Court Declares Biden’s Student Loan Relief Plan Unlawful

Court Declares Biden’s Student Loan Relief Plan Unlawful

The U.S. District Court for the Northern District of Texas Fort Worth Division has ruled that President Biden’s student loan debt relief plan to be unlawful and have vacated the program [Brown et al. v. U.S. Department of Education et al., N.D. Tex., Dkt. No. No.4:22-cv-0908-P, 11/10/22].

Executive Action on Student Loan Debt

On August 24, 2022, President Biden announced a three-part student loan forgiveness plan that further extends the suspension of collection actions and wage garnishments for student loans to provide additional assistance to borrowers through the end of 2022. The plan allows for a certain amount of debt forgiveness for certain individuals and extends the pause on student loan debt repayments until December 31, 2022.

Prior Attempts to Forgive Student Loan Debt

The Trump Administration considered its statutory authority under the Higher Education Relief Opportunities for Students Act of 2003 (“HEROES Act”) to forgive student loans due to the COVID-19 pandemic. However, the Department of Education concluded that it lacked such authority. House speaker Nancy Pelosi agreed with the decision and noted that student loan debt can be postponed by the President, forgiveness must be done through an act of Congress.

DOE changes tune. According to the Court, the Biden Administration also instructed the DOE to explore legal avenues to justify a loan forgiveness program, which it did and changed course by saying that the HEROES Act allows the executive branch to create a loan-forgiveness program to address the financial harms of the COVID-19 pandemic.

HEROES Act. The HEROES Act (P.L. 108-76) grants the Secretary of Education the authority to “waive or modify any statutory or regulatory provision applicable to the student financial assistance programs…in connection with a war or other military operation or national emergency.”

HEROES Act claim. The Secretary claims that the pandemic was declared a national emergency by President Trump in 2020 and thus a “national emergency” under the HEROES Act. The Secretary further claims that every portion of the country is a “disaster area due to COVID-19,” and “every person with a federal student loan…is an affected individual.”

Plaintiff claims. The plaintiffs in the case claim that they have student loans but are ineligible because the loans are commercially held and did not receive a Pell Grant. The Program did not undergo notice-and-comment rulemaking procedures under the Administrative Procedure Act. Therefore, the plaintiffs could not voice their disagreement.

Court conclusion. The Court said that if the executive branch seeks to use its delegated power to create a law of vast economic and political significance, it must have clear congressional authorization. If not, the executive branch unconstitutionally exercises “legislative powers” vested in Congress, the Court explained.

The Court further said that in this case, the HEROES Act does not provide the executive branch clear Congressional authorization to create a $400 billion student loan forgiveness program. It concluded that the program is an unconstitutional exercise of Congress’s legislative power and must be vacated.

Federal Student Aid Webpage

The U.S. government’s Federal Student Aid webpage notes that court have issued orders blocking the student debt relief program and is no longer accepting applications at this time.

DOE Confirms DOJ Appealing Decision

U.S. Secretary of Education Miguel Cardona said that the DOE believes the student loan debt forgiveness program is lawful. He added that the U.S. Department of Justice appealed the decision on November 11, 2022 and that borrowers will be kept informed about further efforts.

What About Student Loan Garnishments?

One of the three parts of Biden’s student loan debt forgiveness program includes extending the suspension of collection actions and wage garnishments for student loans to provide additional assistance to borrowers through the end of 2022.

According to the Court’s ruling, Pelosi claims that the President does have the power to postpone student debt. Also, these collection actions had been postponed before under President Biden and former President Trump. Although the Court ruled Biden’s program to be unlawful and vacated it, this may not mean student loan garnishments collection actions are beginning again.

Even if the ruling includes the collection actions, it would seem possible for President Biden to order these actions suspended again until 2023 as a stand alone order without legal issues, since the focus of the case is the debt forgiveness.

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