Francis Chung/E&E News/POLITICO via AP Images
Sen. Rick Scott (R-FL) criticizes President Biden’s cancellation of student loan debt during a press conference after a Senate Republican Caucus policy luncheon at the Capitol in Washington, September 7, 2022.
Republicans are so incensed with President Biden’s student loan forgiveness that they want to go to court to block it. That seems like political suicide to me, and if they want to actively align with debt collectors and label themselves as the “Gimme Some Money” party to 43 million student borrowers, let them go ahead.
The main legal hurdle Republicans face to their dream of immiserating student debtors is the concept of “standing.” A potential plaintiff has to be harmed by the cancellation of student debt in order to sue the federal government over it. And standing is going to be hard to come by, for a variety of reasons.
While Republicans figure out a way around that roadblock, the Biden administration can do a couple of things to bulletproof their policy. First, they can use the section of the law that more robustly conveys cancellation authority, rather than a shortcut tied to the pandemic. Second, they can extinguish the one likely group that could be granted standing, simplifying the student lending process at the same time. And third, they can rapidly implement debt forgiveness, because every borrower who gets $10,000 or $20,000 in relief, and every story publicizing it, will make it that much harder politically to overturn it.
The standing question is harder than it may sound, and Republicans know it. Sen. Ted Cruz (R-TX), who desperately wants to short-circuit a better life for college students and their families who are swimming in debt, explained on his podcast how much of a hurdle it will be. “As a general matter, just being a taxpayer is not sufficient for the courts to conclude you have standing to challenge an expenditure of funds … You have to find someone who was harmed by the expenditure of funds.”
Recipients of student debt relief are, quite obviously, not being harmed at all. State education programs could be affected, but it’s hard to see how that would be in a negative way. The most authoritative investigation into this, from a Virginia Law Review article, found that nobody would have standing under current precedent.
Cruz postulated that a current student could sue by saying debt cancellation would lead to higher tuition rates. But he then said that would be “far down the causal chain” and wouldn’t reflect a legitimate injury. Another option is finding someone just above the means test for eligibility, who makes more than $125,000 a year, and is being denied the debt relief. But aside from not being a particularly sympathetic plaintiff, winning on that argument wouldn’t necessarily end debt relief so much as it would open it up to everyone. It could also effectively invalidate means testing across a whole length of policies, and Republicans probably don’t want to risk that. Even Cruz said that “it’s not at all clear a court would buy that argument.”
The biggest candidates for standing are the student loan servicers, the for-profit companies contracted to handle day-to-day operations on the loans, such as collecting payments. It sounds straightforward that the servicers would be injured by having fewer loans to manage.
The main legal hurdle Republicans face to their dream of immiserating student debtors is the concept of “standing.”
But there are a few problems with that notion. First, the contracts with the government do not guarantee that any one servicer will get a defined number of loans. Since the payment pause at the beginning of the pandemic (which also denied student loan servicers fees and other remuneration but did not draw a lawsuit), several servicers have dropped out of the federal student loan program, so it’s not even necessarily the case that the remaining servicers will have fewer loans to service. And servicers are in the midst of renegotiating their loans with the federal government, and would be unlikely to pick a fight with the entity they’re bartering with for a good deal.
But even if, with all of that, a servicer sues over the debt relief program, it’s unlikely that their suit, if successful, would invalidate the forgiveness. As a federal contractor, they would likely have to sue for lost compensation, under the Contract Disputes Act. That suit would go through the Court of Federal Claims, and while appeals could route to the Supreme Court, and they are certainly fond of making up their own rules, the likely outcome even if the servicer wins would be a monetary payout, not the reversal of debt forgiveness.
Conservative groups are certainly looking to find someone to sue, and despite these long odds, that should be taken seriously. Trump has stacked the judiciary with hack judges who ignore the law—suggesting a need for broader strategies. In particular, the administration can make some choices to make opposition more difficult, both legally and practically speaking.
Fordham University law professor Jed Shugerman has carved out a starring role for himself as the liberal fretter that debt cancellation will be overturned. Shugerman, a nominal supporter of the program, says that the Biden team based the debt relief on the wrong executive authorities, and that the opposition will “probably prevail” in a lawsuit if they don’t change course. I don’t agree that conservatives will automatically win a legal case, but Shugerman does have a point about the statutory authority.
The Justice Department’s Office of Legal Counsel legally blessed student debt cancellation through authority from the HEROES Act, a 2003 law that allows the Education Department to assist student borrowers during a “national emergency” if they were “placed in a worse position financially.” (The Education Department general counsel report uses the same authority.) This was the authority that the Trump administration used to pause payments, and since it worked for them, it’s somewhat logical for the OLC to use it for debt cancellation.
But several years ago, the Prospect laid out how the Education Department can use “compromise and settlement” authority under the Higher Education Act of 1965 to alter the terms of federally issued student debt at their discretion. That seems like a more robust authority for the current action, Shugerman surmises, and I agree. The national emergency has waned, and the courts have not allowed COVID as an excuse to extend things like the eviction moratorium or the vaccine mandate for all employers. The “placed in a worse position” clause could also prove a bit dicey: Borrowers might have to prove through past bank balances that COVID hurt them financially.
Compromise and settlement authority is just a better way to deliver broad-based relief of this type, that fits better with the administration’s rhetoric on why they’re engaging in this. That should serve as the legal basis.
To guard against the student loan servicers having standing to sue, the government could just allow those contracts to expire or even buy their way out of the contracts, as I suggested over a year ago. We have an agency called the IRS that is perfectly capable of billing and collecting monthly student loan payments. And student loan servicers are actually terrible at their job, actively harming students by steering them into bad programs, misapplying payments, imposing illegal fees and penalties, and dozens of other violations. In addition to wiping away all that, you remove the biggest threat to standing. Removing the servicers is unlikely to happen overnight, but it should be the direction for the student loan program.
Finally, the legal threat to debt forgiveness makes implementing the forgiveness as fast as possible even more critical. Every story of someone receiving their cancellation will build momentum for a program that makes it tougher politically to dislodge. It won’t necessarily deter the Supreme Court if they’re determined to make student borrowers suffer, but it will ensure that a major price is paid for that decision, not unlike what we’re seeing now with the Dobbs decision. The Court would likely have to break a lot of precedent around standing and executive deference to reinstate student debt; the more that’s canceled first, the more painful that decision will be.
