Is Biden’s Student Loan Forgiveness Plan Legal?

College students and graduates banking on loan forgiveness should curb their enthusiasm until legal battles play out.
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  • Some politicians and legal experts are challenging the legality of Biden's loan forgiveness program.
  • The justification for loan forgiveness under the Heroes Act remains questionable.
  • On February 28, the Supreme Court heard oral arguments on two cases challenging the legality of Biden's plan.
  • A SCOTUS decision should be forthcoming in June or July, or perhaps earlier.

Millions of Americans celebrated President Joe Biden's August announcement promising to wipe away up to $20,000 in student loan debt.

But this celebration might be short-lived for one simple reason: Biden's plan might not be legal, say political opponents and some legal analysts.

Who exactly is challenging the legality of loan forgiveness, and on what grounds? Will Americans realize the debt relief they've been promised?

President Biden Unveils Plan to Forgive Student Loan Debt

During his 2020 presidential campaign, Biden promised to relieve some portion of student loan debt. In August, he kept true to that promise, announcing the cancellation of up to $20,000 for borrowers who received a Pell Grant and up to $10,000 for those who did not.

To qualify, individuals must earn less than $125,000 per year. Couples filing taxes jointly must fall below the $250,000 threshold. Parents who hold PLUS loans are also eligible for debt reduction. Biden's plan applies only to federal student loans, not those issued by private sources.

A White House fact sheet claims the plan will provide relief for as many as 43 million borrowers and will cancel the full remaining balance for about 20 million people. White House estimates suggest 90% of the debt relief will assist those making under $75,000 a year.

But Is Biden's Plan Legal?

Even though Biden committed to forgiving some amount of loan debt, he believed his authority to do so through executive action was "ambiguous" instead preferring congressional legislation on debt relief.

Still, a 2020 memo from Harvard Law School concluded the president can, in fact, direct the secretary of education "to create and to cancel or modify debt owed under federal student loan programs."

The Biden administration justified debt cancellation under the Higher Education Relief Opportunities for Students (HEROES) Act of 2003, which grants the education secretary "expansive authority to alleviate the hardship that federal student loan recipients may suffer as a result of national emergencies." The law was passed following the terrorist attacks of Sept. 11, 2001.

What is the "national emergency" allowing such action? The COVID-19 pandemic, which the Trump administration characterized as such in March 2020.

Critics claim invoking the Heroes Act to forgive student loan debt is a stretch. Arizona Attorney General Mark Brnovich, who — along with fellow Republican attorneys general from Missouri and Texas — has threatened to challenge the president's plan, said Biden is on "very, very shaky legal grounds right now."

Arkansas Attorney General Leslie Rutledge told the Fox Business Network, "I am ready to join with other attorneys general, or if I have to go alone, to take action against President Biden's latest executive order in regard to student loan debt."

Some legal experts agree. Fordham Law School's Jed Shugerman called the Biden administration's use of the Heroes Act as the basis for loan forgiveness "sloppy."

Washington Post columnist Marc Thiessen claims President Biden undermined his legal justification for invoking the Heroes Act by claiming the pandemic is done.

"We still have a problem with COVID," Biden said in a 60 Minutes interview. "We're still doing a lotta work on it. … But the pandemic is over."

Absent an ongoing pandemic, Thiessen argues, there is no "legal basis for using it to forgive student loans."

Thiessen also suggests the act was written to prevent Americans in active military service during national emergencies from defaulting on student loans.

"There is no way to read this law as justifying debt relief for an entire class of individuals who never wore the uniform," Thiessen wrote.

"He's driving a steam engine right through the plain text of the law and providing mass debt forgiveness for those who did not serve in any capacity in a national emergency — and using the pandemic as justification."

At the same time, the Department of Education has invoked the Heroes Act since 2020 to justify suspending student loan repayments, an initiative whose legality has yet to be challenged.

Who Has the Standing to Sue?

Challenging the legality of Biden's plan requires a plaintiff. Someone has to have what's called a "standing to sue," having sustained some form of injury or harm.

Writing for "The Volokh Conspiracy," a blog on the Reason website penned mostly by law professors, Ilya Somin of George Mason University outlines three potential litigants who could file suit.

