Is Biden’s Student Loan Forgiveness Plan Legal? Competing DOE Memos Highlight the Legal Fight Ahead
News of Biden’s plan to cancel portions of student debt has stirred up debate regarding his legal authority to do so. The plan, in part, will “provide up to $20,000 in debt cancellation to Pell Grant recipients with loans held by the Department of Education, and up to $10,000 in debt cancellation to non-Pell Grant recipients.” The legal fight is primarily over interpretation of the Secretary of Education’s authority to do this type of debt cancellation per the HEROES Act.
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.
On January 12, 2021 the Department of Education – Office of the General Counsel (OGC) issued a memorandum explaining their opinion concerning the Secretary’s statutory authority to cancel student loan debt due to the declared National Emergency caused by the COVID-19 pandemic or otherwise. Their conclusion was, “We believe the Secretary does not have statutory authority to provide blanket or mass cancellation, compromise, discharge, or forgiveness of student loan principal balances, and/or to materially modify the repayment amounts or terms thereof, whether due to the COVID-19 pandemic or for any other reason.” Here is a link to this memorandum.
On August 23, 2022, under the new Administration, the OGC reversed their opinion in a newly issued memorandum, stating, “For the past year and a half, the Office of General Counsel, in consultation with our colleagues at the Department of Justice Office of Legal Counsel, has conducted a review of the Secretary’s legal authority to cancel student debt on a categorical basis. This review has included assessing the analysis outlined in a publicly disseminated January 2021 memorandum signed by a former Principal Deputy General Counsel. As detailed below, we have determined that the Higher Education Relief Opportunities for Students (“HEROES”) Act of 2003 grants the Secretary authority that could be used to effectuate a program of targeted loan cancellation directed at addressing the financial harms of the COVID-19 pandemic. We have thus determined that the January 2021 memorandum was substantively incorrect in its conclusions.” Here is a link to this memorandum.
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?
This disagreement reflects the larger, ongoing argument over the legitimate scope of Congress’ delegation of authority to Executive Branch agencies via rule-making and discretionary authority through interpretation of broad legislation. It is a perfect example of why such delegation is dangerous, undemocratic, and open for abuse. Most of the Framers of the Constitution would likely roll over in their graves if they could see the extent of bureaucratic growth at the expense of the People’s representatives in Congress and their system of limited, accountable government in general. On the other hand, in more recent times the Supreme Court has, unfortunately, often sided with the bureaucrats and backed their interpretive authority on the grounds of practical necessity – provided specific Constitutional and legislatively defined limits are followed. It is likely this student loan forgiveness program will get a legal challenge in court. How will they decide? I think the devil is in the details. Before this recent August 23, 2022 memo, the consensus seemed to be that the Administration lacked authority to do this type of action even on a HEROES Act basis. With the COVID pandemic generally over, the impetus and rationale upon which the forgiveness is based is fading. As argued elsewhere, (such as here, here, and here) this type of action is unwise, unfair, and not likely to make much of a postive practical impact and is likely being done largely for political reasons. But the constitutionality and legality of it and other programs like it are of just as great a concern. Renewed debate on this more general topic is warranted. We need to choose, as a nation, if we are going to solve problems in the structure provided by the Rule of Law and wisdom of our Founders who created for us a limited and accountable government, or if we are going to continue to throw that away in favor of direct, short-sighted reactions to problems with “ends justifies the means” top-down measures chosen by unelected bureaucrats. It may not be the most exciting or hottest of topics, but it is surely one of the most important for the future of our Republic.