Is Biden’s $400 Billion Student Loan Forgiveness Legal? The Fight Goes To Court

In late August, President Biden announced he was using a provision in the 2003 HEROES Act to have taxpayers “forgive” $400 billion in federal student loans. Biden’s move was attacked as regressive, inflationary, arbitrary, and for promising to encourage the kind of borrowing that’s fueled rising college costs. There were also big questions about whether Biden had the legal authority to act.

After all, even House Speaker Nancy Pelosi, a staunch Biden ally, conceded in July 2021 that, “[Some] people think that the President of the United States has the power for debt forgiveness. He does not. He can postpone. He can delay. But he does not have that power. That has to be an act of Congress.” The U.S. Department of Education has similarly cautioned, in a 2021 memo, that the president lacks “the statutory authority to cancel, compromise, discharge, or forgive, on a blanket or mass basis, principal balances of student loans.”

Well, the dispute is now headed to court. Earlier this week, in U.S. District Court, the Pacific Legal Foundation filed suit against Biden’s scheme. The plaintiff, Frank Garrison, charges that the “administration has created new problems for borrowers in at least six states that tax loan cancellation as income” and that he’ll “face immediate tax liability from the state of Indiana because of the automatic cancellation of a portion of his debt.” (The U.S. Department of Education website says that, while most borrowers will have to apply for debt relief, “We have income data on hand for around 8 million borrowers” and they’ll “get the relief automatically.”)

An employee at the non-profit Pacific Legal Foundation, Garrison contends that he already qualifies for the “Congressionally authorized” Public Service Loan Forgiveness (PSLF) program. Under PSLF, borrowers pay no taxes when their loans are eventually dismissed. Garrison argues that he will therefore receive “no additional benefit from cancellation – just a one-time additional penalty.”

The odd thing is that the specifics of Garrison’s complaint are pretty far removed from the familiar concerns about the legality, fairness, and consequences of Biden’s plan. So, why is the Pacific Legal Foundation filing on behalf of Garrison?

The answer: Because it’s been hard for anyone with broader concerns to establish “standing” to sue (for instance, even irate taxpayers have no legal basis to file suit again Biden over the plan). Thus, the question is whether Garrison’s case is enough to get the courts to evaluate the legality of Biden’s executive order. The real challenge for those fighting Biden’s scheme is to get standing; if they do, there’s an excellent chance that the courts will agree with Speaker Pelosi that Biden had no authority to act.

For starters, the White House claimed in August that Biden was acting in accord with the 2003 HEROES Act, which was intended to aid borrowers serving in the military in the wake of the 9/11 attacks. As Bloomberg Law has noted, though, the Act does not cover debt cancelation and the law’s “direct economic hardship” language does not provide a basis for the kind of universal relief Biden has attempted.

Meanwhile, even if the HEROES Act did authorize blanket forgiveness in an emergency, it’s hard to make the case that U.S. is in a state of emergency. Just recently, barely weeks after the student lending order, the president told 60 Minutes a few weeks ago that “the pandemic is over.” Heck, last spring, Biden’s Department of Justice insisted that it was obliged to end the use of Title 42 for border enforcement because the CDC had determined that these emergency measures were “no longer warranted in light of the current public-health circumstances.”

If the courts find that the president exceeded his authority, it wouldn’t be the first time. In August 2021, Biden regretfully concluded that he was not empowered to continue an “emergency” eviction moratorium, and then attempted to do so anyway. The Supreme Court shot down the attempt. A few months later, Biden cited emergency powers in announcing that the Occupational Safety and Health Administration (OSHA) would be enforcing a vaccination mandate, a power no one had ever imagined that OSHA possessed. The Supreme Court again rejected Biden’s order, explaining that the president’s authority is not boundless.

As Fordham law professor Jed Shugerman explained when the White House announced its plan, “I think it’s a loser argument with the Roberts U.S. Supreme Court. The Roberts court has already indicated in three different decisions . . . that it’s skeptical of COVID being invoked in a broad way to achieve policy goals.” If Mr. Garrison is deemed to have standing, there’s an excellent chance that Biden’s action will ultimately be deemed unlawful, justified by neither statute nor circumstance.

The bottom line: Those excited by the president’s promised largesse shouldn’t go spending their windfall just yet.