Assessing an Alternative Legal Justification for Biden's Student Loan Debt Cancellation Policy

Relying on Section 432(a) of the Higher Education Act of 1965, as some propose, has many of the same flaws as the Administration's emergency powers theory.

In my last post about President Biden's plan to cancel hundreds of billions of dollars in student loan debt, I criticized the administration's claims that the policy is authorized by an emergency power provision of the 2003 HEROES Act. But there is an alternative potential legal justification for the policy: Section 432(a) of the Higher Education Act of 1965, (now codified as 20 U.S.C. Section 1082(a)(6), which authorizes the Secretary of Education to "enforce, pay, compromise, waive, or release any right, title, claim, lien, or demand, however acquired, including any equity or any right of redemption" related to loans authorized by the Federal Direct Loan Program.

Fordham law Professor Jed Shugerman, who is highly critical of the administration's HEROES Act theory, argues that the Higher Education Act (HEA) provides a much stronger rationale for Biden's plan. Earlier, Sen. Elizabeth Warren and others argued that Section 432(a) could even justify a much larger debt cancellation program. Last year, the administration viewed this theory with skepticism. But should Biden's plan be challenged in court, they could potentially still resort to it.

In some ways, the HEA argument is indeed superior to the HEROES Act theory. Taken in in isolation from the rest of the Act, Section 432(a) does appear to grant the executive the power to cancel as much student loan debt as it wants. That can be extrapolated from the power to "waive…or release any right, title, claim, lien, or demand" (emphasis added). Moreover, unlike the HEROES Act theory, the HEA justification isn't confined to emergency situations or to borrowers who can plausibly claim that an emergency or disaster has made it more difficult for them to pay their debts. If the argument is correct, the administration can cancel any amount of federal student loan debt, at any time, for virtually any reason.

But a closer look suggests that the HEA theory is flawed for may of the same reasons as the HEROES Act rationale. Indeed, its breath-taking scope contributes to its undoing.

The HEA rationale was examined in some detail in a January 2021 memorandum written by then-Education Department Deputy General Counsel Reed Rubinstein, for outgoing Trump Administration Education Secretary Betsy DeVos (Secretary DeVos actually resigned in protest of Trump's role in the January 6, 2021 attack on the Capitol, a few days before the memo was officially submitted to her; but I don't think this changes its status). I don't agree with everything Rubinstein says. But he does make several strong points against the idea that Section 432(c) gives the Secretary of Education a blank check to cancel student loan debt.

As Rubinstein points out, "reading 20 U.S.C. § 1082(a)(6) to permit the Secretary [of Education], on a blanket or mass basis, to cancel, compromise, discharge, or forgive student loan principal balances" would render superfluous various other provisions of the HEA and later statutes, which give the Secretary the power to cancel or limit debt in more limited circumstances. And, as he rightly explains, there is a longstanding presumption against interpreting statutes in a way that renders parts of them superfluous. The Supreme Court has repeatedly reaffirmed this principle.

To avoid this and other problems, Rubinstein suggests that it makes more sense to construe Section 432(c) as only giving the Secretary the authority to waive or release student loan debt  "on a case-by-case basis and then only under those circumstances specified by Congress." In such situations, the provision serves to eliminate any ambiguity about the Education Department's ability to forego any rights in question and to do so in whatever way the Department sees fit.

Like the HEROES Act theory, the HEA rationale for Biden's plan is vulnerable to attack under the "major questions" and nondelegation doctrines. The former requires Congress to "speak clearly when authorizing an [executive branch] agency to exercise powers of vast economic and political significance." If a statute is ambiguous, courts must presume that Congress has not given the agency the power in question.

Jed Shugerman rightly argues that the HEROES Act argument runs afoul of the Supreme Court's recent major questions rulings.  The authority to forgive hundreds of billions of dollars in student loan debt under an expansive definition of what qualifies as an "emergency" surely qualifies as a power of "vast economic and political significance." But that's even more true of the HEA theory, which would give the executive the power to cancel any amount of student loan debt at any time, for any reason.

Under the HEA approach, there would essentially be no limit to the executive's power to cancel student loan debt. If the major questions doctrine applies anywhere, it surely does here. And Rubinstein's analysis suggests there is at least some significant ambiguity about whether Section 432(c)—read in conjunction with the rest of the Higher Education Act—actually gives the administration such vast power. If so, the major questions doctrine requires federal courts to rule against the executive.

What is true of the major questions doctrine is also true of nondelegation. In my earlier post, I explained why, if there are meaningful constitutional limits to Congress' power to delegate its authority to the executive, the HEROES Act theory likely runs afoul of them. That reasoning applies with even greater force to the HEA rationale, which would give the executive still greater discretionary authority. The Constitution gives Congress, not the president, the power to allocate federal funds. Giving the president unfettered authority to deprive the treasury of hundreds of billions of dollars in student loan debt is a truly enormous delegation.

At the very least, as the Rubinstein Memorandum  points out, courts must apply the Supreme Court's longstanding canon against interpreting federal statutes in ways that raise constitutional problems. In his controlling opinion in NFIB v. Sebelius (2012), Chief Justice John Roberts famously emphasized that this rule requires courts to reject "the most natural" reading of a statute if there is any "fairly possible" interpretation that would avoid the risk of rendering it unconstitutional. Rubinstein's interpretation of Section 432(c) is at least a "fairly possible" one, and it would enable courts to avoid confronting a massive constitutional nondelegation problem.

I'm no great fan of the constitutional avoidance canon, especially Roberts' very broad view of it. But the Supreme Court doesn't seem likely to curb it anytime soon, and lower courts are required to follow it.

In sum, the HEA rationale for Biden loan cancellation plan has some advantages over the HEROES Act theory advanced by the administration. But the enormous scope of the power the theory gives the executive should lead courts to reject it.

UPDATE: I plan to write one more post in this series, addressing the question of whether anyone has standing to sue to challenge the loan debt cancellation policy.