Prelogar said the states did not have the legal standing to challenge the administration’s actions, and that at any rate, federal law gives the education secretary broad authority to make changes in the student loan program during emergencies, such as the pandemic. The Trump and Biden administrations both invoked the law to suspend loan repayments.
“Congress expressly contemplated that national emergencies would necessitate student-loan relief for affected borrowers, and Congress specifically authorized the secretary to grant such relief without delay,” Prelogar wrote in the administration’s petition to the court. “Here, the secretary determined that relief was necessary to ensure that borrowers do not default on their loans or enter delinquency when payments obligations resume, with potentially irreparable consequences for their credit and financial futures.”
The 8th Circuit ruling arrived days after a federal judge in a separate lawsuit in Texas declared Biden’s debt relief plan unlawful, effectively barring the Education Department from accepting more applications and discharging any debt. Administration lawyers asked the U.S. Court of Appeals for the 5th Circuit to stay the ruling in the Texas case, and for expedited consideration.
Prelogar told the Supreme Court that if it chooses not to lift the 8th Circuit’s injunction, it should accept the case soon and hear the merits of the legal arguments in February. While the court normally waits for the appellate process to play out, it has chosen such a route in hearing challenges to administration policies on immigration and vaccines. Hours after Prelogar’s filing Friday, the justices asked the states to file a response by noon Wednesday.
A spokesperson for Nebraska’s attorney general, one of the officials who filed the states’ suit, said they would be preparing a response.
Biden’s loan relief plan would cancel up to $10,000 in federal student debt for borrowers earning up to $125,000 annually, or up to $250,000 for married couples. Those who received Pell Grants are eligible for an additional $10,000 in forgiveness. To date, more than 26 million people have applied for the debt relief, and 16 million of those files have been reviewed, according to the education department.
The Justice Department released a 25-page memo in August after the relief program was announced that says the program is authorized by a 2003 law, the Higher Education Relief Opportunities for Students Act (HEROES Act). The act authorizes the education secretary “to alleviate the hardship that federal student loan recipients may suffer as a result of national emergencies.” It was passed in response to the Sept. 11, 2001, attacks, but has been used since then in other times of emergency.
But Republican-led states and other opponents of the program argue that the scale of loan cancellation, at a cost of about $300 billion over 10 years, requires more specific congressional authorization because of the economic and political significance.
The lawsuit filed in September by six states — Arkansas, Iowa, Kansas, Missouri, Nebraska and South Carolina — accuses the president of overstepping his authority and threatening the revenue of state entities that profit from federal student loans. At least seven suits have been filed to try to stop it.
The 8th Circuit decided there was standing, at least for Missouri, to bring the challenge on behalf of the Missouri Higher Education Loan Authority, a quasi-state outfit that owns and services federal student loans. The lawsuit said MOHELA, which funds state scholarships, would lose revenue from servicing Direct Loans — those made and owned by the federal government — that are wiped away.
The panel also said delaying the program was justified because of “substantial questions of law which remain to be resolved” and it would be too late to resolve them if the program was operating.
Prelogar told the Supreme Court that the relationship between MOHELA and the state was too tenuous to convey standing. And she rejected the states’ contention that the program went beyond what Congress has authorized.
The loan forgiveness program for some, she wrote, was more targeted than the previous approach by Trump and Biden, which simply suspended repayment of the debts for everyone with federal student loans.
After careful study, Prelogar wrote, the education secretary found that reducing the principal owed by the most vulnerable borrowers “would ameliorate the risk that delinquency and default rates will rise above pre-pandemic levels,” once payments resume. “The secretary thus acted to ‘ensure’ an enumerated objective of the Act: that borrowers ‘are not placed in a worse position financially in relation to’ their loans.”
She rejected the states’ arguments that more specific congressional authorization was needed under the “major questions” doctrine, which the Supreme Court invoked last term to limit the Environmental Protection Agency’s power to combat climate change.
“Since its enactment in 2003, the Department has repeatedly invoked the HEROES Act to provide class-wide relief to certain borrowers, and since March 2020, both the Trump and Biden Administrations have invoked the Act to issue relief to all borrowers,” she wrote. “The pandemic-related relief is estimated to have cost the government more than $100 billion.”
The case is Biden v. State of Nebraska, et al.