The fate of Biden’s student loan relief plan rests with the Supreme Court

The Supreme Court is expected to soon decide the financial fortunes of more than 40 million Americans lining up for significant student loan relief when it hears arguments over the legality of President Joe Biden’s plan to provide targeted relief to borrowers for students.

On February 28, the court is expected to hear arguments on whether the millions of Americans eligible for forgiveness of up to $20,000 in student loan debt should get that relief or whether they should be forced to continue paying their pay the loans.

With a conservative six-vote majority, the court appears unlikely to uphold a major action by the executive branches of a Democratic administration that involves reallocating money from creditors to debtors. But there may be a way for at least some of the court’s conservatives to preserve the debt relief program by meeting a conservative goal.

The most likely way the program would survive the challenges presented in two cases — Biden v. Nebraska and Department of Education v. Brown — is if the outcome addresses the status issue; that is, if the parties suing to challenge the program can prove that it harms them and that they are the interested party that is harmed. If the court rules that the six states and two individuals who sued the administration are wrong, the justices will not have to decide whether the program is legal.

“The standing theories that have been thrown to the wall in these cases are wrong, and many of them would have dangerous implications,” conservative law professors Samuel Bray and William Baude argued in a friend-of-the-court brief filed in the case. . .

Despite their belief that the administration’s debt relief plan is “illegal,” Bray and Baude argue that none of the states or individuals they sued can adequately demonstrate that they were harmed by the program. And if the court were to grant the statute, it would further expand states’ ability to file lawsuits to compel or block executive action — something three of the conservative justices opposed in the 2007 Massachusetts v. EPA case, in which the court declared “special request” to ask the government to regulate carbon emissions.

Chief Justice John Roberts wrote a dissent from that decision, along with Justices Clarence Thomas and Samuel Alito and then Justice Antonin Scalia. In contradiction, Roberts argued that the “special request” to the states has become a “lawyer’s game rather than a fundamental limitation that ensures that courts function as courts and do not interfere with judicially accountable political branches.” .

Courts are meant “to decide concrete cases, not to serve as a convenient forum for political debate,” Roberts added.

These concerns “proved prophetic,” Bray and Baude write. Since then, there has been a dramatic increase in lawsuits filed by state attorneys general against federal actions while the opposing side occupies the White House. Under former President Barack Obama, the general prosecutors of the Republic of Moldova filed over 50 lawsuits. Democratic attorneys general filed more than 130 lawsuits while Donald Trump was president. And now Republicans have filed more than 50 such lawsuits against Biden.

“The states’ more outlandish theories are emblematic of the larger tendency to take advantage of vague language in Massachusetts vs. EPA to challenge any federal action they disagree with,” Bray and Baude write. “If this Court is unwilling to constantly adjudicate every major executive action — which is not its constitutional role — it is time to say ‘enough.’

By rejecting the standing theories offered in the student loan cases, Roberts and other conservatives could set new limits on states’ “special pleading” for rights, or reject it altogether. That could help keep the court out of thorny political issues, making it more difficult for liberal attorneys general to file suit to enforce environmental or civil rights law. It’s something Fordham Law School professor Jed Shugerman, who advocates for student debt relief, warned about in a brief to the court in support of the state’s arguments to enforce it.

Such a move would allow Roberts to do what he has done in the past: uphold the policy priority of a Democratic president as he advances his own agenda.

The case against the eight plaintiffs is pretty straightforward, according to Baude, Bray and a patent filed by the Biden administration, among others.

Biden announced his plan to offer student loan debt relief to some borrowers on August 24, 2022. The plan offered $20,000 in aid to Pell Grant recipients and $10,000 to other borrowers who earned less than $125,000 per year in 2020 or 2021. authority under the HEROES Act of 2003 to provide debt relief during the national COVID-19 emergency.

The debt relief plan drew swift legal challenges from conservatives. The states of Arkansas, Iowa, Kansas, Missouri, Nebraska and South Carolina sued in the 8th Circuit, while Myra Brown and Alexander Taylor, two student borrowers, sued in the 5th Circuit.

