At the end of August, we discussed the proposal from the Biden Administration to provide forgiveness of student loans in the amount of at least $10,000. We noted that beginning with Title IV of the Higher Education Act (HEA), first signed into law in 1965 as part of Lyndon Johnson’s “Great Society,” over the years, Congress has given increasing authority to the Secretary of Education in regards to forgiveness of all or part of student loans. The Health Care and Education Reconciliation Act of 2010 “had some provisions for forgiveness of loans'” and also gave “the Secretary of Education (even more) authority” in this regard.
Yet, in its most recent proposal, the government cited the 2003 HEROES Act as the basis for its authority to engage in wholesale student loan forgiveness. We then asked whether President Biden had “the authority to transfer hundreds of millions of dollars in private debt to the public with the use of his pen?”
We were not the only one with that same question. In fact, several lawsuits have been brought in various federal courts across the country in an effort to find an answer. Predictably, there have been different results in different jurisdictions.
Nebraska v. Biden was brought in federal court in Missouri, and heard by Judge Henry Autrey. In his opinion dated October 22, 2022, the Court began by explaining one mystery – the use of the HEROES Act by the Biden Administration to justify its actions. “In 2003, Congress enacted the Higher Education Relief Opportunities for Students Act… (the) Act allows the Secretary (of Education) to ‘waive or modify any statutory or regulatory provision applicable to the student financial assistance programs…as…necessary in connection with a war or other military operation or national emergency’…‘national emergency’ means a national emergency declared by the President of the United States.”
The Court continued; “Most recently, the Secretary has used the HEROES act to provide relief in response to the COVID-19 pandemic…(a)ccordingly, on March 20, 2020, the Secretary relied on the HEROES Act to pause the accrual of interest and repayment for all federally held student loans…(o)n August 24, 2022, President Biden announced the Department’s student debt relief plan to address the financial harms caused by the COVID-19 pandemic and ensure a smooth transition back to repayment status. The Secretary announced that the HEROES Act authorizes him to provide a ‘one-time’ debt relief to federal student loan borrowers affected by the COVID-19 pandemic.”
Is this a valid exercise of the powers granted to the Secretary of Education? Or is this in excess of the authority conferred by the HEROES Act?
Judge Autrey never reaches the issue – instead, he dismissed the case on the basis of Standing.
“’Standing‘ is a legal term used in connection with lawsuits and a requirement of Article III of the United States Constitution. In simple terms, courts use ‘standing’ to ask, ‘Does this party have a ‘dog in this fight?’…To have standing, a party must show an ‘injury in fact’ to their own legal interests. In other words, has the party itself ‘suffered’ some sort of actual harm?”
As Judge Autrey notes, “Standing is a threshold inquiry; it requires focus on the part[ies] seeking to have [their] complaint heard in a federal court, and it eschews evaluation of the merits. The court is not to consider the weight or significance of the alleged injury, only whether it exists.” (Citation omitted).
Here, the Missouri District Court found its opportunity to sidestep the merits of the claims brought by the State Plaintiffs. “Nebraska Iowa, Kansas, and South Carolina attempt to assert a threat of imminent harm in the form of lost tax revenue in the future. Currently, federal student loan discharges are not taxable under federal law (until 2026 – another Covid-19 relief measure)…(these states) argue that they will lose tax revenue to the extent that the total amount of loan discharges they currently project to occur after January 1, 2026, is reduced because of the Department’s student debt relief plan.”
The Court was not persuaded by this argument; “These future lost tax revenues are merely speculative. Moreover, there is nothing imminent about what may happen several years in the future…(t)he effect upon future taxation is uncertain. ‘[T]hreatened injury must be certainly impending to constitute injury in fact… allegations of possible future injury’ are not sufficient.” (Citation omitted).
Based upon the lack of Standing, Judge Autrey dismissed the case. However, on Appeal from the State Plaintiffs, “(t)he 8th U.S. Circuit Court of Appeals at St. Louis…granted an administrative stay that temporarily pauses the Biden administration’s student-loan debt-relief program.” According to the ABA Journal. “The stay will remain in place until the 8th Circuit decides whether to grant an injunction pending appeal.”
The 8th Circuit opinion is only one page – it is a temporary stay, while the parties prepare further arguments. But at least the States now have another chance to establish the harm their tax revenues will suffer as a result of the Student Loan Forgiveness plan.
Meanwhile, another lawsuit was filed against President Biden by the Brown County Taxpayer’s Association in the Eastern District of Wisconsin. That case was dismissed by Judge William Griesbach.
In their case, the Taxpayer’s Association asserted that “Defendants, as executive branch officials, have usurped congressional powers under Article I, section 8 of the Constitution and created a program that obligates federal taxes and erases federal assets without any authority.” But these Plaintiffs ran into the same problem the States face in their case – Standing.
“Plaintiff asserts that it has taxpayer standing,” the Court wrote. “The Supreme Court has repeatedly held, however, that ‘the payment of taxes is generally not enough to establish standing to challenge an action taken by the Federal Government.’” (Citation Omitted.) Thus, “(i)n the absence of standing, Plaintiff’s case must be dismissed for lack of jurisdiction.”
Recently, Supreme Court Justice Amy Coney Barrett refused to issue a stay of Judge Griesbach’s order.
Judge Wilson’s (ret.) Report concludes tomorrow
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