One is Congress. Either the House or Senate could sue for breach of the Appropriations Clause, arguing the executive branch denied Congress its "constitutionally indispensable legislative role." Given that both the House and Senate are controlled by Democrats, such action is unlikely, but the midterm elections this fall could alter the political landscape.

The Biden administration justified debt cancellation under the Higher Education Relief Opportunities for Students Act of 2003. Critics claim invoking the act to forgive student loan debt is a stretch.

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Other possible plaintiffs include colleges that don't accept federal funding, including student loans. Such logic suggests institutions such as Grove City College and Hillsdale College now face a competitive disadvantage in the educational marketplace because colleges that do accept student loans have become relatively cheaper alternatives thanks to loan forgiveness.

Somin's George Mason colleague Eugene Kontorovich believes states could file a lawsuit on behalf of public universities alleging loan forgiveness makes an affordable in-state education less attractive to students.

Yet in both cases, it would seem this logic holds only if student loan forgiveness might be a future event because those eligible to benefit from Biden's plan have already made their educational decisions.

A more likely scenario, Somin notes, involves student loan servicers, which collect student loan payments on the government's behalf. Loan forgiveness may result in fewer payments and reduce the fees these service agencies earn.

"My guess is that one of these private banks will go to a Federal District Court with a favorable judge and there will be a nationwide injunction that stops this program from going into effect," Fordham's Shugerman told The New York Times.

It turns out a plaintiff has stepped forward. Frank Garrison, a public interest lawyer in Indiana who works for the conservative Pacific Legal Foundation, is suing to block Biden's plan because he'll be taxed on the forgiven amount. Indiana is one of several states planning to tax as income the amount of loan discharged.

Garrison is attempting to have his student loans canceled through the Public Service Loan Forgiveness program, which doesn't include a tax penalty. Instead, Garrison will face a tax bill exceeding $1,000.

His standing to sue might evaporate, notes Mark Joseph Stern, if the Biden administration includes an opt-out mechanism for the 8 million people who have already qualified for loan forgiveness based on income (Garrison is one of them). Stern claims that by advancing this lawsuit before the plan's details have been finalized, the Pacific Legal Foundation "has given the Biden administration a roadmap to defeat its own lawsuit."

Experts Warn Public Not to Bank on Debt Reduction

The Department of Education promises to make loan forgiveness applications available sometime in October. Once that process begins, The Wall Street Journal predicts, Republicans will move ahead with legal challenges.

Shugerman believes there's a chance this action reaches the U.S. Supreme Court, which may not agree with the administration's reliance on the Heroes Act as justification for loan forgiveness.

"If they keep going with this argument and this interpretation of the statute, it is likely they will lose 6 to 3, and it's possible they could lose by more than 6 to 3," he told The Washington Post. "I foresee this good policy being rightly struck down by the courts on legal terms."

But that could take time. Barring any legal maneuvering to block forward progress, what if by then some loan debt has already been forgiven? Could the Department of Education attempt to cram the toothpaste back into the tube?

"Once the money goes out the door," said Brnovich, the Arizona attorney general, "it's going to be tough to get it back."

While all this shakes out in the coming months, experts warn borrowers eager to benefit from loan forgiveness not to set their hopes too high.

"Blanket student loan forgiveness is undoubtedly an act of economic and political significance, and the likelihood it is upheld within the president's authority is dubious," Lanae Erickson, senior vice president for social policy, education, and politics at The Third Way, told The New York Times. "It is incumbent upon the advocates and policymakers who pushed to take this unprecedented step to also communicate to borrowers that there is a strong chance it will never come to fruition."

Update: On February 28, the U.S. Supreme Court heard oral arguments for two cases challenging the Biden administration's student loan forgiveness program.

In Biden v. Nebraska, the plaintiff, a coalition of six Republican-led states, claimed debt cancellation would harm the states because of loan servicing revenue loss. The case also challenged the Secretary of Education's statutory authority to enact the debt relief plan.

The other case, Department of Education v. Brown, was brought on behalf of two individuals arguing they did not have the opportunity to weigh in on the plan, thus denying them the plan's full benefits.

The court heard both cases together.

Many legal experts noted the justices expressed sufficient doubt about the legality of Biden's plan and predict the court might rule for the plaintiffs as a way to limit executive power.

A decision could be forthcoming in June or July, though perhaps earlier given the expedited nature of these cases.

Stay abreast of updates on and the website.