or other broad policies that contradict the bulk of statutory requirements in the overall regulatory scheme regarding student loan repayment in the federal loan program. Per the relevant laws, only forgiveness or modification on a case by case basis would be permitted and only then under specific circumstances indicated by Congress. This applies regarding the HEROES Act, as Congress narrowly cabined the scope of the Secretary’s discretion in 20 U.S.C. § 1098bb(a)(2). Finally, even if the relevant laws could be fairly construed as granting the Secretary authority to provide blanket or mass cancellation, etc., the Executive action doing so might be appropriately and necessarily considered a legislative rule under the Administrative Procedure Act and all the requirements of notice and comment rulemaking might need to be met.

August 23, 2022 Memo Summary

The shorter and less detailed August 23, 2022 memo centers on the notion the HEROES Act provides broad authority to the Secretary and argues that this was Congress’ intent based on the language. Emphasis is placed on the bold terms in the Act’s language; “waive or modify any statutory or regulatory provision applicable to the student financial assistance programs” if the Secretary “deems” such waivers or modifications “necessary to ensure” at least one of several enumerated purposes, including that borrowers are “not placed in a worse position financially” because of a national emergency.” The memo states the Supreme Court has recognized that when empowering a federal official to act as that official “deems necessary” in circumstances specified by a statute, Congress has granted the official broad discretion to take such action. Per the memo, the COVID pandemic constitutes an emergency that allows for categorical determinations and they do not need to be on a case-by-case basis. The memo describes the January 12, 2021 memo as correct on discussing the limits of the statue, but incorrect in assuming the suggestion that these provisions impose limitations beyond their clear terms.

How Should We Frame This Disagreement?

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