As a presidential candidate, Joe Biden promised to cancel $10,000 in student debt per borrower. He called this a “critical step” to “help make it easier for working people to make ends meet.” But after winning office, Biden found it difficult to get this passed into law, given his party’s razor-thin majority in the Senate. Congress on several occasions considered including $10,000 in debt relief in multiple pieces of COVID-19 legislation and ultimately chose not to do so.
It seemed his hands were tied. Even most Democrats, including then-House Speaker Nancy Pelosi (D-CA), had long acknowledged that student debt cancellation couldn’t be done without passing a law. Actions to “cancel” student debt actually involve spending taxpayer money or requiring that taxpayers absorb the reallocated debts, and Congress has the power of the purse per the Constitution.
Then, a few radicals on the Democratic Party’s left flank, namely Sens. Elizabeth Warren (D-MA) and Bernie Sanders (I-VT), reminded Biden of the precedent his old boss, Barack Obama, had set. Also stymied by an unhelpful Congress, Obama famously turned to “pen and phone” governance on everything from immigration reform to public school bathrooms, sidestepping the first branch and the Constitution in favor of unilateral executive action. Progressives lobbied Biden to do the same, making the specious and legally radical argument that the president had the authority to “cancel” student debt unilaterally with simply an executive order.
Thus, last August, the White House unveiled its unilateral plan to enact partial student debt cancellation. “A post-high school education should be a ticket to a middle-class life, but for too many, the cost of borrowing for college is a lifelong burden that deprives them of that opportunity,” the president said, adding that he was “following through on his promise” and “canceling” $10,000 per borrower. But the initiative actually went even further than what Biden had promised during the campaign. It also included $20,000 in cancellation for graduates who had received Pell Grants, a form of federal financial aid, and a sweeping income-driven repayment reform that would mean hundreds of billions in additional debt relief.
“What President Biden has in effect decided to do is to take from working-class people,” Sen. Ted Cruz (R-TX) said. “To take from truck drivers and construction workers right now, thousands of dollars in taxes in order to redistribute it to college graduates who have student loans.”
“President Biden’s announcement that he intends to cancel student loan debt is irresponsible, unfair, and deeply cynical,” then-Sen. Richard Burr (R-NC) similarly argued in a statement. “He’s asking taxpayers to subsidize debt held by some of America’s highest earners in order to court votes. Every American who paid back their student loans, who put themselves through school by saving and working extra jobs, or who chose not to go to college at all should be outraged right now.”
Nor was it only conservatives who were unhappy with Biden’s move. Even former Obama administration economist Jason Furman blasted it as “reckless” and warned it would worsen inflation. Meanwhile, the centrist, nonpartisan Committee for a Responsible Federal Budget analyzed the plan and estimated it would cost roughly $500 billion, an astounding $3,489 per federal taxpayer. It also warned that it would do nothing to actually solve the student debt problem, with debt returning to current levels by 2028.
The other big criticism of student debt “cancellation” generally is that it benefits primarily affluent people. The president attempted to negate this criticism by cutting off his relief at those who earn $125,000 individually or $250,000 as a household. But even still, the benefits overwhelmingly flow to college-educated, above-average earners.
An analysis by the Wharton School at the University of Pennsylvania found that Biden’s plan would still give up to 73% of the benefits to the top 60% of earners. A simpler way to think of it is that the vast majority of the loan forgiveness benefits would not go to the bottom 40%, those who are the actual poor and working class.
The legal community also took umbrage with Biden’s initiative due to its flimsy constitutional justifications. The president’s order claimed that he had the ability to cancel half a trillion dollars in debt due to a 2003 law, the HEROES Act, that was passed in the wake of 9/11. As law professor Ilya Somin has explained, this law gives the secretary of education the authority to “waive or modify any statutory or regulatory provision applicable to the student financial assistance programs” so that during a national emergency, “affected individuals” are not hurt financially by the crisis.
Even 2 1/2 years into it, the White House is using COVID-19 as its “emergency” and defining “affected individuals” to include pretty much the entire country. The big problem, however, is that the law requires people to be financially hurt by the emergency at hand, and most of Biden’s student debt relief recipients simply weren’t. Indeed, the unemployment rate for college graduates is now back to just 2%.
