The Biden administration’s student loan forgiveness program is on hold indefinitely after a Texas federal court issued its decision, finding the program to be unconstitutional. In Brown v. U.S. Department of Education, the Northern District of Texas held that the Higher Education Relief Opportunities for Students Act of 2003 (HEROES Act) does not authorize the administration to create the student loan relief program. “In this case, the HEROES Act — a law to provide loan assistance to military personnel defending our nation — does not provide the executive branch clear congressional authorization to create a $400 billion student loan forgiveness program. The Program is thus an unconstitutional exercise of Congress’s legislative power and must be vacated.” The Department of Justice has already filed a notice of appeal with the Fifth Circuit.
Plaintiffs Myra Brown and Alexander Taylor both have student loans. Brown is ineligible for any debt forgiveness under the program because her loans are commercially held, and Taylor is ineligible for the full debt forgiveness because he did not receive a Pell Grant. They disagreed with the eligibility criteria and sued the Department of Education (Department) and Secretary of Education (Secretary), seeking vacatur of the program or nationwide injunctive relief for two reasons: (1) they allege that the program violates the Administrative Procedure Act’s (APA) notice-and-comment requirements; and (2) they contend that the Secretary lacks the authority to implement the program under the HEROES Act.
The court found that the program did not violate the APA because it was issued under the HEROES Act, which exempts notice-and-comment requirements that typically apply.
However, the court agreed with the plaintiffs that the Secretary lacks the authority to implement the program for three reasons. First, the HEROES Act does not mention loan forgiveness. It only allows the Secretary to “waive or modify” provisions of Title IV. The court found that, “‘enabling legislation’ like the HEROES Act is not an ‘open book to which the agency may add pages and change the plot line.'”
Second, the HEROES Act fails to provide clear congressional authorization for the program. The administration contended that the HEROES Act authorizes the Secretary to address the financial hardship of the COVID-19 pandemic. While the court agreed that the pandemic falls within the HEROES Act’s definition of an emergency, it questioned whether student loan forgiveness was necessary in connection with that emergency.
Third, the fact that the Department had not relied on the HEROES Act or any other statutory, regulatory, or interpretative authority for the blanket cancellation of student loans in the past was another “clue” that the Secretary lacks clear congressional authority. The court ultimately found that “vacatur of the [p]rogram is the appropriate remedy.”
The case is not over and has already been appealed to the Fifth Circuit. Additionally, last month, the Eighth Circuit granted an emergency motion by Republican officials in six states to temporarily pause the program while they appeal the dismissal of their challenge by a Missouri federal judge, who found that they don’t have standing to sue. While these appeals play out, the administration’s student loan forgiveness plan will be on hold.
Troutman Pepper will continue to monitor this case for future developments.