The Volokh Conspiracy

Mostly law professors | Sometimes contrarian | Often libertarian | Always independent

Joe Biden

Two Federal Courts Rule Against Biden's New Student Loan Forgiveness Plan on the Same Day

Both rulings were by Democratic-appointed judges - a result that bodes ill for the plan's future.


Silhouettes of students wearing caps. The students are made out of money. | Illustration: Lex Villena; Stephen Coburn |
(Illustration: Lex Villena; Stephen Coburn |

President Biden's new large-scale student loan forgiveness plan had a terrible, horrible, no good, very bad day. That's because two separate federal district courts ruled against its legality, in lawsuits brought by different coalitions of GOP-led states. Moreover, both of the judges who issued the rulings were Democratic Barack Obama appointees. That makes it hard to argue the decisions were a result of ideological or partisan bias, and is a very bad sign for the Administration's chances of prevailing on appeal.

The new loan forgiveness plan—known as the SAVE Plan—which would discharge at least $156 billion in federally backed student loan debt, is a successor to the one the Supreme Court invalidated Biden v. Nebraska, last year, on the grounds that the Administration's actions were not authorized by Congress (that plan would have discharged some $430 billion in student debt).

While the administration claimed last year's plan was authorized by the 2003 HEROES Act, they have defended the new plan as an exercise of authority delegated by the Higher Education Act of 1965. But both plans use vague statutory language to justify a massive expenditure of funds and both are vulnerable to attack under the "major questions" doctrine, which requires Congress to "speak clearly" when authorizing an executive branch agency to make "decisions of vast economic and political significance." It was therefore foreseeable (and in fact foreseen) that the new plan might well suffer the same fate as the old, if challenged in court, and that is what happened today.

In Missouri v. Biden, federal district Judge John A. Ross issued a preliminary injunction blocking parts of the plan that forgive debt, as opposed to merely restructure it. He first had to address the issue of "standing"—whether Missouri and the other plaintiff states were likely to suffer an "injury" caused by the plan. Standing was a major issue in Biden v. Nebraska, one the Supreme Court resolved by ruling that the state of Missouri had standing because it has a state agency –  the Higher Education Loan Authority of the State of Missouri (MOHELA)—that services federally backed student loans, and MOHELA's income would be reduced if some of those loans were forgiven. In a previous post, I noted that Missouri could use the exact same reasoning to get standing to challenge the new plan. Judge Ross agrees:

Here, Plaintiffs have established standing through the alleged injuries to MOHELA and thus to Missouri. The allegations in the Complaint are substantially similar to, if not identical to, those the Supreme Court held were sufficient to establish Missouri's standing just last year in Biden v. Nebraska. The Court finds no reason to reach a different result here.

The Final Rule calls for accelerated loan forgiveness for a set of borrowers with low initial principal balances who elect repayment through the SAVE plan and make a set number of qualifying payments. To the extent MOHELA services accounts subject to this early forgiveness—and there is no dispute that MOHELA does service such accounts—MOHELA will lose revenues from administrative servicing fee when those accounts are forgiven.

If Missouri has standing, the court concludes that it need not issue standing rulings for the other plaintiff states (again following the precedent set in Biden v. Nebraska).

On the merits, Judge Ross finds that the SAVE plan goes beyond what the statute authorizes:

According to Defendants, Congress intended to grant the Secretary [of Education] authority under the HEA to forgive balances on loans in the ICR [income contingent repayment] program by creating a maximum repayment period of 25 years or "an extended period of time prescribed by the Secretary." 20 U.S.C. § 1087e(d)(1)(D)…… Under this alleged authority, the Secretary has been providing loan cancellation for loans in the ICR plan since the first ICR regulations became effective in 1995.

Despite this history, the plain text of the statute does not support Defendants' position.
The Court is not free to replace the language of the statute with unenacted legislative intent…. It is true that offering forgiveness of loan balances after 25, or even 10, years of repayments to borrowers under the SAVE plan will ensure that fewer borrowers will default or become delinquent. These loan forgiveness provisions thus comport with the Secretary's expressed purpose for creating the Final Rule. But because the statute is silent on loan forgiveness under the ICR program, it is at least equally as likely that the HEA's time limitations in the ICR program refer to the maximum period that borrowers can be in repayment before the entire loan amount must be repaid or borrowers must default….

