Michael rappaport

Hugh and Hazel Darling Foundation Professor of Law; Director, Center for the Study of Constitutional Originalism

VII. tackling a $400 Billion Question in Biden v. Nebraska

In a much-anticipated case, the Supreme Court in Biden v. Nebraska decided that the Biden Administration’s comprehensive plan for canceling student debt was not authorized by statute . Chief Justice Roberts authored the decision for the six justices in the majority; his opinion was accompanied by an important concurrence by Justice Amy Coney Barrett .  A strong dissent by Justice Elena Kagan was joined by the other two progressive justices .

In August 2022, towards the end of the pandemic, the Biden Administration announced a comprehensive student loan forgiveness plan based on its authority to respond to a “national emergency . ” The Congressional Budget Office estimated the plan would cancel about $430 billion in debt principal

There were two main issues in the case: whether the state of Missouri had standing to challenge the plan and whether the Department of Education’s statute authorized the cancellation of the debt . Prior to the decision, the standing question was generally thought to be the more difficult one for those challenging the plan The key standing issue was whether the state of Missouri had suffered a cognizable injury as a result of the cancellation of the student debt .  While the Missouri Higher Education Loan Authority (“MOHELA”), which administered the loans, would clearly have had standing to sue because it would lose an estimated $44 million from the cancellation, it had not chosen to file a lawsuit .

The Court, however, concluded that the state of Missouri could sue for the harm to MOHELA .  The Court noted that MOHELA was a “public instrumentality” of Missouri, established by the state to perform the “essential public function” of helping Missourians access student loans .  MOHELA’s profits help to fund education in Missouri, and it was subject to state supervision and control . Consequently, the Court concluded that the state of Missouri could challenge the cancellation, even though MOHELA was a separate corporation

The merits question turned on whether the Secretary of Education had statutory authority to issue the debt cancellation plan The Court concluded that the Secretary did not have such authority based on ordinary methods of statutory interpretation and on the separate ground of the major questions doctrine .

For statutory authority, the Secretary relied upon the HEROES Act, which empowered him to “waive or modify any statutory or regulatory provision applicable to … student financial assistance programs as the Secretary deems necessary in connection with a war or other military operation or national emergency . ” The question was whether the loan forgiveness plan constituted a waiver or modification within the meaning of this statute

The Court concluded that the plan exceeded the Secretary’s authority both to “modify” and “waive” provisions . Relying on a prior case as well as the ordinary meaning of “modify,” the Court interpreted that term as allowing the power only “to change moderately or in a minor fashion,” rather than as encompassing the power to make “basic and fundamental changes in the scheme designed by Congress . ”

The Court noted that the statute authorized the Secretary to discharge a borrower’s liability only “under certain narrowly prescribed circumstances,” such as a borrower’s death or bankruptcy or a borrower’s inability to complete a program due to a school’s closure By contrast, the Secretary’s forgiveness of $10,000 or $20,000 for all borrowers who satisfied an income cap applied irrespective of circumstances . Thus, the forgiveness worked a major change in the statute

Nor, according to the Court, could the plan be justified under the Secretary’s authority to “waive” provisions . The Court understood waiver to mean eliminating or excusing compliance with a legal requirement or provision . But since the Secretary’s plan adopted new rules, such as particular sums to be forgiven and incomebased eligibility requirements, waiver authority alone could not support those new rules Instead, the Secretary had to rely on his modification authority to adopt those new rules . But since those rules would effect a major change, they could not be regarded as modifications .

After holding that ordinary statutory interpretation principles did not justify the Secretary’s plan, the Court then moved to an alternative ground for its holding: the major questions doctrine Under that controversial doctrine, the Court asks whether there is “clear congressional authorization” to justify an agency’s assertion of certain exceptional claims of power Where the agency claims broad authority that has not been historically asserted under the statute, and where the claimed authority is economically and politically significant, the Court will find “reason to hesitate before concluding that Congress meant to confer such authority ” Since the Secretary had exercised much narrower authority prior to this program and since the program was both economically and politically significant, the Court concluded that the statutory provisions did not provide the clear authority necessary to justify the program .

In an importance concurrence, Justice Amy Coney Barrett sought to root the major questions doctrine in the ordinary rules of statutory interpretation . In her view, “the doctrine serves as an interpretive tool reflecting common sense as to the manner in which Congress is likely to delegate a policy decision of such economic and political magnitude to an administrative agency . ”

Finally, Justice Kagan dissented from the Court’s decision on all three grounds, arguing that Missouri lacked standing, the statute authorized the Secretary’s loan forgiveness plan, and the major questions doctrine was “made-up . ” Justice Kagan claimed that the Court’s opinion exceeded the proper role of the judiciary, which prompted a rebuke from Chief Justice Roberts and a further response from Justice Kagan

Apart from halting the Biden student loan forgiveness program, the decision is likely to prove consequential in future challenges to executive branch actions with broad-scale economic or political effects, including agency decisions that affect federal spending . The decision suggests that a majority of the justices agree that such regulatory actions must rest upon clear statutory authorization, though they may disagree on what that test requires and the reasons for the test .

Michael Rappaport