Supreme Court's conservatives sharply question legality of Biden's student loan forgiveness program

Washington — The Supreme Court's conservative wing appeared to doubt the legality of President Biden's plan to cancel up to $20,000 in student loan debt for millions of Americans, hearing oral arguments in a pair of disputes over the program on Tuesday.

But where some justices stood on the key question of whether a group of six states and two borrowers were entitled to sue in the first place remained unclear, potentially throwing the Biden administration a lifeline as it seeks to save the program.

A decision in the case, which is expected this summer, will affect roughly 40 million borrowers who are eligible for the relief that President Biden announced last August, 20 million of whom stand to have their loan balances eliminated altogether, according to White House estimates. 

Under the plan, eligible borrowers earning less than $125,000 can receive up to $10,000 in student debt relief. Qualifying Pell Grant recipients, who are students with the greatest financial need, can have up to an additional $10,000 forgiven. 

The Department of Education relied on a 2003 law known as the HEROES Act to wipe out the debt, totaling roughly $430 billion. That law authorizes the education secretary to "waive or modify" student financial assistance programs for borrowers "in connection" with a national emergency, such as the pandemic. 

The program was met with swift legal challenges from a group of six states — Arkansas, Iowa, Kansas, Missouri, Kentucky and South Carolina — and two borrowers from Texas, who separately argued the plan exceeds the administration's authority.

The court's six conservative and three liberal justices considered two questions at Tuesday's arguments: whether the states and borrowers have standing to challenge the program, and whether the Biden administration exceeded its authority with the plan.

Over the course of several hours of arguments, Chief Justice John Roberts raised concerns that the plan violated separation-of-powers principles, and indicated that Congress should have given express authorization for the secretary of education to wipe out nearly half-a-trillion-dollars in student debt.

"Most casual observers would say if you're going to give up that much amount of money, if you're going to affect the obligations of that many Americans on a subject that's of great controversy, they would think that's something for Congress to act on, and if they haven't acted on it, then maybe that's a good lesson to say for the president or the administrative bureaucracy that maybe that's not something they should undertake on their own," he said.

But Roberts and many of his fellow conservative colleagues were quiet on whether the states and two borrowers behind the court fight have legal standing to sue. For the Biden administration to prevail, it must persuade a majority of the court that neither parties are harmed by the plan.

Arguing for the Biden administration, Solicitor General Elizabeth Prelogar stressed that neither the states nor the two borrowers who sued have the legal standing to do so, since any harms to tax revenues are "self-inflicted" and "indirect." Secretary of Education Miguel Cardona, she said, "acted within the heartland" of his authority.

Several conservatives justices were skeptical the secretary of education could act without the explicit green-light from Congress. Roberts repeatedly highlighted the enormous cost of the plan and said the case brought by the states "presents extraordinarily serious, important issues about the role of Congress and about the role that we should exercise in scrutinizing that, significant enough that the major questions doctrine should be implicated."

The major questions doctrine holds that there must be clear congressional authorization if an agency wants to decide an issue of "vast economic or political significance." The states have accused the Biden administration of attempting to bypass Congress with its plan to unilaterally cancel student debt, and argue the secretary of education needs clear, express congressional authorization to wipe out the loans.

"In effect, this is a grant of $400 billion," Justice Clarence Thomas said, "and it runs headlong into Congress's appropriations authority."

Roberts raised concerns about the fairness of the policy and put forth an example of two high school graduates. One takes out a loan to attend college that is then forgiven by the government. Another decides to start a lawn-care service, receives a bank loan to do so, and then sees his tax dollars used to support the cancellation of the student loan.

"We like to usually leave situations of that sort when you're talking about spending the government's money, which is the taxpayers' money, to the people in charge of the money, which is Congress," he said. "Why isn't that a factor that should enter into our consideration under the major questions doctrine?"

Prelogar, though, reiterated that the states are not the proper party to challenge the program, but acknowledged that loan service providers would be. She also noted that Congress could take legislative action if it disapproves of the debt relief program.

Justice Elena Kagan sought to counter concerns of executive power and said Congress "used its voice" through the HEROES Act by allowing the secretary to "modify or waive" student financial assistance programs.

"Congress doesn't get much clearer than that," she said of the law. "We deal with congressional statutes every day that are really confusing. This one is not."

In the case brought by the six states, known as Biden v. Nebraska, a federal district court in St. Louis dismissed the case for lack of standing. But a federal appeals court blocked the debt relief program, finding that "Missouri is harmed from the financial losses that the cancellation inflicts."

The appeals court focused its decision on the Higher Education Loan Authority of the State of Missouri, or MOHELA, a state-created entity that services federal student loans, finding that the financial impact on the loan servicer due to the debt discharge threatened financial harm to Missouri.

For the second case from Texas brought by borrowers Myra Brown and Alexander Taylor, dubbed Dept. of Education v. Brown, a federal district court found the borrowers satisfied the requirements for standing and ruled the plan is an unconstitutional exercise of Congress's legislative power. A federal appeals court declined to reinstate the program.

Brown does not qualify for debt relief, as her loans are held by commercial entities, and Taylor is eligible for $10,000 in loan forgiveness. 

The Biden administration argued in court papers that neither the states nor the borrowers have legal standing to challenge the debt relief program. Any harm to the states' treasuries is "self-inflicted" and their theory of decreased tax revenues "unduly speculative," according to Prelogar. With regards to Missouri and MOHELA, the two are "legally separate entities," she said.

While several of the conservative justices expressed concerns over the agency's power, the three liberal justices, joined by Justice Amy Coney Barrett, suggested that the states do not have the legal right to sue.

MOHELA, Justice Ketanji Brown Jackson said, is effectively a separate entity from the state, with separate financial interests. If the loan servicer is being injured as a result of the debt relief program, it has the ability to sue, she said.

"Usually we don't allow one person to step into another's shoes and say, 'I think that that person suffered a harm,' even if that harm is very great. We leave it to the person, him or her or itself, to make that judgement," Kagan said. "Why isn't MOHELA responsible for deciding whether to bring this suit?"

When Nebraska Solicitor General James Campbell argued that MOHELA is part of Missouri, since it is a state-created and state-controlled public entity, Justice Amy Coney Barrett asked why the state didn't just force the loan servicer to mount the legal battle.

"If MOHELA is an arm of the state, then why didn't you just strong-arm MOHELA and say you've got to pursue this suit?" she said.  

Missouri argues the student debt relief program will inflict "substantial financial losses" on MOHELA and therefore injure the state, while the other states involved in the case claim they will lose tax revenues as a result of the program. 

In the second case brought by the two borrowers, Justice Sonia Sotomayor told Michael Connolly, who argued on behalf of Brown and Taylor, that she is "at a loss as to how you have standing."

"The only way you can win is if you strike down this program completely, and that means you don't get an opportunity to be heard, but nobody else does either," she said. 

Sotomayor said that if the court invalidates Mr. Biden's plan, neither Brown nor Taylor, who is eligible for $10,000 in loan cancellation, will receive any relief.

"You strike it down, he gets nothing, neither does your person who wants something. This is so totally illogical to me that you've come into court to say, 'I want more. I'm going to file suit to get more, but I know I'm going to get nothing,'" she said.

Mr. Biden announced his student debt forgiveness plan last August, and in the less than four weeks that the application was available, more than 26.2 million people applied. Over 16 million of those applications were approved by the Department of Education, according to the White House. The Trump administration, followed by the Biden administration, paused federal student-loan payments during the COVID-19 pandemic, with the most recent extension running through June.