Last August, the Biden Administration announced a landmark plan to cancel up to $20,000 in federal student loan debt for millions of borrowers. The plan was hailed as a way for former students to finally get out from under an unmanageable burden of debt, allowing them to contemplate purchasing a home or starting a family.
But then federal courts in two Circuits ordered the Administration to stop the plan in its tracks. With relief to up to 40 million Americans hanging in the balance, the Supreme Court granted cert in December.
Yesterday, the Berkeley Center for Consumer Law and Economic Justice filed an amicus brief in defense of the administration’s plan. Check out our brief, and don’t miss this article in MarketWatch profiling our brief and quoting our own staff attorney David Nahmias!
Background: The Administration’s historic debt cancellation plan represents a significant step forward toward lasting economic justice for low-income borrowers, especially borrowers of color. In forgiving the debt, the Administration invoked its authority under the 2003 Higher Education Relief and Opportunities for Students (HEROES) Act, which allows the Secretary of Education to waive or modify federal student loans in the event of a national emergency—here, the ongoing economic fallout from the unprecedented COVID-19 pandemic. Almost 90% of the debt relief will go to borrowers earning less than $75,000 a year.
Yet the debt cancellation plan was immediately challenged by attorneys general from 6 states (Arkansas, Iowa, Kansas, Missouri, Nebraska, and South Carolina) and two borrowers from Texas who brought separate lawsuits in federal courts in Missouri and Texas. In December, the U.S. Supreme Court accepted both cases on an extraordinary basis—before the appellate courts had fully adjudicated either matter—and consolidated them for hearing in Biden v. Nebraska and Department of Education v. Brown.
The Center’s brief: The Center filed an amicus brief on behalf of two Missouri consumer advocacy groups arguing that the state plaintiffs in Biden v. Nebraska lack standing to challenge the Administration’s action. The States’ theory of standing relies principally on the claim that Missouri will be injured by the projected loss in revenue by the Higher Education Loan Authority of the State of Missouri (MOHELA, or the Authority), an independent entity that services and administers federal student loans. The States contend that debt cancellation will include federal student loans serviced by MOHELA, that the elimination of that debt will cause MOHELA to lose revenue, and that the loss to MOHELA will in turn impact the coffers of the State of Missouri.
Our brief breaks the links in the tenuous chain of assumptions underlying the States’ theory. The brief points out that when the Missouri legislature created MOHELA over 40 years ago, it made clear that the agency was to be financially and operationally independent from the State. In fact, the text of MOHELA’s enabling statute explicitly provides that MOHELA’s assets are to remain separate from the Missouri treasury and must “remain under the exclusive control and management of the authority.” And over the years, MOHELA has maintained this autonomy from Missouri. As a result, a financial loss to the Authority does not and will not mean a loss to the State treasury.
The brief goes on to establish that the remaining states also lack standing to challenge the Administration’s debt cancellation plan. Their proffered theories of standing rely on even longer and more speculative chains of events than Missouri’s; their claims that the debt relief plan may someday result in lost general tax revenue simply do not conform to the Court’s required statement of a “certainly impending” injury for standing purposes. Indeed, even the States’ claim of revenue loss is factually dubious. Our brief references several empirical studies suggesting that student debt cancellation may well have a net positive economic impact on state treasuries, thereby undercutting any notion of economic harm.
Under the Supreme Court’s settled law on Article III standing, the State plaintiffs simply do not have a right to challenge debt cancellation. As David Nahmias, a staff attorney with the Center, explained, “Missouri and the other state plaintiffs are merely speculating that debt cancellation may cause them harm in the future. Time and again, the Supreme Court has rejected lawsuits based on speculation and conjecture. That's all that this is.”
Our brief joins over a dozen amicus curiae briefs filed in support of the Administration’s debt cancellation plan—including one filed by legal experts including Berkeley Law Dean Erwin Chemerinsky and Center Faculty Director Professor Jonathan Glater. According to Secretary of Education Miguel Cardona, “The broad array of organizations and experts – representing diverse communities and different perspectives – supporting our case before the Supreme Court today reflects the strength of our legal positions versus the fundamentally flawed lawsuits aimed at denying millions of working and middle-class borrowers debt relief. As these diverse groups made clear today, student loan borrowers from all walks of life suffered profound financial harms during the pandemic and their continued recovery and successful repayment hinges on the Biden Administration’s student debt relief plan. We will continue to defend our legal authority to provide the debt relief working and middle-class families clearly need and deserve.”