SCOTUS Decision in Student Loan Forgiveness Cases May Hinge on Article III Standing

On February 28th, 2023, the United States Supreme Court heard oral arguments in two related cases, Biden v. Nebraska and Department of Education v. Brown, both of which challenge President Biden's one-time student loan forgiveness program.

In October 2022, the Department of Education had implemented student loan cancellation of up to $20,000 in federal student loan debt for qualifying borrowers pursuant to the Higher Education Relief Opportunities for Students (HEROES) Act of 2003.

Student loanThe HEROES Act gives the Secretary of Education authority to "waive or modify any statutory or regulatory provision applicable to [Title IV of the Higher Education Act student loans] as the Secretary deems necessary in connection with a war or other military operation or national emergency[.]" 20 U.S. Code § 1098bb(a)(1). Under the Act, the Secretary may waive or modify "as may be necessary to ensure that—recipients of student financial assistance under title IV of the Act who are affected individuals are not placed in a worse position financially in relation to that financial assistance because of their status as affected individuals[.]" 20 U.S. Code § 1098bb(a)(2)(A).

In the first case before the Supreme Court, Biden v. Nebraska, six states challenged Biden's forgiveness plan arguing, in part, that the plan exceeds the Secretary of Education's authority under the HEROES Act. In the second case, Dept. of Ed. v. Brown, two private student loan borrowers argued the absence of a notice and comment period improperly denied them the ability to urge for broader borrower eligibility criteria.

U.S. Solicitor General Elizabeth Prelogar argued on behalf of the Biden administration and contended that the COVID-19 pandemic is a national emergency as contemplated by the HEROES Act and that in waiving and modifying student loan debt for eligible borrowers the Secretary of Education avoided "millions and millions of student-loan borrowers" entering into default because of the pandemic.

In response to the administration's reliance upon the COVID-19 pandemic as the triggering national emergency, Nebraska Solicitor General James Campbell countered, "the Secretary here asserts a breathtaking power, to do anything that he thinks might reduce the risk of borrowers defaulting, even years after a national emergency arises."

"[I]s this a waiver, or is it a modification?" – Justice Thomas

SCOTUS also honed in on the question as to whether Biden's student loan forgiveness plan was in fact a waiver or modification. While Prelogar argued "It's both a waiver and a modification," the Nebraska Solicitor General framed Biden's debt relief as, in essence, an entirely new program.

When asked by Justice Kagan if in response to an earthquake, as opposed to a pandemic, the Secretary could discharge the debt of a borrower if the primary earner in the household died in the earthquake, Campbell responded "I don't believe so because it doesn't sound like a modification of an existing program. It sounds like the creation of a brand-new program."

Justice Sotomayor further pressed on whether the states were truly taking issue with the extent to which the loan forgiveness program waived or modified student loans and compared the program to waivers for teachers that had a pause in service as a result of the COVID-19 pandemic. Sotomayor characterized the teachers' waiver as "changing the program" and called it a "re-write." In response, Campbell stated that "It's a bigger rewrite than the words 'waive or modify' allow." To which, Sotomayor replied, "That really has us, as the third branch of government, changing Congress's words because we don't think we like what's happening."

Was there authority to pause loan repayment? – Justice Coney Barrett

SCOTUS also pressed Campbell as to whether "this administration and the prior administration had authorization under the HEROES Act to pause loan . . . repayment obligations?" – Justice Barrett. Campbell responded, in summary, that while the initial extension of paused loan repayment under the HEROES Act was a legitimate modification under the Act, "now that we're two years down the road, we're beyond a modification. And not only that, the connection to the national emergency has become even more tenuous."

The states' arguments on this point would appear to be in line with their position that the COVID-19 pandemic is not an "emergency," at least 2 years after the start of the pandemic, appropriate to trigger mass debt cancellation under the HEROES Act.

"Do you have any understanding about why MOHELA isn't here?" - Justice Kagan

A large focus of the argument centered on the issue of Article III standing, and particularly, the ability of the states to articulate a cognizable injury in fact. In what appeared to be the clearest line of argument in favor of standing for the states, Missouri claimed that the loss of servicing revenue and contributions to other state funds by Missouri-created MOHELA, was sufficient to create standing. Many factual questions arose concerning the relationship between MOHELA and Missouri. Below are some key exchanges concerning standing:

Justice Alito: "If MOHELA itself had brought this suit, would you contest Article III standing?"

Prelogar: "No, we would not."

Justice Jackson: "If MOHELA is being injured as a result of the plan or at least if that's the allegation, MOHELA has the ability to defend itself and its interests, correct?"

Prelogar: "Exactly. It's a separate legal person. It has the right to sue or be sued in its own name. There is nothing that stands in the way of MOHELA asserting these interests if it's experiencing financial harm[.]"

Justice Kagan: "Do you have any understanding about why MOHELA isn't here?"

Prelogar: "No. The only evidence in the record about MOHELA is that its involvement in this suit has been responding to sunshine law requests."

While it is unclear on what issue the Court's ultimate opinion will turn, it is apparent that SCOTUS is having to balance serious questions about the executive branch's use of perceived statutory authority, against whether Article III standing will even allow the Court to reach a decision on the merits.