November 27, 2022

Today the Biden Administration  filed an application urging the Supreme Court to lift a lower court preliminary injunction blocking implementation of the president’s massive student loan forgiveness program, which would cancel some $400 billion in student loan debt. I wrote about the lower court decision here. The Supreme Court’s resolution of the Administration’s request may well prefigure the justices’ views on how the student loan litigation should be resolved overall. If the justices lift the lower court injunction, it could be a signal a majority of the Court believes that the plaintiffs don’t have standing to challenge the loan forgiveness program, that the program is legal, or some combination of both. If, on the other hand, the Court rules against the Biden Administration, that may well indicate a majority of the justices oppose Biden’s position on  both standing and the merits.

The Eighth Circuit appellate decision the administration seeks to overturn itself overruled a trial court decision holding that the six state governments that filed the case lacked standing to do so. In my view, the Eighth Circuit correctly ruled that the state of Missouri, at least, has standing because a state agency –  the Missouri Higher Education Loan Authority (MOHELA)—is a loan servicer that would suffer financial losses if the Biden loan forgiveness plan gets implemented.

In its brief urging the Supreme Court to vacate the Eighth Circuit decision, the Biden Justice Department argues that Missouri lacks standing because the stand cannot assert standing on behalf of the rights of a “third party,” and MOHELA’s leadership was not involved in the decision to bring the lawsuit. This overlooks the fact that MOHELA is not a third party, but a state-owned corporation. Indeed, Indeed, the very same letter in which the agency’s leaders disclaim involvement in the lawsuit also indicates that MOHELA is “a government entity” and “a public instrumentality of the State of Missouri.” Thus, any financial loss to MOHELA is also necessarily a loss to the state. As the Eighth Circuit emphasized, MOHELA also is legally obliged to turn over funds to the state treasury and that flow of payments will be reduced if MOHELA suffers financial losses as a result of the loan forgiveness program.

If the Administration’s ultra-narrow theory of standing is accepted, it would give the White House broad power to usurp congressional spending authority without anyone being able to challenge it in court. Presidents could raid the Treasury to hand out funds to favored constituencies, even in the absence of congressional authorization. They could then turn around and claim no one has standing to sue because almost every such claim would involve a harm that is somehow channeled through a “third party.” Even if you trust Biden with such sweeping power, I suspect you do not have such confidence in the next Republican administration, whether run by Donald Trump, Ron DeSantis, or someone else.

For all these reasons, I hope and tentatively expect that a majority of justices will reject the Administration’s pernicious standing argument.Obviously, the Administration also argues that the program is legal on the merits under the 2003 HEROES Act. I will not try to go over that issue here. But I have previously criticized the HEROES Act theory in some detail.

Most experts believe the Administration has a much better chance of prevailing on standing than on the merits. That may be why the administration itself has significantly reduced the scope of the program in order to eliminate some potential plaintiffs who might be able to get standing.

There are other ongoing cases challenging the Biden loan forgiveness program, including one where a federal district court has issued its own injunction blocking the program. I will have more to say about some of these other cases in a future post.

But virtually all informed observers agree that the six-state lawsuit is the one with the strongest case for standing. If the Supreme Court ends up denying standing in this one, it is likely to do so in the others, as well. Thus, the state case remains pivotal for the overall fate of the program, and the resulting precedent this litigation will set.

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