The Biden Administration Used the Pandemic to Justify Loan Forgiveness. Some Say It Didn’t Need To.

President Joe Biden’s student loan forgiveness plan, which cancels $10,000 of debt for borrowers earning under $125,000 and offers $20,000 of relief to Pell Grant recipients, is scheduled to come before the U.S. Supreme Court later this month. The administration will argue that it has the authority to cancel student debt under the Higher Education Relief Opportunities For Students (HEROES) Act of 2003, which allows for the cancellation of loans for people who have suffered economic hardship due to national emergencies—namely, the COVID-19 pandemic. The court’s six-justice conservative majority is expected to strike the program down, unless it finds that the subjects of the case don’t have standing. However, there’s another authority for debt relief that some scholars and advocates believe is stronger than the HEROES Act—and that could be used to let the program continue even if the Supreme Court strikes it down.

The authority comes from a line in the Higher Education Act (HEA) of 1965 that gives the U.S. Secretary of Education the power to “modify” and to “compromise, waive, or release” claims against students. Supporters believe that this allows the Secretary of Education to lower loan balances by the amounts intended by the Biden administration—or even further. Although it would be a broad use of the power, supporters think that it’s logical.

Sparky Abraham, legal strategist for the Debt Collective“In general, if you are a lender, if someone owes you money, you can cancel the debt,” said Sparky Abraham, legal strategist for the Debt Collective, a non-profit that seeks to abolish student debt. “It’s kind of just that straightforward.”

Abraham says that the authority has been used previously to perform large, group discharges of student debt, albeit never at this scale, and that it lines up with the policy goals of the HEA.

“The HEA set up the student lending system in order to expand access to college for people who wouldn’t have otherwise been able to go,” he said. “So, if you keep that goal in mind, it makes sense for the Department of Education to be able to decide that student debt shouldn’t be punishing people in certain circumstances.”

One of the main attacks on HEROES authority for debt cancellation is that the connection between the pandemic and the intended relief is tenuous. Many student borrowers didn’t suffer economically from COVID, and some may have benefitted financially. Using the “compromise, waive, or release” authority avoids this issue because it doesn’t require any sort of national emergency. This, says supporters, makes it potentially stronger.

But if it’s a potentially stronger authority, why didn’t the Biden administration use it to begin with? The administration appears to have considered it, with the president asking Secretary of Education Miguel Cardona in 2021 to prepare a policy memo on his options for achieving student loan relief without Congress. The substance of the administration’s deliberations has not leaked, but John Hunt, professor at the University of California, Davis School of Law, believes that the HEROES authority was chosen to make it clear that debt relief was intended as a one-time maneuver.

John Hunt, professor at the University of California, Davis School of Law“What seems plausible is that by tying it to COVID, they are signaling that they’re not going to keep doing this,” he said. “If you say we can forgive any loan whenever we want, then next year or two years later, people are going to come back and be like, ‘Well, forgive my loans.’”

However, the calculus might change if the Supreme Court shoots down HEROES authority. Hunt thinks that a switch to “compromise, waive, or release” is possible, if unlikely.

“If the idea is to heighten the conflict with the Supreme Court by illustrating how the Supreme Court is standing in the way of a lot of popular programs, maybe they would want to beat the Supreme Court over the head with this again,” Hunt said.

Of course, there are plenty of arguments against the “compromise, waive, or release” authority, if the program were to wind up in front of the Supreme Court a second time. Critics say that there’s little historical evidence that such broad forgiveness was the intent of the HEA’s drafters. They also argue that forgiving debt is equivalent to expending federal resources, which would require the authorization of Congress.

Abraham and Hunt argue that the plain text of the law seems to give the Secretary of Education the power to offer relief and that forgiving debt is not the same as spending money. But they disagree about how using “compromise, waive, or release” authority would hold up if it were challenged.

Abraham thinks that if the debt relief was done automatically, without any application process for borrowers, it would be very difficult to unwind.

“It would be a stretch to think that a court would come in and say, ‘Yes, we know the Department of Education wiped the books clean for 20 million people and that they’ve now moved on with their lives, but we’re going to somehow force a lender to reinstitute debt that it has said it has no intention of collecting,'" he said. “I have a hard time seeing how a challenge like that would work.”

But Hunt was more cynical.

“Before an impartial panel that was not opposed to student loan forgiveness, I think it should be a winning argument,” he said. “But that’s different from predicting it would actually succeed before the Supreme Court that we have.”

“My guess,” said Hunt, “is that the Supreme Court will find a way to make the administration lose.”

Jon Edelman can be reached at [email protected].