What Happened with the Cancellation of Student Loans?

 The liberty principle for this Freedom Friday concerns freedom from tyrannical executive orders. Today marked the last day of the U.S. Supreme Court season, and the final decisions were made known. One decision concerned President Joe Biden’s announcement in August 2022, that he would use the HEROES Act to cancel the federal student loans of certain deserving borrowers. The HEROES Act was meant to help active-duty soldiers, not all borrowers.

According to an article by Jack Fitzhenry in The Daily Signal, “over 40 million borrowers qualified at an aggregate price of $430 billion” to be relieved of their student loan debt. The announcement by Biden brought out several questions: “how had college graduates, a demographic which then had only 2% unemployment, been affected financially by the pandemic? Why was this species of relief announced well after the pandemic’s worst effects but suspiciously close to a midterm election? Speaking of suspicion, why did this relief mirror a Biden campaign promise in every relevant particular.” The questions went unanswered. 

States and nonprofits sued to stop the action, but many of them lacked standing. However, Biden v. Nebraska was heard by the Supreme Court. Chief Justice John Roberts wrote for the six-justice majority that Missouri “had standing because it founded and funded an entity, ‘MOHELA,’ that was paid to service federal student loans. MOHELA would lose money because of the canceled loans, and because MOHELA was Missouri’s ‘instrumentality,’ its financial injury could be attributed to the state.”

On the merits of the case, Roberts “rejected the argument that the power to ‘waive or modify’ laws conferred by the HEROES Act enabled the education secretary to create a ‘novel and fundamentally different loan forgiveness program’ more to the president’s liking than Congress’.”

The waiver and modification powers, whether read singularly or in tandem, did not enable the secretary to “draft a new section of the Education Act from scratch by ‘waiving’ provisions root and branch and then filling the empty space with radically new text.” Yet, that was effectively what the secretary had done when he issued his cancellation plan as “modifications” to the student loan program. This went well beyond HEROES’ boundaries.

The case’s seriousness did not prevent justices in the majority from coming up with some humorous analogies. Roberts channeled the late Justice Antonin Scalia when he mused that the “Secretary’s plan has ‘modified’ the cited provisions only in the same sense that ‘the French Revolution modified’ the status of the French nobility’ – it has abolished them and supplanted them with a new regime entirely.” This is always a great citation, though I’d prefer if Roberts refrained from giving progressives ideas on how to handle the opposition….

Per Roberts, cancellation “amounts to nearly one-third of the Government’s $1.7 trillion in annual discretionary spending. There is no serious dispute that the Secretary claims the authority to exercise control over ‘a significant portion of the American economy.’”

No cancellation of this magnitude had ever been set in motion, let alone without any direct input from Congress. Is it plausible that Congress meant to authorize this some 20 years ago when it drafted the phrase “waive or modify”?

As Barrett explained, “commonsense principles of communication” should lead us to answer no because “an initiative of this scope, cost, and political salience is not the type that Congress lightly delegates to an agency.” That is a view we should take seriously. For pretensions to vast power will continue to assert themselves as well-intentioned responses to the next emergency on the horizon.

This decision was a big loss for Biden, but he is so dense that he does not even realize how wrong he was. The borrowers who voted for Democrats were duped by a lying president because they do not know and/or understand that the House of Representatives holds the purse strings for the nation. Biden’s plan was bribery for votes – 77% of youth voters voted for Democrats.

What Will Justices Decide on Student Loan Debt?

Yesterday, the U.S. Supreme Court heard arguments in two cases that challenge the claim that President Joe Biden has the authority to forgive student loan debt. The administration claims that the HEROES act can be used to cancel $430 billion in student loans borrowed by 40 million students. The HEROES Act is a law meant to give emergency help to military personnel responding to national security emergencies. Jack Fitzhenry and GianCarlo Canaparo explained the proceedings. 

An important question asked about court cases related to standing, a legal doctrine that describes the right to sue. The doctrine “requires that before a court will hear a case, the plaintiff must have suffered a concrete injury caused by the other party that a court can fix.”

The first case was brought by several states. They claim that their standing is based on the amount of revenue that they will lose if the Biden administration forgives student loans. The lost revenue would then be unavailable “for scholarships and other education programs meant to benefit citizens of those states.”

U.S. Solicitor General Elizabeth Prelogar’s argument was that the “state entities are not really arms of the states that they serve.” Therefore, the “states cannot sue on behalf of the agencies.” However, the conservative justices did not seem interested in Prelogar’s argument.

