Is Joe Biden’s student debt forgiveness plan legal?

President Joe Biden has made a long-awaited decision on how to handle student debt. On Aug. 24 Biden announced that his administration will waive student loan debt for qualifying Americans — $10,000 for individuals earning less than $125,000, plus an additional $10,000 for those who had received Pell Grants, which support tuition for lower-income students.

But can Biden make his plan stick? 

On that question, the jury is out.

Legal experts say the Biden administration’s legal rationale for waiving student debt may not hold up in court. But it’s unclear whether such a case could make it to court in the first place.

Here, we’ll look at the confusing legal battleground surrounding student debt relief.

About 20% of Americans have outstanding student loan debts, totaling an estimated $1.6 trillion.

Besides the waiver of $10,000 to $20,000, Biden also said the government would cap monthly loan payments for undergraduate loans at 5% of a borrower's discretionary income, which is half of the current level.

The policy announced by the White House would benefit up to 43 million borrowers and cancel the full balance for about 20 million borrowers, according to the administration’s calculations. The White House cited Education Department estimates that nearly 90% of relief dollars would go to Americans earning less than $75,000 a year.

Biden’s announced policy was not as aggressive as the complete debt wipeout that some on the left of his party had urged; Biden had suggested such a wipeout at least once during the 2020 campaign. On other occasions, though, candidate Biden proposed a more modest policy in line with what he eventually announced.

Still, critics on the political right framed the policy as one that shoveled money from lower-income, non-college-educated workers to higher-earning college graduates. And the policy attracted criticism from centrists, who said it is poorly timed because it will increase inflationary pressures amid the country's highest inflation in 40 years.

However, none of this matters unless Biden can get the policy enacted. And there are legal obstacles for him doing so on his own, without congressional approval.

One of the political figures who has argued that the president has to work with Congress to enact a debt forgiveness plan is Biden’s close legislative ally, House Speaker Nancy Pelosi, D-Calif.

When Biden announced his plan, he didn’t issue an executive order. Rather, his administration drew on the HEROES Act, a law passed after the 9/11 terrorist attacks that allows relief from student loan payments during times of war or national emergency.

The Donald Trump and Biden administrations repeatedly used the law to pause payments on student loans since the coronavirus pandemic started in early 2020. (Under Biden’s plan, that pause would end in January 2023.)

In a legal opinion, Biden’s Education Department broke with the Trump-era department in advising that the same law could be used not just to pause payments, but also to forgive debt. 

The HEROES Act, the department wrote, "grants the Secretary (of Education) authority that could be used to effectuate a program of targeted loan cancellation directed at addressing the financial harms of the COVID-19 pandemic." This authority, the legal memo says, can be used to "address the financial harms of such a war, other military operation, or emergency," such as the COVID-19 pandemic.

The memo continues, "Specifically, the HEROES Act authorizes the secretary to ‘waive or modify any statutory or regulatory provision applicable to the student financial assistance programs’ if the secretary ‘deems’ such waivers or modifications ‘necessary to ensure’ at least one of several enumerated purposes, including that borrowers are ‘not placed in a worse position financially’ because of a national emergency."

By taking this legal approach, the Education Department "must demonstrate a plausible connection between the relief offered and the financial burdens created by the pandemic," said Ryan D. Doerfler, a Harvard law professor.

Luke Herrine, a doctoral candidate at Yale Law School who has written extensively about education law, said there is a legal provision separate from the HEROES Act that could be used to justify debt forgiveness. The provision, known as 20 USC 1082(a)(6), "broadly gives the education secretary authority to compromise, waive, or release claims against private parties, including student debtors who owe money directly to the government," Herrine said. 

The Biden administration has not invoked this provision so far.

Under both this law and the HEROES Act, "the basic argument is that these authorities are broad grants of discretion to the secretary," Herrine said.

But these arguments are far from universally recognized. 

"It seems likely that there will be a legal challenge and that this expansive interpretation of the HEROES Act will ultimately be blocked by the courts," said Mark Kantrowitz, a student loan policy specialist and author of "How to Appeal for More College Financial Aid."

The main challenge with using the HEROES Act authority is that the U.S. Supreme Court has looked unfavorably on the assertion of executive-branch authority that is not spelled out in congressionally enacted legislation. A majority of justices might be swayed by an argument that the Education Department is reading too much authority into the HEROES Act’s text.

In several recent cases, the Supreme Court’s conservative majority has opposed agencies’ interpretations of "sweeping or otherwise surprising grants of authority," Doerfler said. 

Those cases include Alabama Association of Realtors v. Department of Health and Human Services, which kept the Centers for Disease Control and Prevention from extending a pandemic-related eviction moratorium; National Federation of Independent Business v. Department of Labor, Occupational Safety and Health Administration, which limited vaccination requirements for employees; and West Virginia v. Environmental Protection Agency, which curbed the Environmental Protection Agency’s authority to cap emissions.

Because of the court’s recent aggressiveness in curtailing federal agencies’ claims of authority, "it's likely that this Supreme Court would overturn debt cancellation if it ruled on the merits," Herrine said.

Doerfler agreed. "The possibility is very real that it will strike the action down in the event some plaintiff is deemed to have standing to challenge the action," he said.

Doerfler and others zeroed in on the question of "standing" as a key unknown in the legal resolution of debt forgiveness. 

To pursue a lawsuit, a plaintiff must be judged to have standing, which in the context of a federal lawsuit means that the plaintiff must have suffered an identifiable, concrete injury, and a causal relationship must exist between the injury and the conduct challenged in the lawsuit.

That might be difficult to prove when challenging the new student loan policy. For instance, student loan servicers whose business depends on a good working relationship with the Education Department may not want to antagonize the department, Herrine said. And it’s not clear that people who already paid off their loans could sue, any more than people could sue for a retroactive tax refund if the government changes tax laws.

Borrowers who make $126,000 per year, just outside the income bracket for forgiveness, might be able to sue, Lanae Erickson, senior vice president for social policy, education and politics at the centrist think tank Third Way, told The Hill newspaper.

"If someone can show that this measure will cost them something financially, that would probably be the strongest way to have a challenge be heard on the merits," University of Virginia law professor Richard Re told The Hill.

Although having the Biden plan struck down in court would hurt borrowers, there could be a political silver lining for Democrats, Kantrowitz said. 

"If the forgiveness is blocked in the courts, it sets up a sharp contrast between Democrats and Republicans ahead of the midterm elections," he said.

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