Biden’s Latest Student Loan Bailout

What to President Joe Biden is an adverse legal judgment? A reminder that he has claimed more power than the law gives him? A lesson in the differences between writing law and faithfully executing it?

No. To Joe Biden, an adverse legal judgment is an opportunity to showcase his artistic side. Just as modern artists reject the old rules of perspective, proportion, and balance, Biden rejects the rule of law as an anachronistic constraint upon the freedom to fully express his creativity through the medium of law.

Biden’s latest attempt to cancel hundreds of billions of dollars of student loan debt looks at the law as through a rain-covered windowpane. It is impressionistic, at best, surrealist at worst, and doomed to be rejected by a Supreme Court that interprets the law with a distinctly realist eye.

The first time Biden tried this, he squinted at a law called the HEROES Act until he saw in its words “waive or modify” enough power to erase $430 billion dollars of student loan debt. But the Court said that those words were a “reed” too “thin” to bear that awful weight. The power to waive or modify did not give Biden the power to “draft a new section of the Education Act from scratch by ‘waiving’ provisions root and branch and then filling the empty space with radically new text.”

In other words, the Supreme Court expects the executive to take care that the law be faithfully executed, not creatively reinterpreted. But Biden has not learned that lesson. His latest debt-cancellation plan, which follows several piecemeal efforts to cancel certain debts or reduce repayment obligations, commits many of the same errors that the Court rejected the first time.

This time, Biden and Secretary of Education Miguel Cardona creatively interpret the Higher Education Act. Unlike HEROES, that law gives the Secretary the power to cancel some student loans in what the Court described as “certain limited circumstances and to a particular extent,” such as if a borrower completes 10 years of public service, becomes permanently disabled, or was defrauded by his school. 

It is, however, precisely the careful limits Congress imposed on these plans that make them unsuitable for what the President wishes to do. Biden instead looks at the HEA’s income-driven repayment plans, asserting that the limits on these programs are somehow more flexible. Although Congress specified the repayment plans’ durations, borrower qualifications, and income-contribution requirements, Secretary Cardona contends that he has nearly unlimited authority under the Higher Education Act to reshape these programs.

Under the so-called “Saving on a Valuable Education” (SAVE) Plan, the Secretary claims authority to exempt more borrower income from the repayment obligation first by raising the contribution threshold from 150 to 225 percent of the federal poverty line, and second by lowering the amount of discretionary income contributed towards repayment from 10 to 5 percent. The result is that a typical borrower “repays less than what [she] took out: only $6,121 for every $10,000 borrowed,” and “4.3 million out of 7.8 million borrowers under the income-driven repayment plan from the Final Rule have a monthly payment of $0 on their loans.”

The effect is to confound the law’s distinction between student loans and education grants at a cost of $475 billion over 10 years. This is hardly a faithful reading of Congress’s work, and the administration acknowledges no limit to this power except political expediency. Already 18 states have filed two lawsuits attempting to halt the SAVE Plan. 

As one student-loan rule lands in court, another is wending its way through the bureaucratic bowels. Under the administration’s latest proposal, the Secretary asserts an authority under the HEA to cancel loans balances for several subsets of borrowers, to the tune of $84 billion. The asserted legal basis is the HEA’s grant of power to the secretary to “waive” a “right, title, claim, lien, or demand.” This appears stronger at first glance than the administration’s previous justifications.

But the devil is, as usual, in the details. What debt is subject to the Secretary’s HEA waiver power? Loans made under the Federal Family Education Loan program. Biden is, no doubt, happy to cancel as many Family Education loans as he can. But he really wants to target the much larger Federal Direct Loan Program.

That desire faces two substantial legal problems. First, “waiver” in the Higher Education Act does not permit the wholesale erasure of any debt—only the cancellation of set amounts on certain loans. And second, the Act gives the Secretary no authority to cancel Direct loans.

