EMERGENCY DOCKET

Supreme Court temporarily bars latest Biden student debt relief plan

The Supreme Court on Wednesday temporarily barred the Biden administration from implementing one of its latest efforts to provide debt relief to Americans with student loans. In a brief unsigned order, the justices declined to allow the Department of Education to put into effect a July 2023 rule, known as the SAVE Plan, intended to provide debt relief for lower-income borrowers while challenges to the rule continue in the lower courts.

There were no dissents recorded from Wednesday’s order, which instructed the U.S. Court of Appeals for the 8th Circuit, which is currently considering the government’s appeal, to act quickly.

In a second order issued on Wednesday, the justices turned aside a request from a different group of states to bar the Biden administration from implementing the July 2023 rule. That brief unsigned order pointed to a letter from lawyers for the states indicating that they did not need the Supreme Court to step in as long as a related order by the 8th Circuit remains in place – which, with Wednesday’s order, it now does.

Either or both cases could return to the Supreme Court once the federal appeals courts rule on the merits of the dispute.

The Department of Education issued the rule at the center of the dispute last year after the Supreme Court quashed an effort by the Biden administration to cancel up to $400 billion in student loans in the wake of the COVID-19 pandemic. In that decision, Biden v. Nebraska, a divided court ruled that the Biden administration had overstepped its authority when it announced the debt relief program, which relied on the HEROES Act, a law passed in the wake of the Sept. 11 attacks that gives the secretary of education the power to respond to a national emergency by “waiv[ing] or modify[ing] any statutory or regulatory provision” governing the student-loan programs so that borrowers are not worse off financially because of the emergency.

The 2022 debt relief program, Chief Justice John Roberts wrote for the majority, did not waive or modify the existing student loan laws, but instead “created a novel and fundamentally different loan forgiveness program.” The 2022 debt relief program, Roberts continued, also ran afoul of the “major questions” doctrine, which is the idea that if Congress wants to give an administrative agency the power to make decisions of vast economic or political significance, it must say so clearly. In this case, Roberts said, the HEROES Act did not authorize the debt-relief program at all, much less clearly.

The Higher Education Act of 1965 requires the Department of Education to offer student loan borrowers repayment plans tailored to their incomes. The SAVE Plan, announced in July 2023, is a new repayment plan intended to provide debt relief for low-income borrowers. Among other things, the plan modifies how a borrower’s “discretionary” income (which is used to determine the repayment amount) is calculated, allows borrowers to pay 5%, rather than 10%, of that discretionary income toward their undergraduate loans, and shortens the repayment periods for borrowers whose original balances were smaller.

Two different challenges, both filed by groups of Republican-led states, followed. A federal appeals court in Denver allowed the government to implement most of the plan, while a different appeals court in St. Louis blocked the government from implementing the major provisions of the plan.

Eleven states brought the first challenge in March of this year. A federal district court in Kansas allowed three states – Alaska, South Carolina, and Texas – to continue the challenge to the SAVE Plan. It found that they had “just barely” established a legal right to sue, known as standing, because each of them has state agencies that service federal loans and will lose money as a result of the plan.

The district court entered an order barring the Biden administration from implementing the provision that reduced the percentage of discretionary income used to calculate payments from 10% to 5%, and it also blocked other provisions of the rule that had not yet taken effect. It declined, however, to block the two other provisions of the July 2023 rule because they had already gone into effect, and so the challengers could not contend that they had been permanently harmed by their implementation.

On June 30, the U.S. Court of Appeals for the 10th Circuit temporarily put the district court’s order on hold, and it agreed to fast-track the government’s appeal (as well as the states’ appeal of the portion of the district court’s order that ruled against them) and heard arguments on Aug. 21. (It later temporarily discontinued review of the appeal in light of the 8th Circuit’s order.) 

The states came to the Supreme Court on July 5, asking the justices to reinstate the district court’s order and grant review without waiting for the court of appeals to weigh in. They argued that the justices “will rarely see a more clear-cut case where the Court is likely to grant” review and rule for the states.

In a letter to the justices on Aug. 10, Texas Solicitor General Aaron Nielson urged the court to either take the very unusual step of ordering the district court to strike down the SAVE plan now, without any additional briefing, or at the very least “set this case for argument.”

The second challenge to the SAVE Plan was filed by seven states in Missouri in April of this year. A federal district judge on June 24 blocked the provision of the rule that shortens the timelines for loan forgiveness for borrowers whose original loan balances were smaller. But on Aug. 9, the U.S. Court of Appeals for the 8th Circuit issued an order that temporarily put most of the SAVE Plan on hold while that appeal continues.

The Biden administration came to the Supreme Court on Aug. 13, asking the justices to lift the 8th Circuit’s order and allow it to implement most of the SAVE Plan. The filing by U.S. Solicitor General Elizabeth Prelogar characterized the plan as a “straightforward exercise” of the Department of Education’s power to set the “parameters of income-contingent repayment plans.” To invalidate the plan, Prelogar contended, the court of appeals “relied almost entirely on an (unofficial and inaccurate) estimate of the rules aggregate cost” – an analysis, she argued, that was a “caricature of the major-questions doctrine, which is supposed to be a tool for discerning Congress’s intent using text and context,” rather than “a license for reflexive judicial veto of any policy a court deems too expensive.”

Prelogar suggested that if the justices do not lift the 8th Circuit’s order, they might instead want to hear oral argument on the merits of the dispute, fast-tracking the case for review in November.

The justices rejected both of Prelogar’s suggestions in their brief order on Wednesday, instead turning down the request to allow the Department of Education to implement the July 2023 rule in a brief order. Although the court did not provide any explanation for its decision, it noted that it “expects that the Court of Appeals will render its decision with appropriate dispatch.”

The student loan dispute is one of several now pending on the court’s emergency appeals docket, sometimes known as the “shadow docket.” The justices are also currently considering (among others) requests to reinstate federal grants for family planning services to Oklahoma, which lost the funding after it refused to provide referrals for abortions to patients in the state, and to temporarily block the Environmental Protection Agency from enforcing a rule regulating emissions from power plants.

This article was originally published at Howe on the Court.