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Only Congress can authorize a student-debt forgiveness program, and Congress has chosen not to enact such a plan.
The Higher Education Reinvestment and Opportunity Act for Students (HEROES) was passed by Congress in 2003. The law was passed in response to the Iraq War, as suggested by its name and chronology. Members of Congress have stated on the floor that deferring student loan payments for military personnel was a major incentive for the Act.
The current government, led by Vice President Joe Biden, is trying to exploit the HEROES Act to accomplish a legislative aim that is both unprecedented and unprecedentedly vast. After a nearly three-year moratorium on federal student loan payments, the government announced in August of last year that borrowers who met a particular income threshold would get $10,000 to $20,000 in debt forgiveness on the main student loan sum. The Congressional Budget Office has put the price tag on this scheme at approximately $400 billion, while the exact amount is still up in the air.
The administration relied on a provision of the HEROES Act that allows the Secretary of Education to "waive or amend" parts of law pertaining to federal student loans in order to implement this huge debt forgiveness plan. The Secretary can do "what may be necessary to ensure that... beneficiaries of student financial aid" who are affected by war or a national emergency "are not placed in a worse financial position in respect to such financial assistance because of their status as affected individuals."
The government contends that this provision authorizes the secretary to write off billions of dollars in student loans for millions of borrowers. It argues that after payments begin after the multi-year pandemic hiatus, some borrowers will default on their school loans. It further contends that the risk of default for these millions of debtors will not increase after principle balance forgiveness, and will actually be lower than it was before the pandemic.
A number of organizations, notably Cato Institute, have filed lawsuits to overturn this decision. The Supreme Court has now heard two of those cases, one brought by a coalition of states and the other by a collection of private persons. Additionally, an amicus brief was filed supporting the challengers in both cases by the Cato Institute and the Manhattan Institute.
Our brief explains that the HEROES Act does not permit the debt forgiveness program because reducing principal balances for millions of debtors is not "essential" to maintain the default rate at the pre-pandemic level. The same result might be attained through much less harsh means, such as expansion of income-driven repayment (IDR) programs. To further ensure that those who do miss payments do not worsen their financial situation, the Secretary can dismiss the harsh legal repercussions for default itself.
The "Major Questions Doctrine" is applicable here, the brief argues, making the matter straightforward. The Supreme Court has shown some justifiable skepticism in recent judgments toward agencies that claim unexpected and sweeping new powers. Everything points to the government suddenly discovering the authority to enact debt relief not because it is legally conceivable but because it is politically desirable.
For a policy with as much weight and debate as a $400 billion debt forgiveness program, there must be explicit backing in the law itself. The HEROES Act should be struck down by the Supreme Court because it fails to fulfill this threshold.
