Texas federal court finds Biden student loan forgiveness program unconstitutional Troutman pepper

The Biden administration’s student-loan-forgiveness program is suspended indefinitely after a Texas federal court issued its ruling finding the program unconstitutional. in the Brown v. US Department of Education, the Northern District of Texas ruled that the Higher Education Relief Opportunities for Students Act of 2003 (HEROES Act) does not authorize the administration to create the Student Loan Relief Program. “In this case, the HEROES Act — legislation designed to provide loan assistance to military personnel that defends our nation — does not give the Executive Branch clear congressional authorization to create a $400 billion student loan forgiveness program. The program is thus an unconstitutional exercise of Congressional legislative power and must be overturned.” The Justice Department has already appealed to the Fifth Circuit.

background

Plaintiffs Myra Brown and Alexander Taylor both have student loans. Brown is not eligible for debt relief under the program because her loans are held commercially, and Taylor is not eligible for full debt relief because he did not receive a Pell Grant. They disagreed with the eligibility criteria and sued the Department of Education and the Secretary of Education, seeking the repeal of the program or a statewide injunctive relief on two grounds: (1) They allege that the program violates the Administrative Procedures Act (APA) notification and comment obligations; and (2) they allege that the Secretary has no authority to implement the program under the HEROES Act.

The decision

The court found that the program did not violate the APA because it was issued under the HEROES Act, which exempts the usual notice and comment requirements.

However, the court agreed with the plaintiffs that the secretary does not have authority to implement the program for three reasons. First, the HEROES Act makes no mention of a credit waiver. It only permits the Secretary to “repeal or amend” provisions of Title IV. The court found that “‘enabling legislation’ like the HEROES Act is not ‘an open book to which the agency can add pages and change the storyline’.”

Second, the HEROES Act does not provide clear congressional authorization for the program. The Government claimed that the HEROES Act empowers the Secretary to address the financial emergency of the COVID-19 pandemic. While the court agreed that the pandemic falls within the HEROES Act’s definition of an emergency, it questioned whether student loan forgiveness was required in connection with this emergency.

Third, the fact that the Department had not historically relied on the HEROES Act or any other statutory, regulatory, or interpretative authority for blanket student loan cancellations was another “indication” that the Secretary lacked clear congressional authority. The court finally found that “vacatur of the [p]Program is the appropriate means.”

Go forward

The case is ongoing and has already been challenged at the Fifth Circuit. Additionally, last month the Eighth Circuit granted an emergency motion by Republican officials in six states to temporarily suspend the program while they appeal the dismissal of their challenge by a Missouri federal judge, who found they lacked standing. While these appeals are expiring, the Student Loan Administration’s salvation schedule will be suspended.

Troutman Pepper will continue to monitor this case for future developments.

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