BANKRUPTCY BULLETIN
Contributing Editor:
Chen Di Xu
Benjamin N. Cardozo School of Law
Juris Doctor Candidate, 2024
Judicial Extern to U.S. Bankruptcy Judge Kesha Tanabe
In Biden v. Nebraska, 2023 WL 4277210 (U.S. June 30, 2023), the United States Supreme Court held that the United States Secretary of Education (“Secretary”) lacked authority under the Higher Education Relief Opportunities for Students Act of 2003 (“HEROES Act”) to depart from the existing provisions of title IV of the Higher Education Act of 1965 (“Education Act”) and establish a student loan forgiveness program that would eliminate the federal student loan debt of most borrowers.
The Education Act authorizes the Secretary to assist in making available the benefits of postsecondary education through federal student loans. 20 U.S.C. § 1070(a). Under the HEROES Act, the Secretary “may waive or modify any statutory or regulatory provision applicable to the student financial assistance programs under title IV of the [Education Act] as the Secretary deems necessary in connection with a war or other military operation or national emergency.” § 1098bb(a)(1). Additionally, the Secretary may issue such waivers or modifications only “as may be necessary to ensure” that “recipients of student financial assistance under title IV of the [Education Act affected by a national emergency] are not placed in a worse position financially in relation to that financial assistance because of [the national emergency].” §§ 1098bb(a)(2)(A), 1098ee(2)(C)–(D).
During the COVID-19 pandemic in 2022, the Secretary invoked the HEROES Act to issue waivers and modifications that reduced or eliminated the federal student debt of most borrowers (roughly $430 billion in debt). Six States, including Missouri, challenged the plan as exceeding the statutory authority of the Secretary. The Supreme Court granted certiorari to address whether the Secretary had authority under the HEROES Act to depart from the existing provisions of the Education Act and establish the student loan forgiveness program.
Before the Supreme Court, the Secretary argued the States lacked Article III standing to challenge the Secretary’s program. In rejecting the argument, the Supreme Court held that at least Missouri had standing because the program would cost a government instrumentality of Missouri an estimated $44 million annually in fees.
Further, the Supreme Court held that the text of the HEROES Act does not allow the Secretary to rewrite the statute to cancel the $430 billion of student loan principal under the loan forgiveness plan. The Supreme Court concluded that the plan was not a waiver or modification under the statute because the plan augmented and expanded existing provisions dramatically and was effectively the introduction of a whole new regime.
To read the Supreme Court’s decision, click here.
Editors-in-Chief:
C.J. Harayda, Stinson LLP
David M. Tanabe, Winthrop & Weinstine, P.A.