Among Arkansas, Iowa, Kansas, Missouri, Nebraska and South Carolina, the Eighth Circuit Court of Appeals upheld only Missouri. The claims of the other five states were too weak, as they turned out to be either self-inflicted or non-existent.

Iowa, Kansas, Nebraska and South Carolina said they would lose tax revenue because of a 2021 law that exempts student loan debt repayments from being counted as “gross income.” These states argue that they would lose tax revenue because they tie their state tax definitions of “gross income” to the IRS definition.

However, court precedent states that a state cannot claim damages resulting from a self-inflicted act. It was the individual choice of Iowa, Kansas, Nebraska, and South Carolina to tie their state tax codes to the federal tax code.

In the 1976 case, Pennsylvania v. New Jersey, the court ruled that Pennsylvania could not claim to have been harmed when New Jersey approved a new tax, despite Pennsylvania’s argument that it was harmed because it allowed residents to request a tax credit for taxes paid to other states. The court ruled that Pennsylvania need not offer such tax credits and ruled that no state “can be heard to complain of harm done by its own hands.”

Claiming to be right is also suspect because the harm claimed is not direct. In a 1927 case, after Florida challenged a federal property tax on the grounds that it would cost state tax revenue, the court rejected Florida’s argument, finding that the harm was “at most, only remote and indirect”.

Arkansas, Missouri and Nebraska say they would lose revenue because the White House program only benefits direct loans over family loans and would encourage borrowers to consolidate any family loans into direct loans. Because some state entities own investments in home loans, these states claim they would be harmed. But the administration changed its policy to prohibit debt holders from consolidating in this way to receive the proposed relief.

“Federal student loan borrowers are not owned by [the Department] cannot obtain one-time debt relief by consolidating these loans into direct loans,” the Biden administration court notes.

As for Brown and Taylor, both sued to challenge the plan, claiming they would not receive all or part of the promised private loan because they did not receive the maximum $20,000 offered to Pell Grant recipients. They argued that their ability to register their complaints was cut short when the administration failed to post the policy through the normal notice and comment process.

In this case, the remedy Brown and Taylor seek, to eliminate the program entirely, is less than the harm they claim: exclusion from all or part of the aid. Baude and Bray’s briefs and the Biden administration argue that they lack standing because eliminating the program would not address their alleged harms.

As for the administrative complaint, the HEROES Act exempts changes to debt payments during a declared national emergency from the normal notice and comment period, so the Biden administration’s brief argues that this harm does not actually exist.

That leaves Missouri, which claims it would lose money that MOHELA, the state-created student loan servicer, must donate to a state capital improvement fund because MOHELA could lose revenue on any loans it holds and which is forgiven.

While this is “the strongest argument made by both plaintiffs,” Bray and Baude argue, it is still problematic because “the State of Missouri is not the ‘proper party’ to bring this suit.”

Despite being created by the state, MOHELA is an independent entity that has the power to sue and be sued. MOHELA, not Missouri, is the party that should be suing here, Bray and Baude’s briefs and the Biden administration argue — something it obviously isn’t doing.

The claim that it remains legal because MOHELA may not be able to pay its state obligations has its problems. Besides the fact that the matter is speculative, the state is already granting MOHELA extensions and delays in paying what is owed. It could also set a new standard for the statute, which would create a number of perverse consequences.

If the court were to accept such a theoryThis would give “any creditor” the right to sue to block “any regulation that reduces the income of any of its debtors,” Bray and Baude argued — adding that “such a theory should not be taken more seriously here.”

Conservative justices may ultimately rule in favor of the statute, as they have in a number of post-Massachusetts v. EPA cases in which states have made similar arguments. If they do, then the case boils down to whether or not the bailout program is legal under the court’s “principal issues doctrine” that limits expansionary regulatory actions that harm the economy. But staying is the Biden administration’s best bet to keep its plan intact, even if it comes with collateral damage.