The second case was brought to “two borrowers who did not qualify for debt cancellation” and were not included in “the decision-making process.” Prelogar argued that the government is not required “to involve anyone in this process.” Her position was supported by the liberal justices, and some conservative justices seemed to be “more receptive to her counterargument that they did in the first case.”

The bottom line is that if “none of the plaintiffs have standing,” then the Supreme Court will not take the case regardless of whether or not Biden’s plan is legal. However, the case will continue if only one of the plaintiffs has standing.

The second important question is about merit. The outcome of this question “may depend on how the court interprets the language in the HEROES Act that empowers the secretary of education to ‘waive or modify’ the laws and regulations governing student loans.

Prelogar acknowledged that the HEROES Act does not express state that the Department of Education has “the power to cancel debt.” That did not seem to matter because “she insisted that the phrase ‘waive or modify’ is broad enough, using the terms separately or jointly, to infer that it gives the secretary the power to cancel student loans.”

According to the authors, the Biden administration and the Department of Education created the program “in secret, without public input, without consulting Congress.” In addition, “they designed the cancellation to deprive affected parties of a right to challenge this action in court.”

Chief Justice John Roberts and some of “the conservative justices were skeptical of Biden’s plan.” The justices seemed to think that Congress should manage the issue, not the executive branch. They did not seem anxious to grant more power to the executive branch. The authors concluded:

The burden of student debts was significant before this case and, sadly, it will remain so no matter how the court rules. Debt cancellation for one set of borrowers is no real solution.

But if the court determines no plaintiff has standing and declines to reach the merits, or if it defers to the secretary of education’s interpretation of the HEORES Act, we will see an ever-growing list of contested social issues addressed unilaterally by the president under the guise of an emergency.

Who Should Pay for Student Loan Debt?

             The liberty principle for this Freedom Friday is President Joe Biden’s executive order about student loan debt. Under Biden’s plan, the federal government will “forgive” $10,000 of student debt for any American earning less than $125,000 ($250,000 per couple). If the former student received Pell grants, they would have $20,000 of student debt “forgiven.”

Responsible Americans worked their way through college and/or paid off their student loans as soon as possible after graduating. My children worked in high school and college. They even donated plasma to pay college expenses. They sacrificed after graduation to pay off their student loans. Their children are working and saving for college to decrease the amount that they will borrow. Biden’s plan is unfair to former students like my children and future students like my grandchildren. College should prepare the students to become self-reliant adults who pay off their own loans and their own bills.

Rachel Greszler at The Daily Signal believes that Biden’s “morally and economically derelict” plan will make our out-of-control inflation worse, and it will also make the labor shortage worse. Greszler explained her thinking as follows. 

The Committee for a Responsible Federal Budget estimates that a $50 billion, one-year extension of the pause in student loan repayment would increase inflation (as measured by the personal consumption expenditures index) by 20 basis points.

The budget group’s estimates for the roughly $500 billion worth of taxpayer spending on loan “forgiveness,” payment pause extensions, and other payment reductions will be significantly more inflationary.

Moreover, in one year these provisions would wipe away almost two times the 10 years’ worth of deficit reduction estimated to come from congressional Democrats’ recently passed Inflation Reduction Act.

Student loan repayments generally require people to work to repay their debts. The extended pause on loan repayments, up to $10,000 or $20,000 in outright loan forgiveness, and a new income-based repayment provision that eliminates payments for those who don’t work would make it even easier to work less or not at all.

And this comes on top of a slew of bad government policies that have caused unprecedented labor shortages.

Nearly two job openings are available today for every unemployed worker, and half of employers report that they have job openings they can’t fill….

If all those missing workers were contributing to the economy instead of sitting on the sidelines, it’s possible that gross domestic output would not have declined in the first half of this year and the U.S. might not be entering a recession.

            In addition to increasing inflation and making the labor shortage worse, Biden’s “forgiveness” of student loans will lead to an increase in the costs of college. This means that future college students will take out even bigger student loans that they cannot repay and will need help to get out from under the loans. The better action for the federal government would be to force universities to control their costs or even lower them.

One way to lower costs is to stop offering all the degrees – such as gender studies and basket weaving – that will never benefit the students. If the degrees will not help the students to pay off their degrees, they are worthless degrees that should be discontinued. Parents should teach their children to be self-reliant and to be wise about how much money they borrow. Biden’s student loan forgiveness does not help irresponsible former students or America.