Pfister: Legality of student loan reduction
In February 2023, in Biden v. Nebraska, the Supreme Court will hear oral argument and decide whether the president, by and through his secretary of education, can reduce student loan debt pursuant to a particular statutory delegation. This will be a heavy load since the recent case of Virginia v. EPA this last summer, which held that delegations from Congress must be clear in their intent on major questions. This is the “major question doctrine.”
The statute in question is the Higher Education Relief Opportunities for Students Act of 2003 (herein HEROES Act). The act states: “…the Secretary of Education … may 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 to provide the waivers or modifications authorized by paragraph (2)." Paragraph (2) ensures that a recipient not be in a worse financial position because of war, military operation, or national emergency, regarding the loan.
The secretary’s action here on loan reduction is based on a national emergency, which was the COVID-19 pandemic. On March 13, 2020, the president declared that pandemic to be a national emergency for every state, the District of Columbia, and all five permanently populated U.S. territories, according to a memorandum dated Aug. 23, 2022, by Christopher H. Schroeder, Office of Legal Counsel, Department of Education. The purpose, Schroeder memorandum states, is “to alleviate the hardship that federal student loan recipients may suffer as a result of national emergencies.” Prior secretaries have exercised this power, say, for those working in disaster areas. Here, the secretary proposes to reduce the loans for a broad class of borrowers, not on a case-by-case basis.
The memorandum concludes that the secretary has the authority to act based on the plain text of the act. The statute contains the words “waive” and “modify,” as the “Secretary deems” to be “necessary.” The term “modify” authorizes the secretary “to reduce, by any degree, the obligation … the term ‘waive’ confers the power to excuse an individual from legal obligations in their entirety” the memorandum states. This is a broad discretionary power for the secretary.
A key word is “necessary.” The reduction must be necessary to avoid financial harm to the individual because of COVID-19; that is, “but for” COVID-19 the financial harm would not have occurred and a reduction of the debt is the necessary remedy.
The memorandum defines “necessary” in the broad way done in McCulloch v. Maryland (1819) to mean convenient or useful, not in its normal legal meaning as being essential or indispensable. Did the Congress intend to define the word so broadly and loosely, to convert it into a reasonableness test? I believe this definition of necessary will violate the major question doctrine where congressional intent must be clear.
The final issue is the broad scope of the secretary’s order, applying, as the memorandum states, to “every borrower in the United States with a loan held by the federal government” instead of on a case-by-case basis. This broad sweep was done on the basis of “administrative convenience.” This may turn out to be the major issue of the case. Can the doctrine of administrative convenience be stretched so far as to include massive over-inclusiveness, i.e., those whose financial position has nothing to do with the pandemic.
It would appear that the secretary’s program of loan reduction is only loosely related to the pandemic and is grossly over-inclusive for the sake of administrative convenience. I would guess that the conservative Supreme Court will find the program to be merely a gift, beyond the delegated authority of the statute, in this era of the major question doctrine. (West Virginia v. EPA, 2022).
Note that this is a legal analysis, not a policy discussion. Regarding policy, I believe the federal government should give substantial financial support to students in higher education, not only for the improvement of our society but as an international matter in our relations with other nations. We should be a leader regarding an educated public. But it will take a clear legal foundation from Congress, which we do not have here.
James W. Pfister, J.D. University of Toledo, Ph.D. University of Michigan (political science), retired after 46 years in the Political Science Department at Eastern Michigan University. He lives at Devils Lake and can be reached at jpfister@emich.edu.
This article originally appeared on The Daily Telegram: James Pfister: Legality of student loan reduction
