In Chevron We Trust? How Overturning the Chevron Doctrine Dooms the Fight for Student Debt Cancellation

The state of student debt in the United States remains in limbo as the Missouri district court has halted the Biden Administration from implementing their plans, claiming lack of legal authority and a need for Congressional approval. Under the Higher Education Act of 1965, the Biden Administration claims that the Department of Education does have the legal authority to “compromise, waive, or release” student debt. However, even despite the language being rather clear, Biden’s student debt forgiveness and repayment plans are likely to be struck down, especially given the overturning of the Chevron Doctrine in June 2024. Established in 1984 by the Supreme Court, the Chevron Doctrine was a legal principle that required courts to defer to an agency's interpretation of a statute if that interpretation was reasonable. Analyzing Missouri v. U.S. Department of Education reveals that the recent removal of the Chevron Doctrine will further hinder the Department of Education's ability to cancel student debt, despite its clear and stated power to do so in various legal statutes. This analysis delves into the judicial challenges Biden’s program has faced and examines the implications of the Missouri lawsuit.

 During his 2020 campaign, President Biden promised to reduce the student debt burden, an issue affecting nearly 43 million borrowers, according to the United States Department of Education. Attempting to execute this plan, in August 2022, Biden announced a plan that would cancel $10,000 of debt to those earning less than $125,000 and $20,000 for those who received Pell grants for low-income families. At the time, the Education Department estimated that 27 million borrowers would qualify for up to $20,000 in relief, a historic policy that undoubtedly would have changed the lives of millions of Americans. Immediately, Republicans across the country, including senators and the Republican National Committee, opposed the plan, as one senator, Republican Senator Ben Sasse of Nebraska, said the plan “forces blue-collar workers to subsidize white-collar graduate students.”

 As expected, Biden's plan was soon met with legal challenges; on September 29, 2022, Nebraska, Missouri, Arkansas, Iowa, Kansas, and South Carolina sued the Biden Administration for violating the separation of powers and the Administrative Procedure Act. In addition, these states asserted that they had standing because of the American Rescue Plan Act of 2021, which barred them from taxing loans that were discharged for 3 years. One state, in particular, Missouri, argued its standing because the Higher Education Loan Authority of the State of Missouri (MOHELA), a student loan servicer, would lose revenue from student loan forgiveness and as a result, would not be able to fund Missouri’s student financial aid program.

 After some back and forth between district and appellate courts, in early December 2022, the U.S. Supreme Court granted certiorari before judgment. The question before the Justices was two-fold: Does Nebraska and other states have judicial standing to challenge the student-debt relief program and does the student-debt relief program exceed the statutory authority of the U.S. Secretary of Education, or does it violate the Administrative Procedure Act? In a 6-3 decision, split along ideological lines, the Supreme Court ruled that the Secretary of Education does not have the authority under the Higher Education Relief Opportunities for Students Act of 2003 (HEROES ACT) to establish a student loan forgiveness program that would cancel approximately $430 billion of student loans. This ruling emphasized the court's stance that significant and large-scale financial and policy changes, such as debt cancellation, require explicit Congressional approval or legislation rather than unilateral executive action. More importantly, this loss constrained the Biden administration's ability to pursue debt relief through executive powers, paving an arduous path toward similar proposals for executive-student debt cancellation.

 In the aftermath of the Supreme Court’s decision, Biden looked to implement alternative student loan cancellation programs. In April 2024, the Biden Administration announced a new student loan forgiveness plan that aimed to cancel up to $20,000 of a borrower’s accrued interest, proposed an income-driven repayment plan, and wipe out all debt owed by 4 million borrowers and the partial relief of $5,000 to 10 million borrowers. This plan represented the most sweeping and targeted student loan forgiveness plan from the Biden administration to date, using authority from the Higher Education Act of 1965 (HEA) to enact it. Specifically, HEA grants the Secretary of Education the power to “enforce, pay, compromise, waive, or release any right, little, claim, lien, or demand, however acquired, including any equity or any right of redemption.” This provision is crucial to the Biden Administration's argument defending their pursuit of student loan forgiveness as it explicitly grants the Secretary of Education broad power and discretion to cancel student debt depending on the circumstances. Opponents maintain that widespread student loan forgiveness requires Congressional approval, asserting that this plan still violates the separation of power between the Executive and Legislative branches.