More broadly, no one believes that Congress intended to authorize the executive branch to enact unilateral debt cancellation when it passed this law. That’s why Somin dubbed this feeble attempt at a rationale “blatantly pretextual.”
Even many liberal legal scholars have critiqued the Biden administration’s attempt to exploit emergency powers. “As a progressive who was deeply disturbed by the Trump administration’s abuse of power and executive power and invoking emergency powers, like building a wall, it seems too convenient now for progressives to embrace emergency power references by a new president, when we were so troubled a few years ago,” Fordham University law professor Jed Shugerman said. “What’s good for the goose is good for the gander. We should be tired of the use of emergency powers.”
Elizabeth Goitein of the left-leaning Brennan Center for Justice made a similar criticism of Biden’s plan. “Emergency powers are not meant to address long-standing problems, however dire,” she wrote for the Washington Post. “Nor are they meant to provide long-term solutions. And using them to get around Congress, when Congress has considered a course of action and rejected it, is a clear misuse of emergency powers.”
“Fundamentally, sidelining Congress through emergency powers means sidelining the checks and balances that safeguard our liberties and democracy,” Goitein concluded. “No matter your view of the merits of student debt forgiveness, that’s an outcome that should trouble us all.”
The takeaway here is clear: Biden’s debt relief effort is built on a house of cards.
With so many problems plaguing the plan, it’s hardly shocking that it was deeply unpopular with the public — once it was presented with the full facts. Pollsters at the libertarian-leaning Cato Institute surveyed people on a plan very similar to Biden’s, and the results were glaring.
“Nearly two‐thirds of Americans oppose cancellation if forgiving $10,000 per borrower raises their taxes (64%) or if it primarily benefits higher income people (68%),” Cato reported. “About three‐fourths of Americans would oppose student debt cancellation if it caused universities to raise their tuition and fees (76%) or if it caused more employers to require college degrees even if not needed to do the job (71%), also known as ‘credential inflation.’”
Basically, once you inform people of the actual trade-offs involved with “canceling” student debt, support for Biden’s plan plummets.
The Biden administration certainly knew its initiative was on shaky legal ground. However, it had also anticipated this from the start and maneuvered accordingly. Thanks to the way the administration had structured the debt cancellation, it wasn’t clear if anyone would actually be able to challenge its constitutionality in court. This is because it was initially hard to see what plaintiffs, that is, litigants, would have the legal standing to sue over it. After all, not just anybody can sue the government for any reason in order to challenge a given policy.
“Under current Supreme Court precedent, plaintiffs have to meet three requirements to get standing to file a lawsuit in federal court: They must 1) have suffered an ‘injury in fact,’ 2) the injury in question must be caused by the allegedly illegal conduct they are challenging, and 3) a court decision should be able to redress the injury,” Somin explained for the Volokh Conspiracy.
“The main potential stumbling block in this case is the requirement of ‘injury in fact,’” he continued. “It may be difficult to prove that student loan cancellation injures anybody, in the sense required by Supreme Court precedent. Canceling some of A’s student loan debt doesn’t necessarily injure B and C. The others may believe it is unfair they had to pay off all their loans themselves, while A doesn’t. But, with rare exceptions, current precedent requires some sort of tangible injury. Unfairness, by itself, isn’t enough.”
Yet couldn’t taxpayers sue? They’re the ones being taken advantage of by all this, after all. But no: Under precedent, general taxpayer injury is not considered sufficient standing to challenge a policy in court.
Multiple lawsuits have emerged since Biden’s student loan cancellation policy was announced, taking several different angles to challenge its constitutionality. The best hope of stopping Biden’s plan seems to lie with a lawsuit from several red states that’s set to be argued before the Supreme Court next month.
In September, a coalition of six states with Republican-led governments, Nebraska, Missouri, Arkansas, Iowa, Kansas, and South Carolina, sued to block the plan in federal court. Initially, they lost in the district court, with a federal judge ruling that they lacked standing. The 8th U.S. Circuit Court of Appeals then took the case and issued an injunction blocking the cancellation from going into effect, finding that the states likely did have standing and raised “important and significant challenges” to the plan’s legality.
