Trump administration was 'substantively incorrect' in determining there is no legal authority to cancel student debt broadly, Biden's Education Department says
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- Trump's administration concluded the authority does not exist to cancel student debt broadly.
- Biden's Education Department pushed back this week, saying that is "substantively incorrect."
- On Wednesday, Biden canceled up to $20,000 in student debt for federal borrowers.
It's no secret that student-loan forgiveness has been, and continues to be, hotly contested.
For as long as student debt has been a burden for millions of Americans, there has been the question of how, and if, a president can legally wipe out some of what is now a $1.7 trillion crisis. President Joe Biden's administration on Wednesday decided that the authority is there, canceling up to $20,000 in student debt for Pell Grant recipients and federal borrowers.
"All of this means people can start to finally crawl out from under that mountain of debt to get on top of their rent and their utilities, to finally think about buying a home or starting a family or starting a business," Biden said during Wednesday remarks. "And, by the way, when this happens, the whole economy is better off."
Right before Biden announced this broad relief his Education Department responded to the conclusion former President Donald Trump made in a January 2021 memo during his time in office: that the authority does not exist to cancel student debt for all federal borrowers.
"We have determined that the Higher Education Relief Opportunities for Students ("HEROES") Act of 2003 grants the Secretary authority that could be used to effectuate a program of targeted loan cancellation directed at addressing the financial harms of the COVID-19 pandemic," the department's General Counsel Lisa Brown wrote in a Tuesday memo. "We have thus determined that the January 2021 memorandum was substantively incorrect in its conclusions."
As Brown explained, the HEROES Act gives the Education Secretary the authority to "waive or modify any statutory or regulatory provision applicable to the student financial assistance programs" if the secretary finds waivers are necessary to ensure borrowers would not be placed in a "worse position financially" due to a national emergency, which in this case, is the pandemic.
However, Trump's Education Secretary Betsy DeVos wrote in her memo that "Congress never intended the HEROES Act as authority for mass cancellation, compromise, discharge, or forgiveness of student loan principal balances, and/or to materially modify repayment amounts or terms," ultimately arguing any broad relief is overstepping Congress.
While Brown requested DeVos' memo be formally rescinded, there are still likely to be legal arguments down the road, and even lawsuits, as Biden's student-loan forgiveness becomes implemented.
Biden himself has questioned the legality of student-debt relief
On the campaign trail, Biden pledged to approve $10,000 in student-loan forgiveness, but when it comes to amounts like $50,000 — which many Democrats were pushing for — he expressed hesitancy.
"My point is: I understand the impact of debt, and it can be debilitating," Biden said during a town hall last year. "I am prepared to write off the $10,000 debt but not $50 [thousand], because I don't think I have the authority to do it."
That's why he asked both the Education and Justice Departments to prepare memos assessing his legal authority to cancel student debt broadly. In October 2021, redacted documents revealed that the Education Department was circulating a memo as early as April 2021.
Right before Biden's Wednesday announcement, the Justice Department finally made its memo publicly available, concluding that Biden's "targeting relief towards those individuals who suffered financial hardship because of COVID -19 and who otherwise satisfy the requirements of the Act" is permissible.
Still, critics of Biden's plan are not convinced. DeVos called the relief "100% illegal," following months of pushback from Republican lawmakers who said the authority does not exist for Biden to enact widespread relief on its own, and the power should rest in Congress.
Even after Biden's announcement, legal battles could still arise down the road. As CNN reported in July, the recent Supreme Court ruling that limited the Environmental Protection Agency's authority to fight climate change could suggest challenges to student-loan relief, given the court's belief that such actions are going beyond what Congress intended.
But Democrats have continued to believe the authority is there to provide relief to millions of borrowers recovering from COVID-19. A letter from the Legal Services Center of Harvard Law School provided to Massachusetts Sen. Elizabeth Warren in 2020 detailed the Education Secretary's legal ability to cancel student debt, and the White House feels the same.
"Part of what the legal authority is being used to do here, in a targeted way, is to make sure that those borrowers who are at highest risk of distress after the restart happens, those are the people who are going to get the relief," Bharat Ramamurti, the deputy director of the National Economic Council, said during a Wednesday press briefing. "The legal authority gives the Secretary the ability to make sure that the pandemic and the emergency does not cause a net financial harm to those folks."
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