U.S. DEPARTMENT OF EDUCATION ANNOUNCES NEGOTIATED RULEMAKING AFTER SUPREME COURT STRIKES DOWN STUDENT DEBT FORGIVENESS PLAN
In a 6-3 decision issued on June 30, 2023, the U.S. Supreme Court held in Biden v. Nebraska that the Secretary of Education did not have authority under the Higher Education Relief Opportunities for Students Act of 2003 (“HEROES Act”) to establish a loan forgiveness program that would have cancelled approximately $500 billion in student debt.
A coalition of Attorneys General from six states (Arkansas, Iowa, Kansas, Missouri, Nebraska and South Carolina) led the challenge to the Biden Administration’s student debt-relief program. As an initial matter, the Court determined that Missouri had standing, in part, due to an estimated annual loss of $44 million in fees by MOHELA, a nonprofit government corporation created by Missouri to participate in the student loan market. Notably, in the companion case Department of Education v. Brown, the Court unanimously ruled that the two individual borrowers lacked standing because they failed to establish an injury that was fairly traceable to the student loan forgiveness program.
Reviewing the statutory text and history of the HEROES Act, the Court found that the Secretary of Education’s authority to “waive or modify” regulatory and statutory provisions of the federal student aid program allowed for “minor” or “modest adjustments and additions to existing provisions,” as consistent with prior invocations of this authority on particular issues with limited effect. Thus, the HEROES Act did not authorize the Secretary to “transform” or create a “novel and fundamentally different loan forgiveness program” under Title IV of the HEA. In writing for the majority, Chief Justice Roberts described the Secretary’s student debt-relief plan as, in essence, an attempt to draft “a new section of the [Higher Education Act] from scratch by ‘waiving’ provisions root and branch and then filling the empty space with radically new text.”
Immediately following the Court’s decision, President Biden announced that the Department of Education will establish a Negotiated Rulemaking committee to develop proposed regulations related to the Secretary’s authority under the HEA to modify, waive, or compromise federal student loans. The public comment period for proposing specific topics for the committee to consider ends July 20, 2023. The Department of Education will hold a virtual public hearing to discuss the rulemaking agenda on July 18, 2023. The President’s announcement also included details about the Department of Education’s new SAVE repayment plan, intended to launch before student loan payments restart in October of 2023, and new “on-ramp” leniencies for borrowers who miss payments from October 1, 2023, to September 30, 2024.
HMBR’s Higher Education Group will continue to monitor the effects of the Supreme Court’s ruling and the work of the Department of Education’s Negotiated Rulemaking committee. Should you have any questions or concerns about possible implications for your postsecondary institution, please feel free to contact us at 312-946-1800.