Debt cancelation comes before the Supreme Court

Justice Scalia famously observed that Congress does not normally hide elephants in mouseholes. On Tuesday, his successors on the Supreme Court heard oral arguments on whether Congress did just that in a statute that included provisions for modifications to federal student loan programs. The Higher Education Relief Opportunities for Students (HEROES) Act, passed in the wake of the terrorist attacks of Sept. 11, 2001, allows the Secretary of Education to “waive or modify” the terms of federal student loans in response to the financial repercussions of a war or other national emergency. Congress’ idea was that if someone was called up to serve in the National Guard in Afghanistan, his or her student loan payments could be paused.

Of course, the left has been on a crusade against student loan debt for years, starting long before Bernie Sanders for president was a twinkle in anybody’s eye. Embracing former Obama chief of staff Rahm Emmanuel’s admonition to “never let a good crisis go to waste,” the Biden Administration saw the COVID-19 national emergency as its chance to use the HEROES Act to cancel the student debt owed by many Americans.

At the end of August 2022, shortly before the midterm elections, the Biden Administration announced its plans to “modify” the terms of student loans by cancelling up to $20,000 of individual federal debt, benefiting 50 million debt-holders at a total cost of $400 billion. Lawsuits promptly followed, the program was suspended by a lower court’s order, and now the matter is before the justices.

Assuming the states can establish their standing to bring a case, the question presented is whether the Department of Education even complied with the HEROES Act’s plain terms. First, it is no small stretch to say one is “waiving or modifying” a loan’s terms to cancel it entirely. The Supreme Court several years ago said “modification” usually means a minor or moderate change but not a wholesale transformation. As Chief Justice John Roberts noted wryly at the oral argument, “It might be good English to say that the French Revolution modified the status of the French nobility, but only because there’s a figure of speech called understatement and a literary device known as sarcasm.”

Second, as my law firm argues in its amicus brief, it is hard to credit the Biden Administration’s claim that the pandemic had caused an economic crisis justifying nationwide relief for borrowers at the same time the president, White House press secretary, and cabinet officials were touting “historic job growth” and a “historic economy recovery.” The Biden administration was caught making contradictory arguments about the strength of the economy.

The case presents a broader question as well that goes beyond how to read the HEROES Act, one that poses more fundamental and important issues for our nation. It is that classic problem of all politics: who decides? The Constitution’s answer is obvious. When it comes to matters of domestic policy, Congress decides. To cite the Schoolhouse Rock rhyme, Congress makes the laws, which embody Congress’s policy choices. Returning to Justice Scalia’s quip, it’s hard to believe that Congress made a policy choice to give substantial discretion to an unelected bureaucrat to decide whether and when to cancel hundreds of billions of dollars of federal debt when it passed the HEROES Act.

Several justices asked the government’s lawyer about the “major questions doctrine.” The concept has been bouncing around Supreme Court caselaw for decades, but has crystalized only recently, especially last term in West Virginia v. EPA. The idea is simple: when a policy determines a major question of national economic or political significance, we should assume that is a determination reserved to Congress. If Congress has spoken clearly, then so be it. But if the executive is acting pursuant to a vaguely written statute, or discovering newfound powers in an old provision that has never been read that way before, courts should be deeply skeptical that Congress meant to grant the executive such power.

Such a principle is both right and good. It is right because it reflects the republican structure of our Constitution. It is good especially now, in the era of the modern administrative state, when presidents are wont to rule “by pen and by phone” when they cannot convince Congress to enact their policy priorities. If Joe Biden could not get a debt cancellation bill through a Congress controlled by Nancy Pelosi and Chuck Schumer, he certainly shouldn’t be able to do it through an unelected bureaucrat’s aggressive interpretation of his own powers. We now await the decision of the Supreme Court, and more than student debt is at stake.