Supreme Court Voices Doubt on Biden Student-Loan Relief Plan (1)

The US Supreme Court’s conservative majority cast doubt on President Joe Biden’s plan to slash the student debt of more than 40 million people, imperiling one of his signature initiatives in a high-stakes showdown over presidential power.

As the court heard two cases Tuesday, Justice Brett Kavanaugh suggested he is wary of expanding presidential powers during national emergencies. The Biden administration argues that the student loan forgiveness program is a response to the COVID-19 pandemic.

“Some of the biggest mistakes in the court’s history were deferring to assertions of executive emergency power,” Kavanaugh said. “Some of the finest moments in the court’s history were pushing back against presidential assertions of emergency powers.”

Chief Justice John Roberts suggested Congress didn’t authorize the president to unilaterally take a step with such enormous financial implications for millions of Americans.

“We’re talking about half a trillion dollars and 43 million Americans. How does that fit under the normal understanding of modifying?” Roberts said, referring to a key word in the 2003 law at the center of the case.

The law, known as the Heroes Act, says the secretary can “waive or modify” provisions to ensure that debtors “are not placed in a worse position financially” because of a national emergency.

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Roberts likened the case to the court’s 5-4 decision that blocked the Trump administration from ending a program shielding hundreds of thousands of young undocumented immigrants from deportation. Roberts joined the court’s liberal wing in the majority in that 2020 case.

The student loan plan would forgive as much as $20,000 in federal loans for certain borrowers making less than $125,000 per year, $250,000 for households. The Congressional Budget Office estimates the cancellation would cost about $400 billion over 30 years.

Two Challenges

Solicitor General Elizabeth Prelogar said the secretary of education concluded that “a wave of people across the country” would default on their loans without relief.

“I think it is precisely the type of context where the executive should be able to implement those emergency powers,” she said.

She drew some support from the court’s liberal wing. Justice Elena Kagan said the Heroes Act contained “very broad language” and said that “Congress could not have made this much more clear.”

Justice Sonia Sotomayor said many of the potential beneficiaries of the loan relief “will struggle” without the program.

“Many of them don’t have assets sufficient to bail them out after the pandemic,” Sotomayor said. “They don’t have friends or families or others who can help them make these payments.”

The court heard two challenges, one filed by a group of Republican-run states and another pressed by a conservative advocacy group known as the Job Creators Network on behalf two borrowers who say they are being unfairly excluded from the program’s full scope.

The arguments took place as more than 100 supporters of Biden’s plan, including members of Congress, held a demonstration outside the court.

Nebraska Solicitor General James Campbell said Biden was “creating a brand new program, and that’s not within the language of the statute.”

The conservative-controlled Supreme Court has already stopped Biden from blocking evictions during the pandemic and requiring workers to get Covid vaccines or regular tests. The justices also have slashed the Environmental Protection Agency’s power to address climate change. All three cases were decided 6-3 along ideological lines.

Those rulings are now key precedents in the student loan case. The majority in those cases established the “major-questions doctrine” as a powerful curb on federal regulators, saying the president needs clear congressional authorization before taking actions that have sweeping political and economic significance.

Justice Samuel Alito questioned Prelogar’s assertion that the major-questions doctrine didn’t apply to cases in which the government is conferring benefits, rather that imposing regulations.

That distinction “seems to presume that, when it comes to the administration of benefits programs, a trillion dollars here, a trillion dollars there, it doesn’t really make that much difference to Congress,” Alito said. “That doesn’t seem very sensible.”

Standing to Sue

The biggest issue for opponents has been establishing standing to sue — that is, showing they are being directly harmed by the policy. A federal appeals court said the states had standing because of the impact on the Missouri Higher Education Loan Authority, a state-created loan servicer that could lose many of its accounts.

MOHELA, which isn’t involved in the case, by law must contribute to a fund Missouri uses to pay for projects at public colleges.

Of the six conservatives, only Justice Amy Coney Barrett suggested any skepticism about the standing of the states to sue.

Barrett questioned Campbell’s argument that MOHELA is an arm of the Missouri government, pointing to the loan server’s lack of involvement. “If MOHELA is an arm of the state, why didn’t you just strong-arm MOHELA and say, ‘You’ve got to pursue this suit’?” Barrett asked.

Alito was more skeptical of Prelogar’s argument that Missouri and MOHELA should be considered separate entities.

“I understand a big thrust of your argument to be that Missouri lacks standing because MOHELA separately incorporated,” he said. “But why should that formal distinction govern the determination of injury in fact?”

The cases are Biden v. Nebraska, 22-506, and Department of Education v. Brown, 22-535.

(Updates with additional comments from Kagan, Alito starting in 11th paragraph.)

--With assistance from Mackenzie Hawkins.

To contact the reporters on this story:
Greg Stohr in Washington at gstohr@bloomberg.net;
Emily Birnbaum in Washington at ebirnbaum3@bloomberg.net

To contact the editors responsible for this story:
Elizabeth Wasserman at ewasserman2@bloomberg.net

Greg Stohr

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