Showdown Over Biden's Student-Loan Relief

the president. Here are Chief Justice John Roberts and Justice Samuel Alito. We're talking about half a trillion dollars and forty three million Americans. How does that fit under the normal understanding of modifying seems to presume that when it comes to the administration of benefits programs, trillion dollars here, tillion dollars there doesn't really make that much difference. To Congress. That doesn't seem very sensible. But there was support for

the program from the liberal justices. Here are Justice is Elena Kagan and Sonya so To. Mayor. Congress used its voice in enacting this piece of legislation. Oh, this business about executive power. I mean, we worry about executive power when Congress hasn't authorized the use of executive power. Here, Congress has authorized the use of executive power in an emergency situation. Those are exceptions that clearly are permitted under

the AHA to cancel a debt. So why would I have a view that Congress didn't understand that in an improper emergency debt cancelation would be right? My guest is Harold Grant, a professor at the Chicago Kent College of Law. So how does it appear as if the Court's conservative majority is, to put it mildly, that Biden has the power to implement this plan under the Hero's Act. To put it mildly, yes, the majority of the Court is very skeptical that the statute empowers to Biden administration with

the power to cancel all of the student loans. And the reason is that the statute does give the administration power to waiver modify unique provision under the Act in an emergency. And so much of the argument turns on what's the expanse of waiver and modification and did Congress ever intend waiver and modification to include cancelation of up to four hundred billion dollars of that was such a

tremendous impact upon the economy. And to put it again, as you stated, to put it mildly, Chief Justice Robberts was emphatically clear that he'd never thought that Congress would have given so much expansive authority to the administration to take that kind of action with such a broad impact on the economy. In other words, this emergency power, according to the seeming majority of justices, maybe postponing debt may be limiting interest payments, but certainly didn't entail such broad

cancelation authority. Does it seem like the only hope really for the student loan forgiveness program is if the justices don't find standing. There's grave questions about whether the plaintiffs in both combined cases have what's called standing to proceed. There are lots of questions raised about whether the states

can demonstrate their sufficient injury to continue the case. And with respect to the students were not benefited by the loan cancelation, whether they have standing as being frustrated because Biden didn't include them in the package of loans that were to be canceled, so they may not have any kind of recognized injury to pursue these claims anyway. And of course their claim is odd. Their claim is it's we should have been included it, and so you should

knock down the Biden plan. That's a very strange kind of standing. And I do think it's fair to say that if the court takes this case decides it on the merits, which would not for sure but likely go against the Abiden administration, they will be broadening standing, which is unusual because this court in the past is most recently narrowed standing in lots of different ways. So that's

why I think this is a tough case. You have a case on standing being able to get into court, which is challenging, but on the merits, based on the oral argument, at least a good number of the court, we're saying that Biden administration overstepped its bounds in deciding to cancel these student debts, which could be twenty five to forty million people at a cost over thirty years of four hundred billion dollars to the economy, which again,

this is a huge undertaking by the Abiden administration. So let's look at standing first, Because it seemed as if the liberal justices were more concerned about standing, except for just does any Coney Barrett, Here's justice any Coney Barrett questioning Missouri's standing. Why didn't the state just make Mohila come then, if Mohilla is really an arm of the state, and all of this would be a lot easier than The Solicitor General conceded that if Mohila was here, Mohila

would have standing. If Mohilla is an arm of the state, why didn't you just strong arm Mohilla and say you've got to pursue this suit. Yeah, So there's two theories of standing with respect of the states. All the states said that they will have injuring fact because their tax revenues may go down because of the cancelation by the

Biden administration of the student loans. That argument, I think is very weak, because, if anything, their tax proceeds may go up because of the student debt forgiveness, because people will have more money to spend and more money to invest in, more confidence in the economy about the respect of state, So the states can't show a connection between cancelation of student debt and any kind of harm to

their tax claffers. Both the size of both the Biden administration and the plaintiffs argued that a entity that processes loans, they might suffer because of the fact that there will be fewer people that turn to them for processing loans because their loans will be forgiven under the Biden plan, And that's true, that would be injury. In fact, most

of those loan processors are private. There is one processor in Missouri which is a kind of state corporation that's separate from the state but yet is public, and so that's called Mahilla. And so it was a question as even though they haven't come in into this case, they have ensued whether Missouri as a state has enough overlap with Mohilla, so that day in essence can say that either they will be affected if Mohilla suffers, or where they can raise Mahillo's claims on behalf of Mahla because

they're both part of the state of Missouri. So that was the nexus of the standing argument that was presented. And it's a very complicated question because under Missouri Lawhilla can sue and be sued in its own name, and its debts will not be subject to being paid by the state of Missouri. So there are a state created institution, but they're separate from the coffers of the state, and

they chose not to sue in this case. So that's the question is whether that injury, which everybody recognizes sufficient for injury in fact, whether Missouri as a state can stand in the shoes of that injury and advocate it in order to get into court to challenge the student debt program. Let's talk about the merits. What do you think was the main concern of the justices? Was it a problem with separation of powers? Was it something else?

