According to recent polls, the Biden administration’s recently announced plan to reduce student debt for borrowers who earn less than $125,000 is popular. Unfortunately, the program has a major legal flaw: The administration’s arguments for its executive power to make such a broad effort under federal law will likely lose—and should lose—in the courts.
The good news for President Joe Biden and borrowers is that the administration has time to change those arguments.
In conjunction with the program’s announcement, the Office of Legal Counsel at the Department of Justice issued a memo explaining the legal basis for the president’s actions. That memo makes several dubious claims about presidential authority. Most importantly, it relies on an expansive reading of a provision in the Higher Education Act of 1965 that gives the secretary of education broad discretion to “forgive” certain student loans.
The OLC memo argues that this provision gives the president the authority to cancel up to $50,000 in debt for any borrower with a federal loan. That interpretation is almost certainly incorrect. The statute’s language is clear: It authorises the forgiveness of debt “in connection with” certain specific programs, such as those for teachers and public servants. It does not give the secretary discretion to forgive debt more broadly.
Even if one reads the statute more broadly, it will not authorise the president’s plan. The forgiving of debt “in connection with” a specific program implies some connection between the debt being forgiven and the program. But there is no such connection here: The president’s plan would forgive debt for all borrowers, regardless of whether they participated in any specific programs Congress authorised.
The OLC memo also cites a provision of the Higher Education Act that authorises the secretary to “adjust” the terms of federal loans. Again, this language is far too vague to support the president’s plan. And even if it were read more broadly, it would not authorise the forgiveness of debt; it would only allow for changes to repayment plans, interest rates, and other existing loan terms.
Finally, the OLC memo cites a provision of the Bankruptcy Code that gives the president the authority to “modify” student loans held by the federal government. But this provision applies only to loans in default—loans for which the borrower has failed to make payments for 270 days or more. It does not apply to current loans. And even if it did, it would not authorise the wholesale forgiveness of debt; it would only allow modifications to repayment plans and other existing loan terms.
The OLC memo does not mention any other possible sources of presidential authority for the plan. That’s likely because there are none. The Constitution gives Congress, not the president, the power to enact laws governing student loans. And while presidents have sometimes taken executive action in areas where Congress has failed to act, that authority is limited to cases where Congress has authorised the president to take such action. Here, there is no such authorisation.
The OLC memo is a deeply flawed legal document. It relies on dubious interpretations of vague statutory language and fails to cite any other possible sources of presidential authority. The administration would be wise to abandon it and start over.
There are several ways the administration could structure a legal debt-forgiveness program that would stand up in court. One option would be for the president to use his power under the Bankruptcy Code to modify student loans held by the federal government. This power is fairly limited—it would allow for changes to repayment plans and other terms of existing loans, but not for the wholesale forgiveness of debt—but it would be sufficient to provide relief to struggling borrowers.
Another option would be for the president to use his power under the Higher Education Act to create a new program specifically authorising student debt forgiveness. This would require congressional approval, but it would be far easier to get than the wholesale changes to the Bankruptcy Code that would be necessary to make the president’s current plan legal.
The bottom line is that the Biden administration’s student-debt relief plan is a good idea, but it is currently facing significant legal challenges. The administration should take steps to improve the legal standing of the plan by either Congress or by changing its reliance on dubious interpretations of the statutory language. Otherwise, the plan is likely to be struck down by the courts.
What do you think? Should the Biden administration change its student-debt relief plan to improve its legal standing, or should it pursue other options? Share your thoughts in the comments.
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