 Led by the state of Missouri, a group of Republican Attorneys General filed a lawsuit in a Georgia federal court in September 2024 against the Biden Administration arguing that it overstepped its powers and that the program financially harms state-affiliated entities, namely MOHELA. Following the September filing, U.S. District Judge Randal Hall of Georgia initially issued a temporary restraining order, but then allowed the order to expire,  dismissing Georgia from the suit, citing a lack of standing, and moving the case to a Missouri federal court. However, this win for the Biden administration was short-lived, as once the case was moved to Missouri, the six remaining states were granted a preliminary injunction.

 In other cases, HEA has been used to address issues involving student loan repayment plans, in an effort to make higher education more affordable and accessible. Notably, using the authority of the HEA, the Department of Education developed income-driven repayment programs such as Income-Based Repayment (IBR) and Pay As You Earn (PAYE). Under both programs, monthly payments are capped based on a borrower’s income and family size. These plans account for fluctuations in income and allow borrowers to have flexibility with their repayment to avoid financial burden. In addition, the development of the Teacher Loan Forgiveness (TLF) Program allowed for the forgiveness of up to $17,500 on student loans if a borrower teaches full-time for five complement and consecutive academic years in a low-income school or educational service agency. These programs are examples of the Department of Education exercising authority and discretion with forgiving student loans, without Congressional approval or legislation, emphasizing the precedent for student debt cancellation and income-driven repayment programs such as the plan announced in April.

 Underlying the Department of Education's powers to issue student debt cancellation is the recently overturned Chevron Doctrine. Established in 1984 through the Supreme Court case, Chevron U.S.A., Inc. v. Natural Resources Defense Council, the Chevron doctrine granted federal agencies substantial flexibility in interpreting ambiguous statutes related to their work and area of expertise. For more than 40 years, Chevron has allowed federal agencies the power to interpret a law using their expertise and reason in order to support their objectives and goals. This broad interpretation power is central to the Department of Education’s use and interpretation of laws such as HEA in this case. However, now that Chevron has been overturned in the most recent Supreme Court term, agencies are no longer granted automatic deference in cases where there is statutory ambiguity. This consequential decision complicates the Department of Education's ability to defend student debt cancellation programs using statutory and executive powers since courts can now scrutinize and reject any interpretation that they see unfit. It also forces the Department of Education to use more explicitly stated legal statutes to defend its stance on broad student loan forgiveness, which, at the moment, does not exist. Without Chevron, it seems unlikely that any student debt cancellation program would ever be enacted without a federal law being passed.

 The plan is expected to be struck down by federal courts in Missouri, issuing yet another blow to Biden’s attempt at issuing broad student loan cancellation. This case exemplifies the broader ideological and financial conflicts central to federal student loan forgiveness. For states with vested interests in student loan revenue, Biden’s program poses a direct economic threat, making them more likely to challenge it in court, evident in Missouri’s relentless pursuit of ending any attempt at debt relief.

 While Biden’s administration has highlighted the power and authority of the executive branch to address the burdens of student debt through existing legislation like HEA, the limitations imposed by the courts based on differing legal interpretations have resulted in the executive’s inability to exercise its rightful authority. With the overturning of the Chevron Doctrine, the Department of Education’s efforts are likely to remain burdened by legal battles, as they no longer have the power to interpret statutes as they see fit. The back-and-forth between the Biden administration’s policy announcements and court rulings undoing the plans has left borrowers confused and uncertain as they attempt to financially plan around fast-approaching loan repayments. Looking ahead, any future student debt program may require a clear legislative basis to withstand judicial scrutiny and frivolous lawsuits, creating an uphill battle for the future of broad student loan cancellation.

Edited by Ileane Barrera