Predicted: 8th Circuit and Northern District of Texas Halt Biden Student Loan Forgiveness

By: Shawn M. Flynn and Jared J. Roberts 

In a recent October 2022 Washington Times article, Binnall Law Group correctly predicted that federal courts would halt the Biden Student Loan Forgiveness plan. Specifically, the article argued that courts should be skeptical of the plan because it is a major question, requiring the approval of Congress rather than authorization solely by the Secretary of Education.

The Major Questions Doctrine, developed over the last several decades by the Supreme Court, requires that Congress approve of agency actions of vast political or economic significance. The article argued that the student loan forgiveness plan implicates the doctrine because the plan will cost hundreds of billions of dollars and is politically and nationally significant, affecting over 40 million borrowers. Allowing such a policy to be unilaterally implemented would arm the secretary of education with powers not expressly granted by Congress.

In a memorandum prepared by the Department of Justice Office of Legal Counsel, the DOJ, the agency tasked with defending this program in court, argued that the legislative history supports their position that the Secretary of Education is authorized to forgive the debt. The legislative history, however, does not state as such. DOJ admitted that: “We have no statements from the brief floor debate on the Act expressly rejecting the Secretary’s power to cancel student loan debt under the HEROES Act. … A few statements suggest that some Members of Congress viewed the Act primarily as authorizing the Secretary to defer payments.”

In fact, there is nothing in any statements in the legislative history indicating that Congress meant to prevent the secretary from reducing or canceling debt if the secretary “deems” such cancellations or reductions “necessary” to “ensure” that “affected individuals are not placed in a worse position financially in relation to [their] financial assistance because of their status as affected individuals.” Therefore, it is likely that a federal court will find that the Secretary of Education does not have clear legislative authorization as required under the major questions doctrine.

Two federal courts have now acted to halt the effectiveness of this plan pending further review: (1) the Eighth Circuit Court of Appeals halted the program, and (2) the Northern District of Texas halted the program. The Northern District of Texas specifically discussed how the implementation of this plan would be an “unconstitutional exercise of Congress’s legislative power” and held that because the program “is an agency action of vast economic and political significance, the major-questions doctrine applies.” The Northern District of Texas then further held that the Secretary of Education did not have a “clear congressional authorization” for this action, and, therefore, the Northern District of Texas declared the program unlawful and vacated the program.

DOJ has vowed to defend the program and appeal to the Supreme Court. But it is unlikely that such efforts will be successful for two reasons.

First, DOJ is appealing from a position of weakness as the lower courts have already questioned and ultimately struck down the plan. DOJ must now bear the burden of showing why the plan is constitutional.

Second, the Supreme Court appears poised to limit the power of administrative agencies following the addition of conservative justices under President Trump. Since his 2019 dissenting opinion in Gundy v. United States, Justice Neil Gorsuch has been searching for the right case to limit unilateral administrative power. The essence of Justice Gorsuch’s concern, in that case, was unelected bureaucrats drafting laws without checks on such power, and with two new conservative justices joining the court since this time, Justice Gorsuch could finally have his chance to limit presidential agency power, starting with the apparent overreach here. Past rulings indicate that Justices Clarence Thomas, Samuel Alito, and John Roberts are all on board with Justice Gorsuch’s position. This leaves just needing one more vote between Justices Amy Coney Barrett and Brett Kavanaugh. Both of whom are likely to agree with Justice Gorsuch.

The Department of Justice’s justifications for the constitutionality of this action had legal scholars from across the political spectrum speculating it would fail. Now that it has been struck down, should the decision actually reach the Supreme Court on appeal, it could backfire with a decision that limits Mr. Biden’s presidential power—and the power of future presidents. Accordingly, this case could have a much bigger impact than just student debt. Binnall Law Group is here to keep you apprised of these upcoming changes to administrative law.