Yale Notice & Comment: Biden’s Student Debt Cancellation

Last week, Pacific Legal Foundation (where we work) filed an amended class action complaint challenging the Biden Administration’s plan to cancel up to $519 billion in federally held student debt. The short history of our suit sheds light on the program’s shambolic implementation.

After announcing the policy, the Education Department created a website to provide some information on its plans. At first, the website stated that the debt cancellation would occur in early October on an automatic basis for “up to 8 million borrowers.” Tens of millions of others were promised a “simple” application for cancellation shortly thereafter. So, in late September, we filed suit on behalf of Frank Garrison, an attorney who faced a hefty state tax bill if his loans were automatically canceled. Within days, the agency quietly changed the website to say that borrowers could “opt out” of the program—in an apparent effort to moot our challenge (and leading to our amended complaint).

The Education Department’s about-face in response to our litigation is illustrative of a broader and unfortunate truth: never has an agency attempted to achieve such a significant policy (half a trillion dollars!) in such an informal and sloppy manner, without any administrative record.

At the very least, we can tell the program reflects the apogee of “presidential administration.” On the campaign trail, Biden pledged to unilaterally forgive student debt. Then, as president, he asked the Justice Department’s Office of Legal Counsel whether his administration had such authority under the HEROES Act, a 2003 law intended to assist military personnel deployed during war or other national emergencies. Predictably, the OLC answered in the affirmative. Such internal legal opinions are usually just the start of a long public process to create a new federal program. But without any formal public input the White House last August announced that the president had directed the Education Department to exercise the agency’s supposed statutory authority to cancel up to $20,000 of debt for borrowers who make less than $125,000 a year (or $250,000 for a household). An accompanying “fact sheet” stated that the income ceiling would exclude only the top 5% “high-income” individuals, which implies that the program would apply to 95% of eligible borrowers, or almost 40 million people.

As Professor Emily Bremer recently posted on this blog, “it seems clear that [the program] is already well underway.” This week the Education Department confirmed that automatic forgiveness will begin on November fourteenth, though that date was pushed backed from the administration’s original early October target to allow qualifying borrowers to “opt out” (likely as a result of our suit). Other borrowers can now apply for cancellation, although it is unclear when the agency will process those applications. And yet still, the agency “has not published a proposed or final rule establishing and explaining” its policy. Instead, the agency has conveyed certain aspects of its plan through a handful of press releases, internal memos, and shifting online statements.

How can it be that a half a trillion-dollar policy is being made through haphazard intimation? In answering, the Biden administration would point to 20 U.S.C. § 1098bb(b)(1), which sets forth the HEROES Act’s barebones procedural requirements for wartime and similar waivers. This provision states that “notwithstanding” APA § 553, the Education Department needs only to publish “notice in the Federal Register” when the agency exercises its authority under the statute.

According to the OLC, the statute’s “authorization to disregard notice-and-comment” serves to “underscore the breadth of the Secretary’s … power” pursuant to the HEROES Act. Yet this textual context clearly cuts to the opposite conclusion. Rather than demonstrating the “breadth” of the Education Department’s authority, the Administrative Procedure Act § 553 exemption in 20 U.S.C. § 1098bb(b)(1) seems to “underscore” the limits of the agency’s authority.

After all, a wholesale workaround the APA is not something that may be lightly assumed. Former professor (and current Interior Department officer) Kathryn Kovacs has written persuasively about how the 1946 Congress that passed the APA understood the rulemaking process to be “essential in order to permit administrative agencies to inform themselves and to afford safeguards to private interests” (quoting the Senate Judiciary Committee report on the APA).

Congress has been especially keen on inclusive procedures for regulations relating to federal student loans. In her post, Professor Bremer noted that the Education Department, outside of the HEROES Act, is required to employ “negotiated rulemakings,” which can be analogized to notice-and-comment on steroids. To be precise, negotiated rulemakings call on an agency to conduct a series of discussions with stakeholders before it publishes a proposed rule. And then the proposed rule itself is subject to further public comment.

Given Congress’s historical solicitude for public participation in administrative policymaking—and particularly with respect to federal student loan policy—it’s absurd to argue that lawmakers, in passing the HEROES Act, paved a giant loophole through notice-and-comment requirements for policies applying to 95% of the regulated community. It makes far more sense to read the HEROES Act’s procedural carveout as being part of a less reaching program that targets narrower classes of “heroes,” such as active-duty soldiers, veterans, and their families, or those residing or working in a true disaster area.

It’s worth comparing a typical rulemaking to the administrative “process” now being utilized by the Education Department. Instead of publishing a proposal in the Federal Register, the Biden administration announced the policy in a press release bereft of any details. Rather than improve its policy in response to public input, the Education Department is changing its plan on the fly to avoid legal challenges—and imparting these changes in stealth edits to an agency-operated website.

Above, we discussed the agency’s furtive alterations to its program after we filed our first complaint. A group of states also filed suit and met with a similar fate: the Biden Administration quickly “revised” its unwritten, ephemeral plan to deny the states standing.

These examples support Professor Bremer’s supposition that “the Department of Education has not published a notice or rule establishing the loan forgiveness program (as § 1098bb requires) precisely because the absence of a final agency action makes a legal challenge more difficult.” Assuming, as it now seems, that the utter lack of transparency is part of a cynical ploy to evade judicial review, it’s fair to ask why the Biden administration is so desperate to stay out of court. The answer, of course, is that this far-reaching policy is an obvious abuse of the agency’s delegated discretion, one that reflects the worst excesses of presidential administration.

This op-ed was originally published by Yale Journal on Regulation Notice & Comment on October 20, 2022.