Plaintiffs' alternative reading—that § 1087e(d)(1)(D)'s language does not permit loan forgiveness under the ICR program—finds support in other portions of the HEA that explicitly permit loan forgiveness. Congress has made it clear under what circumstances loan forgiveness is permitted, and the ICR plan is not one of those circumstances.

Later in the opinion, Judge Ross concludes that such a massive loan forgiveness plan clearly qualifies as a "major question," but also indicates that the plan is illegal even aside from the major questions doctrine. That doctrine merely further reinforces the plaintiff states' arguments:

Here, there is no real dispute that the Secretary's Final Rule touches on issues of vast economic and political significance and therefore may implicate the major questions doctrine. But to the extent it is necessary to invoke the major questions doctrine here at this stage of litigation, it merely confirms what the Court has found using the typical tools of statutory interpretation.

The court did reject some of the plaintiff states other arguments, and also would preserve parts of the SAVE plan that do not actually forgive debt, but merely alter payment schedules and the like. Nonetheless, Judge Ross's reasoning indicates that the most important provision of the plan (the one that would forgive vast amounts of student loan debt) is illegal, because not authorized by Congress.

In Alaska v. Department of Education (formerly known as Kansas v. Biden) Judge Daniel Crabtree of the District of Kansas reached a similar decision. The standing issue in this case was addressed in a previous ruling, where Judge Crabtree concluded only 3 of 11 plaintiff states have standing. Unlike Judge Ross, he held that giving one state standing does not resolve the standing issues for the rest. The state of Kansas, which initially led the litigation, was one of those that did not get standing, which to the case being renamed.

On the merits, Judge Crabtree's reasoning is very similar to Judge Ross's, except that he relies much more on the major questions doctrine:

To resolve plaintiffs' motion, the court must answer three questions.

First: does defendants' SAVE Plan present a "major question"—one of such economic
and political significance that defendants must show that Congress clearly authorized the SAVE Plan? In Biden v. Nebraska, 143 S. Ct. 2355 (2023), the Supreme Court answered this question. This recent, binding Supreme Court decision holds "that the basic and consequential tradeoffs inherent in a mass debt cancellation program are ones that Congress would likely have intended for itself." Id. at 2375 (quotation cleaned up). So, this is an easy yes.

Second, given that the case presents a major question, have defendants shown that the Higher Education Act clearly authorizes their SAVE Plan? Biden v. Nebraska doesn't answer this question because that case addressed a different statute with a different regulatory history. While it's a close and difficult question, the court answers this second question no. Defendants have offered colorable, plausible interpretations of the Higher Education Act that could authorize the SAVE Plan, but those interpretations fall short of clear congressional authorization.

Last, the court must decide whether the preliminary injunction should apply nationwide. Scope aside, part of plaintiffs' requested injunction is unworkable, and so the court denies it. But, for the workable part of plaintiffs' injunction, the court reluctantly answers yes—it should apply nationwide.

I think Judge Ross's analysis is a bit better than Judge Crabtree's, and the case can be resolved even without applying the major questions doctrine. But if the statute is indeed unclear, both judges are right to conclude that MQD requires a ruling in favor of the plaintiffs.

Despite some differences, both courts have issued nationwide preliminary injunctions that block the Administration from engaging in most further loan forgiveness. Nationwide injunctions are the subject of extensive controversy. I think the two courts are right to issue nationwide injunctions here, because, as Judge Crabtree puts it, "[a] broad rule, like the SAVE Plan, requires a broad injunction, given the compelling need for nationwide uniformity in the Department's administration of student loan programs."

Both of today's decisions only address preliminary injunctions. They are not yet final decisions on the merits. However, both judges made clear they believe the plaintiffs are likely to prevail on key issues in any such final decision (such a likelihood of success is one of the criteria for getting a preliminary injunction).

The Biden Administration will surely appeal both rulings. But the fact they lost at the trial court level in both cases, despite litigating them before liberal Democratic appointees, is a strong indication they will face an uphill struggle. I am now even more confident than I was before that the most likely outcome of this litigation is that the SAVE Plan will suffer the same fate as its HEROES Act predecessor.

I believe the Supreme Court got it right in Biden v. Nebraska, and I think today's decisions were right to rule against the SAVE Plan. It is dangerous to empower the executive raid the treasury to spend money for purposes not authorized by Congress.  For much the same reasons, I also opposed Donald Trump's attempt to divert military funds to build his border wall, which had a lot in common with Biden's student loan shenanigans.