The case, Biden v. Nebraska, now goes before the Supreme Court, which will hear arguments on it in February. It will first rule on whether the states have standing and then, if they do, on whether the plan is within the executive branch’s constitutional authority. If the states are found to have standing, it’s expected that the Supreme Court’s 6-3 conservative majority will strike down Biden’s plan given its shaky constitutional foundations: It just has to get over that crucial legal hurdle first.
The states argue that they do have standing for several key reasons. Primary among them is that the mass cancellation of debt will adversely affect the finances of state loan servicing agencies that are effectively part of the state government, such as the Missouri Higher Education Loan Authority.
“The Cancellation will unquestionably inflict financial harm on MOHELA,” their lawsuit argued. “Last fiscal year, MOHELA earned $88.9 million for ‘servicing 5.2 million’ Direct Loan accounts. This revenue is determined by how many accounts MOHELA services — the more it does, the more it earns — and the Cancellation will ‘completely’ eliminate the debt of nearly half of all borrowers. MOHELA is at risk of losing at least half of the Direct Loan accounts it services, which equates to millions of dollars of revenue per year.”
This thus establishes the “injury in fact” a litigant needs to have in standing to sue. Somin views this as the strongest argument for standing, writing that “loan servicers like MOHELA pretty obviously have standing under even a narrow interpretation of current precedent.”
The plaintiffs also argue that some of the other states, namely Nebraska, Iowa, Kansas, and South Carolina, have standing because they face “direct injury in the form of a loss of specific tax revenues.” The arguments on behalf of each of these states are too complex to explore here, but essentially, they maintain that cancellation will mean that fewer taxes are paid to the state governments and argue that loss of revenue gives them standing.
The Biden administration argued in response that MOHELA is its own legal entity and the state of Missouri cannot sue on its behalf. It also argued that if MOHELA is not truly a part of Missouri’s government, the mere fact that it owes money to the state and its ability to pay may be adversely affected is not enough to establish standing.
The states’ lawsuit is quick to rebut this argument comprehensively, pointing out that “MOHELA is a state agency, so financial harms to it are harms to Missouri. It is part of the Missouri Department of Higher Education and Workforce Development. Its board members are state officials appointed by the State with the advice and consent of the legislature. And State law establishes MOHELA’s powers.”
The Biden administration also argued the states’ claims of harm over the loss of tax revenues due to student loan cancellation are “self-inflicted” because the states have the ability to change their tax laws. Its reply read, “If they choose not to do so, any resulting reduction in their tax revenues is fairly traceable not to the Secretary’s plan, but instead to their own choices about how to structure their tax laws.”
Again, the states reject this argument easily. The lawsuit pointed to past circuit court precedents in which courts did not “treat the availability of changing state law as a bar to standing.” They also argued that “states have a sovereign right ‘to create … a legal code’” and “forcing States to exercise that power by upending their preferred system for calculating state taxable income is itself an injury.”
So, the states look poised to succeed at the Supreme Court if they can successfully overcome the standing problem and challenge Biden’s suspect initiative on its constitutional merits. In an interesting twist, however, the Supreme Court will consider not just the states’ challenge but also another challenge to the program.
The justices have incorporated an alternative challenge into the case they’ll hear, Department of Education v. Brown, in which two student loan borrowers who are not eligible for the full relief are challenging the plan. They argue that the administration did not follow the proper process that would’ve given them the opportunity to lobby for an expansion of the qualification criteria, and therefore they have standing to challenge the initiative.
The Supreme Court will hear arguments on both cases on Feb. 28. If it can establish that any of the plaintiffs have standing, then the high court will almost certainly strike down Biden’s initiative as the unlawful edict it truly is.
If it can’t, then Biden might just get away with his constitutional workaround. That would be a win for the Democrats’ agenda, yes, but a loss for our constitutional order and the rule of law.
Brad Polumbo is a Robert Novak journalism fellow and co-founder of BASEDPolitics.
