A federal judge in Texas struck down President Joe Biden’s one-time student loan forgiveness program. Media outlets are calling it “the most serious legal setback for the debt relief so far.”
What makes this decision noteworthy is that it is a summary judgment vacating the forgiveness program. The judge has made a final decision on the merits of the case. The judge ordered the Department of Education not to forgive any student debt under the program.
The next stop in this litigation is an appeal to the Fifth Circuit Court of Appeals.
However, for borrowers who don’t want to read the entire 26-page decision, there are many unanswered questions. How big of a threat is this ruling to the student loan forgiveness program? What is this case about? Is the Court of Appeals likely to overturn the decision?
Accessing the Threat to Biden’s Student Loan Forgiveness
After the Supreme Court has denied multiple requests to review the one-time forgiveness program, it might seem like a single federal district court isn’t much of a threat.
Unfortunately, the threat to forgiveness is genuine.
Each lawsuit needs to be viewed individually. The Supreme Court rejecting a challenge to the forgiveness program doesn’t mean that it gets a permanent green light. Instead, it just means that particular challenge failed.
If this decision isn’t overturned by the Court of Appeals or the Supreme Court, it will end Biden’s attempt to forgive up to $20,000 per federal borrower.
What is this case about?
In this case, two Plaintiffs are suing to end the student loan forgiveness program. One plaintiff qualifies for $10,000 in forgiveness, but because he didn’t have a Pell Grant while in college, he is not eligible for the $20,000 of forgiveness. The other plaintiff has commercially-held FFELP loans and is not eligible for forgiveness due to the Biden administration’s recent decision to change FFELP eligibility.
The plaintiffs make two arguments. First, they claim that under the Administrative Procedure Act, they should have been given the opportunity to comment on the program before it became official. Second, they argue that the HEROES Act doesn’t authorize the forgiveness program.
The judge ruled for the Plaintiffs and declared the one-time forgiveness program unlawful.
Analyzing the Judge’s Reasoning Behind Ending the Forgiveness Program
I’m not going to get into a point-by-point analysis of the judge’s decision. Instead, I will say that it seems to be on very shaky legal ground.
It reads like a decision where a very conservative, Trump-appointed federal judge had a desired outcome and generated the necessary analysis to get where he wanted to go.
One of the strengths of the government’s case for the forgiveness program is that it will be very hard for any plaintiff to establish standing. To demonstrate standing, a Plaintiff must show that the statute or action in question harmed them. Wasting taxpayer dollars isn’t sufficient for standing. There must be some direct harm. Notably, a program that benefits others but not the plaintiff doesn’t meet the standing requirement.
In this case, the judge found standing for the Plaintiffs. The entirety of his standing analysis revolved around the Plaintiffs’ argument that the APA was violated and they should have gotten a chance to comment.
Where things get weird is that the judge also ruled that the APA wasn’t violated. The HEROES Act specifies that the APA opportunity to comment doesn’t apply to the legislation.
However, in ending the forgiveness program, the judge found that it exceeded the authority of the HEROES Act.
The logic here feels circular. Plaintiffs want to argue that Biden exceeded his authority under the HEROES Act, but they lack the standing to bring that lawsuit. They argue for standing on a violation of the APA, but there isn’t a violation of the APA because the HEROES Act says it doesn’t apply.
The legal analysis seems questionable at best.
Is the Court of Appeals Likely to Overturn the Decision?
The Department of Education will undoubtedly appeal the decision, and they will provide the Court of Appeals with a long list of reasons to overturn the trial court judge.
I’d argue that there is a strong argument that the Court of Appeals should overturn the Texas judge.
Unfortunately, one of the realities of our legal system is that nothing is certain. The Fifth Circuit Court of Appeals might want to reach the same conclusion the Texas judge reached. They could easily affirm the decision.
If that happens, the Supreme Court gets to decide whether or not they want to hear an appeal of the Court of Appeals decision. The Supreme Court could say they don’t want to take the case. Only a small percentage of requests are heard by the Supreme Court. If the Supreme Court refuses to hear the case, the Court of Appeals decision becomes final.
In other words, the Texas court decision was a bad break for borrowers, but hope remains.
However, a couple more bad breaks for borrowers could mean the end of the $10,000 student forgiveness program before it helps any borrowers.