The problem that the justices sought articulated over and over is this is a massive program. And did Congress when it enacted the Heroes Act and gave the administration the power and emergency to make modifications to the student loan programs, did they ever envision something on this scale, a scale that would encompass twenty five to forty million people in this country, a scale that could cause cancelation of debts to the amount of four hundred billion dollars over thirty years.

And I think they just thought that this was such a massive scale that the Biden administration wasn't just sort of modifying the program in a national emergency, but by canceling debt, it was actually changing the nature of the student loan program. And the question is whether Congress really anticipated or envisioned an administration having that much power, even though they said that you should have extraordinary powers in

the face of an emergency. So most of the argument with respect of the merits just delved into what degree of modification power the administration could use in an emergency. Everybody agreed that COVID would be a relevant emergency, but did that emergency justify a complete transformation of the student loan program? That was the nub of the merits argument.

I mean, is this all about the major questions doctrine that the Court has used before to stop Biden administration initiatives during the pandemic, like the moratorium on randal evictions

that was struck down. The Court did invoke the major questions doctrine as a way to suggest that if we're not sure about the scope of Congress's intended delegation, then we should put our finger on the scale of saying we don't allow an agency to take such kind of wide and expansive action unless we're very confident that the

Congress wanted them to go that far. And the language under the Heroes Act, under which the Biden administration predicated this change, allows the sector of Education to make a waiver and a modification to the program. So clearly Congress said, we think you should take action in an emergency. And the question is, by using the language waiver and modification,

does that include cancelation as well? And if you have the sort of priors, if you will or you have the expectation that agencies should not take expansive interpretations of authority granted by Congress, then you come down the side that a cancelation does not equal a waiver or a modification.

But if, on the other hand, if you come down the side that Congress was acting in an extraordinary way saying you the administration should take extraordinary measures in the face of an emergency, then a waiver and a modification can include a cancelation. And then what the Biden administration

would be upheld. Even Justice Kavanaugh said that you know, Congress acted here, thought about the problem, and it wanted to give the Education Department extraordinary powers to protect Americans in the face of any kind of emergency, whether it's like nine to eleven, which precipitated passage of the Hero's Act, or if it's like COVID. So there is a question, even with respect to the so called conservative justices, how they may come down if they reach the mirrors on

this delegation issue. Justice Kavanaugh also said that some of the biggest mistakes in the Court's history were deferring to assertions of executive or emergency power. He did say that he was referring to the seizure of the mills in the Korean War by President Truman. Maybe he was referring to President Trump and the border wall from when he invoked the emergency for that, I don't know, but he was also probably talking about what we did after nine

to eleven in terms of guantanamobey as well. The other justices didn't seem to pick up on this. I mean, I think that what Justice Kevin I said is very important. That you have to be very careful about allowing an emergency declaration to paper over the kind of legal issues that may arise, and that certainly was manifested in Youngstown steal as well as in some other cases. But most of the rest of the Court seemed focused on whether

this was an excessive delegation. In other words, whether the Education Department went outside the borders of what Congress would have anticipated, as opposed to debating whether this is a proper invocation of an emergency or not. I mean, the difficulty is clearly many Americans felt the sting of COVID and the fact of having to bear these student loans

during a time of economic privation was extremely tough. But does that say just forbearance and wait three years before you pay off the loan, or does that say you could actually cancel the student loans themselves. And that's a big difference. And I think the Court was troubled by the fact that Congress had an explicitly given the power to the Education Department to cancel loans as opposed to

just issue forbearance. I think they all would agree that the Education Secretary had the power to say, Okay, let's wait three years before we collect your loans. We won't charge you interest. Let's wait five years. That would have been okay, But the question of cancelation, maybe that was too far in the minds of at least a number

of the justices. Several of the conservative justices, including the Chief talking about what he called the fairness argument, which echoes a common criticism from opponents of the student loan program, who argues it punishes Americans who couldn't afford college or worked hard to pay off their loans. Here's Justice Neil

Gorsage on that point. What I think they argue that is missing is cost to other persons in terms of fairness, for example, people who've paid their loans, people who don't have planned their lives around not seeking loans, and people who are not eligible for loans in the first place. And that half a trillion dollars is being diverted to one group of favored persons over others. So this is a conservative trope to use that language, but it does

factor here in a particular way. If the Court were to take up the merits of the Biden administration decision and decide that the Biden administration had the power to cancel, then the question would be whether it's decision to cancel the debt was, in the words of the Administry of