Secretary Cardona assumes that the provision that gives him the “general power” to waive certain amounts of certain Family Education loans applies with equal force to all Direct loans. That conclusion is not obvious because the waiver power only applies to “this part,” that is, Part B of the Act, which governs Family Education loans. Part D, which governs Direct loans, does not include a waiver power.

That seems fatal to most of Biden’s latest plan. Aware of this problem, Cardona argues as follows: First, Part B says that Family Education loans have the same “terms, conditions, and benefits” as Direct loans. Second, the Secretary’s waiver power is a term or condition of the Family Education loans. Thus, he contends, the waiver power in Part B is imported into Part D, even though it doesn’t appear there separately.

It’s a creative argument. But a Supreme Court that does not favor impressionistic statutory interpretation is likely to reject it because “general power” is not a synonym for “term, condition, or benefit.” This point is driven home by the fact that these disparate phrases are explained in different parts of the Act.

When the Supreme Court struck down Biden’s first cancellation plan, it said that he “‘modified’ the cited provisions only in the same sense that ‘the French Revolution ‘modified’ the status of the French nobility.” At least there, Biden tried only to expand the definition of a word. Here, he’s trying to rewrite one entirely. If the Supreme Court rejected the lesser error, how likely is it that it would permit the greater one? Not likely when basic tools of statutory interpretation resolve the issue against the administration. The waiver power simply isn’t in Part D though Congress certainly knew how to put it there.

Biden and Cardona might respond by waiving every bureaucrat’s favorite get-out-of-jail-free card: statutory ambiguity. We really can’t know, they might argue, whether “terms, conditions, and benefits” of loans are synonymous with “general powers” of the Secretary, so the Court should defer to us.

Even if the much-criticized Chevron deference wasn’t on this term’s chopping block, it wouldn’t save Biden’s latest gimmick. Chevron applies only if a statute is, in fact, ambiguous, and the Court hasn’t found a statute ambiguous in nearly eight years. And even when it has found that there might be multiple possible interpretations, it has employed the Major Questions Doctrine to choose the more restrained reading, especially when the alternative is a novel expansion of a heretofore-limited agency power.

Are Biden and Cardona aware of the state of the law? They should be. The last time that the Supreme Court used the Major Questions Doctrine, it struck down the first loan bailout plan. And the parallels between the last cancellation bid and the latest efforts are clear enough to ensure that major questions will figure into the imminent legal assessments of these rules.

Apart from the sheer expense, which is every bit as large as previous major questions, the political salience of the issue of student loan debt is and remains a matter of great political import. Nothing has occurred between the Supreme Court’s decision in June 2022 and now to make that any less so. One gets the distinct impression that it is precisely the issue’s enduring political significance that has prompted the Secretary to undertake this and other impromptu executive initiatives to eliminate student debts in an election year. The Secretary cannot avoid the issue’s political valence by simply invoking a new statutory justification for the giveaway, particularly when the new statutory basis is as dubious as the last.

Here, as in Biden v. Nebraska, “[u]nder the Government’s reading of the [Higher Education] Act, the Secretary would enjoy virtually unlimited power to rewrite the Education Act.” Nothing in the Secretary’s thumbnail sketch of a legal theory would prevent future secretaries from doing the same thing as often as the officeholder deems it desirable.

What the Secretary purports to exercise in the proposed rule is no “discretionary” authority appropriate to the executive branch; it is full-blown legislative authority, treading into the appropriations domain constitutionally reserved to Congress, unmoored from any intelligible principled limit to its application.

This sort of legal surrealism likely won’t be well received by our realist Supreme Court, nor should it be.

GianCarlo Canaparo is a Senior Legal Fellow in The Heritage Foundation’s Edwin Meese III Center for Legal and Judicial Studies.

Jack Fitzhenry is a Legal Fellow in The Heritage Foundation’s Edwin Meese III Center for Legal and Judicial Studies.

Reprinted with Permission from The Heritage Foundation – By GianCarlo Canaparo & Jack Fitzhenry

The opinions expressed by columnists are their own and do not necessarily represent the views of AMAC or AMAC Action.