Whatever narrow path the Biden administration has to salvaging its student loan forgiveness plan may depend on the Supreme Court ruling GOP-led states didn’t have standing to sue on behalf of loan servicers.
Justice Amy Coney Barrett joined the court’s three liberals Tuesday in questioning whether Missouri should be able to say that an injury to the Missouri Higher Education Loan Authority is in fact an injury to the state. MOHELA is a state-created corporation that services student loan debt.
The court’s standing doctrine, which generally prohibits a third party from suing for injuries to another party, could be critical for the forgiveness plan’s survival. The 6-3 conservative court appeared poised to strike down the policy, saying that the Biden administration didn’t have the authority to pass such a sweeping program without Congress’ express authorization.
“A majority of the court is skeptical that the government has this power, but they don’t even get to that issue if there’s no standing,” said Villanova law professor Michael P. Moreland.
Beyond Barrett, though, it isn’t clear there is a fifth vote to nix the states’ challenge. It was harder to tell where Justices Brett Kavanaugh and Neil Gorsuch stand on the issue, said Adam Minsky, a Boston-based attorney who helps student loan borrowers.
“Both Kavanaugh and Gorsuch at various points did express skepticism about the underlying merits of the program and the administration’s authority to enact this under the HEROES Act but less from them on the issue of standing,” he said.
Though the other conservative justices largely focused their questions on the administration’s authority to act, Moreland said observers shouldn’t assume they aren’t thinking about standing.
He noted that Chief Justice John Roberts has been critical of state standing in previous cases.
Relaxing standing requirements makes “standing seem a lawyer’s game, rather than a fundamental limitation ensuring that courts function as courts and not intrude on the politically accountable branches,” he said in a dissent to the Supreme Court’s 2007 ruling, Massachusetts v. EPA. A divided court there said states had “special solicitude” to sue the federal government over climate change rules.
But Roberts was also concerned that the judiciary would be abdicating its role to police the balance of power between the two branches of government if it found that no one could sue.
Solicitor General Elizabeth Prelogar, however, suggested there wouldn’t be a standing issue if MOHELA had brought the suit itself. In response to Justice Samuel Alito, she said the federal government wouldn’t contest the loan servicers alleged injury.
“So we think that if MOHELA made allegations that the plan was going to have financial effects on it, it could sue in its own name and we would not contest Article III standing,” Prelogar said.
Barrett wondered why the state didn’t force MOHELA to challenge the program. “If MOHELA is really an arm of the state” and could be forced into court, “all of this would be a lot easier,” she said.
“That’s a question of state politics,” Nebraska Solicitor General James Campbell said.
A finding that any challenger has standing will allow the justices to reach the merits.
And while there were other arguments supporting state standing, a majority of the discussion focused on Missouri and its state-created servicer, said Latham & Watkins’ Melissa Arbus Sherry, who filed an amicus brief arguing against standing here. “The focal point was definitely on MOHELA.”
Missouri argues that, as a state-created injury, any injury to MOHELA will eventually be felt by the state.
Barrett, along with Justices Sonia Sotomayor, Elena Kagan, and Ketanji Brown Jackson, examined the actual relationship between the state and MOHELA. Barrett noted that the state deliberately set up MOHELA as a separate corporation, which has financially benefited both the state and the servicer.
“MOHELA has the right to sue and be sued, the state doesn’t have responsibility for its liabilities, and the state has disclaimed any claim to the assets,” Barrett said.
If the “state itself says this is not the state, it’s an independent corporation,” it would be odd for the Supreme Court “to say instead that it is the state, correct?” Sotomayor asked.
The issue of standing seemed to be an even greater hurdle for two student borrowers to clear in a second case against Biden’s plan argued Tuesday. Borrowers Myra Brown and Alexandra Taylor allege the government’s failure to follow proper notice and comment procedures deprived them of the opportunity to fight for greater debt relief that would cover their loans.
Brown’s ineligible because her loans are held by commercial companies and Taylor’s only eligible for $10,000 in debt relief instead of the $20,000 because he didn’t receive any federal Pell grants. They’re asking the court to strike down Biden’s plan, which Sotomayor said didn’t make sense.
“The only way you can win is if you strike down this program completely, and that means that you don’t get an opportunity to be heard, but nobody else does either,” Sotomayor said.
Justice Clarence Thomas asked if the court has ever held that notice and comment provisions of the Administrative Procedure Act are enough for standing. Roberts seemed concerned a ruling in the borrower’s favor on standing would allow anyone to challenge a federal program.
“There are many, many programs out there that people say ‘I ought to be covered by that and I wasn’t,’ and we certainly don’t allow everyone to come in and say ‘just because I would have a right to comment if this law were struck down, I therefore have a right to bring a suit,’” he said.
In the states’ case, even the Biden administration admitted that loan servicers themselves could sue, but so far there’s been no appetite to do so. That may be because doing so could hurt their bottom line.
Student loan servicers have contracts with the federal government to service loan accounts and those contracts expire, said Dalié Jiménez, a professor and director of the Student Loan Law Initiative at the University of California, Irvine School of Law
“They’re long contracts, but they’re still not entitlements. You may need to shift your business if you don’t win that contract,” she said. “Conversely, if you really want that contract, you may not want to anger or upset the person who’s deciding whether or not to give it to you.”
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