In recent years the question as to what should be done about the ever-increasing amount of student loan debt, both federally and privately held, has become a hotly debated political issue. Regardless of political affiliation, it is generally agreed that student debtors are particularly burdened by their obligation to repay their loans and that this adversely affects their ability to participate in the national economy. Various plans aimed at lessening this burden have circulated in recent years, with many such plans on display during the recent 2020 Democratic Presidential Primary. The numerous debt cancellation proposals ran the political gamut, with some candidates calling for the abolition of all student debt while others proposed only canceling debt for individuals that meet certain requirements, such as an income threshold or partaking in certain forms of post-graduate entrepreneurship. But regardless of the notable differences in the proposals, it appears that the consensus among Democratic politicians is that some form of student debt relief should occur.
President Biden was one of the candidates proposing a cancellation of at least some portion of student debt during the 2020 campaign season, and his proposal to cancel $10,000 worth of debt per borrower gained increasing attention as the COVID-19 pandemic worsened and left many borrowers increasingly strapped for cash. With the Democrats currently controlling both houses of Congress as well as the Presidency, one may think that legislation aimed at student debt forgiveness is likely to pass sometime within the next two years. However, the current political climate makes the passage of such legislation highly unlikely if not wholly impossible. The Democrats control the Senate by only a slim majority, and Republicans have been openly contemptuous towards almost all debt forgiveness proposals. The current rules surrounding the filibuster make it such that a unified opposition party (in the absence of the other party holding a supermajority) can effectively kill any legislation by withholding the votes needed to meet the sixty-vote threshold to end debate.
Student debt cancellation is extremely popular, and so Democratic politicians are motivated to deliver on their party’s and the President’s promises of forgiveness. However, the high likelihood of Republican obstruction (to say nothing of intra-party opposition they may face) makes many Democrats wary of attempting to affect debt cancellation through the traditional legislative process. Thus, many Democrats are urging President Biden to take a swift, unprecedented, and likely controversial action: deliver on his promise of canceling $10,000 of federally backed student debt per borrower through executive order. This, of course, raises the question of whether or not any President has the authority to do this. If President Biden were to take such an action a lawsuit concerning the legality of the order would doubtless ensue, and so it is worth examining some of the arguments that would be made both in defense and in opposition to this potential exercise of presidential authority.
Legal Foundation and Precedent
Those urging President Biden to cancel debt via Executive Order argue that the President does indeed have the legal authority to forgive student debt in this way as it was granted to him in the Higher Education Act of 1965. Section 432 (a)(6) of the Act gives the Secretary of Education (at the time of the law’s enactment referred to as the “Commissioner”) the authority to “enforce, pay, compromise, waive, or release any right, title, claim, lean, or demand, however, acquired including any equity or any right of redemption.” When a creditor agrees to compromise the debt owed to him by a debtor, the creditor agrees to allow the debtor to forgo paying the full amount of his debt. Thus, if the Secretary of Education has the power to compromise federally backed loans taken out by student borrowers, then the Secretary could in theory choose to forgo most if not all of a borrower’s outstanding balance under this provision of the Act. And since the Secretary of Education is an executive officer serving at the pleasure of the President, the President could by extension order the Secretary to exercise their authority in this way.
And the Secretary’s exercise of their power to modify certain aspects of loan repayment isn’t totally unprecedented. While a large-scale debt cancellation has never been attempted, Presidents have previously ordered the Department of Education to stop pursuing the collection of student debt payments. Most recently, as a part of his response to the economic downturn caused by the COVID-19 Pandemic, former President Donald Trump issued a temporary moratorium on student debt repayment for most of those who received student loans through the federal government. Upon taking office, President Biden extended this moratorium for an additional eight months past its initial expiration date of January 21, 2021. To date, no legal challenges have been filed alleging that either President’s actions (in these particular instances) were unlawful.
However, there is every indication that the moratorium will only last as long as the pandemic. Additionally, the CARES Act, passed by both houses of Congress and signed into law by the President in March of 2020, provided for a student loan repayment pause that coincided with former President Trump’s executive order (although the moratorium for which the Act provided has since expired). It is hard to imagine that a President taking such an action in “normal” circumstances without any form of congressional blessing would be treated as benignly as it is at the present. Thus, any argument that could be advanced in favor of debt cancellation by executive order would have to rest on the authority granted to the Department of Education by the Higher Education Act. And this authority surviving a legal challenge would hinge on the Act’s Constitutionality.
Proponents of student debt cancellation through executive order claim that Congress’ power under the Property Clause of the Constitution (“to dispose of and make all needful Rules and Regulations respecting the territory or other Property belonging to the United States”) was partially delegated to the Executive Branch by the Higher Education Act. The Secretary of Education has been given authority over the “property” that is the money taken out of the Treasury and distributed as student loans. The Court has long held that Congress can delegate its authority to the Executive Branch, and it is highly unlikely that even the most “conservative” justices would be eager to return to a strict application of the nondelegation doctrine. However, Congress cannot delegate its power without limitation. Under the test set forth in Misretta v. United States, Congress’ delegation must include an “intelligible principle” which is to guide the delegee’s exercise of authority.
Assuming the Court were to accept the interpretation of the statute that granted the Secretary of Education the ability to cancel student debt, it would be very quickly recognized that the power is, as at least one of its proponents admits, “unrestricted.” The power granted to the Secretary is incredibly broad, and its limits have never been truly tested. While the Higher Education Act is unlikely to be struck down in its entirety as it serves as the foundation for the modern federal student loan program, it is very likely that Section 432(a)(6) of the Act will be challenged on the grounds that there is no “intelligible principle” guiding how, when, and to what extent student loans can be abated or canceled. As the law stands, the Secretary can modify student loans in any way and for any reason that they see fit. Had the law included some provision stating the circumstances in which student debt could be compromised or had even subjected canceling to a specific dollar amount that would be allowed within a defined period, the government would probably be in a much better position to argue that the power is sufficiently limited. However, the law’s current form leaves it open to this criticism and makes it at least somewhat likely that the Court would strike Section 432(a)(6) down.
This discussion, however, is purely speculative. Despite prodding from several in his party, President Biden has offered no indication that he will as much as attempt to ameliorate student debt in this way. Quite to the contrary, he has indicated that he has an aversion to more “radical” forms of student debt relief. However, if the past four years have taught us anything, it’s that the political arena is anything but predictable. So, who knows? Maybe we will get to see President Biden’s authority to cancel student loan debt challenged in the courts. Only time will tell.