On August 24, 2022, President Biden announced a student loan forgiveness program (“Program”) to forgive up to $20,000 in federal student loans. In Brown v. U.S. Dep't of Educ., No. 4:22-cv-0908-P (N.D. Tex. 2022), the plaintiffs, two individuals who hold student loans but who were not eligible for any or all of the $20,000 loan forgiveness, sought vacatur of the Program or nationwide injunctive relief. The plaintiffs alleged that (at 4-5):
- the Program violated the notice-and-comment requirements of the Administrative Procedure Act (“APA”); and
- the Secretary lacked the authority to implement the Program under the HEROES Act.
The United States District Court for the Northern District of Texas considered whether the Higher Education Relief Opportunities for Students Act of 2003 (“HEROES Act”) gave the executive branch the constitutional authority to create and implement the Program.
Disposition
The United States District Court for the Northern District of Texas held that the Program was an unconstitutional exercise of Congress's legislative power and must be vacated.
The APA's procedural requirements were met
The plaintiffs argued that the Program violated the APA's procedural requirements because it did not go through the notice and comment process required by the APA before implementation (at 16). The Court disagreed. The Court noted that because the Program was issued under the HEROES Act, which exempts notice and comment, the Program did not violate the APA's procedural requirements (at 17).
The HEROES Act does not authorize the implementation of the Program
The plaintiffs then argued that the Program was unconstitutional because the Secretary lacked the authority to implement the Program under the HEROES Act. The United States District Court for the Northern District of Texas agreed.
The major questions doctrine applies to the Program
The Court noted that under West Virginia v. EPA, 142 S.Ct. 2587 (2022), when an agency seeks to resolve a “major question,” a merely plausible textual basis for the agency action is not enough. Rather, the agency must point to clear congressional authorization for the power it claims (at 18). The Court held that the Program, which was an agency action of vast economic and political significance, qualified as a “major question” such that the above test was applicable (at 18-20).
There was no clear congressional authorization permitting the implementation of the Program
As a result of the Program falling under the major questions doctrine, the Government was obligated to point to clear congressional authorization permitting the implementation of the Program. The Court held that the Secretary lacked clear congressional authorization for the Program under the HEROES Act and noted the following factors:
- The HEROES Act allows the Secretary to “waive or modify” provisions of Title IV. However, by creating the Program, the Secretary used its ability to “waive or modify” to rewrite Title IV portions to provide for loan forgiveness. This was improper—enabling legislation, such as the HEROES Act, is not an open book to which the agency may add pages and change the plot line (20-21).
- The Government argued that COVID-19 was a national emergency that gave the Secretary the authority to address the financial hardship caused by the pandemic, including the implementation of the Program. However, the Court held that it was not clear that COVID-19 constituted a national emergency that was sufficient to give the Secretary the ability to modify provisions of Title IV in connection with a national emergency (at 21-22).
- When an agency claims to have found a previously ‘unheralded power' in a rarely invoked statutory provision, its assertion generally warrants a measure of skepticism. The HEROES Act had not previously been relied on for the blanket or mass cancellation of student loan principal balances, and/or the material change of repayment amounts or terms (at 22).
Therefore, the Court granted summary judgment for the plaintiffs and held that the Program was unconstitutional (at 22).