Procedure act arbitrary and capricious. And what the Justice is noted was that in these declarations of policy announcing the cancelation of the debts, there was no recognition or acknowledgement of the potential unfairness to those who had gone to a less costly school because of the face of the debt, or those who had struggled to pay off the debt, and that there was at least no recognition of those interests in the calculus that was used by the least

articulated by the Education Department announcing the cancelation. So that issue would arise only if the court decided that the Education Department had the power to issue a cancelation, and

then they would just decide whether that was fair. And they might say that because the Biden administration didn't articulate the concerns that could be raised by people who weren't benefited, such as the two plaintiffs in the second companion case, that the whole cancelation should be dismissed for being arbitrary

and capricious. If they do that, that would leave open the path for the Education Department go back and announce again anew the cancelation, only this time addressing the concerns of those who weren't benefited, and just to find the line drawing that the Education Department had to do in deciding who should get their loans canceled and who like me who paid off their loans years and years ago,

would not get any kind of reimbursement. Hours and hours of oral arguments becoming even harder to tell what's going on with these cases. But do you see even the possibility of five justices forget the standing issue, who would vote to uphold the student loan forgiveness program. I think that the court might be fractured. It's possible that there would be some justices saying this is an excessive delegation or the major question SOCTA and would apply, and therefore

the bide administration policy must be rescinded. There's some who'd say, well, there was a targeted emergency type of delegation to the Education Department. We should allow the Education Department to proceed, but it has to do so in a measured, thoughtful way. And because they didn't give concern to the people who would feel frustrated and left out of this cancelation program, that the administration has to go back and do it again. That kind of fracture we saw in the Docker case

a couple of terms ago. The Docker case, what the court said was Okay, you have the power to do this, but you didn't really have a complete enough explanation about all the factors. And so the Chief Justice was invoking that case in that approach to say, Okay, if you had the power, the least you had to consider the fairness and the impact on thitter parties, and they would

send it back. And so there may be that kind of alliance, and I do think there'll be a couple of justices and maybe even as you mentioned Justice Barrett, who decides there's certainly no standing in this case. If the Justice's rule against the student loan program, well, that amplify frustrations that many Americans have with the Supreme Court that continues to interfere in these major political decisions and seems to be out of step with the majority of Americans.

I think there'll be a continued wave of frustration, perhaps anger at the Supreme Court for its willingness to curtail the operations of the executive branch. And indeed there may be some political fallout, and this may give President Biden more of another kind of argument to use in his reelection campaign, showing people that, hey, what administration does is really important people's lives, and so therefore you should give

me another four years. That may happen as well. Let's talk for a moment again about the Major Questions doctrine. It was the Roberts Court that established that doctrine. The Roberts Court established it. There was reference to earlier cases in which the Roberts Courts had articulated the Major Questions doctrine. Justice Scalia was one of the first two articulated and

a sort of a single point. And then since that time more courses systematically referenced it, and now it's known and basically you can look at the Major Questions in a variety of ways. At its most appealing, which many people don't agree with it, but at its most appealing,

the major question. Doctor and says, Look, if we're not sure that Congress gave the agency this authority and the agency's action would chart a whole new path in terms of social and economic policy, we should read the delegation narrowly. But I think, as the so called liberal justices noted in this case, we know what the Congress did. Congress wanted to give the head of the Department of Education the authority to deal with an emergency, and so it's

not like charting a new path. It's not like being an activist. They're just trying to interpret the powers that Congress gave him, and in this case, to cancel at least part of the student loan debt that twenty five or forty million people in the United States has. There's

an interesting argument under the Major Questions doctrine. During the discussion, the point was raised about whether it is less risky for Congress to give a great deal of power to administrative agencies in administering benefits programs as opposed to in regulating The thought underlying that discussion was, if you're just talking about merits, you're not giving the ability administration to regulate new areas, to compromise new kinds of economies at all.

All you're suggesting is whether to tinker with a program that Congress clearly established, and even if it's canceled, then you're not necessarily again changing the economies of industries. And so from that perspective, a number of justices echoed that thought, as did this listener general that a delegation of the

power to limit a marriage program. It could be Social Security, or it could be here education loan is a lot less dangerous, and therefore the major questions doctor should not apply as fully as opposed to when we're talking about regulating new authorities such as carbon emissions. Well, we'll have to keep guessing about what happens until perhaps as late as June when they come down with their final decisions of the term. Thanks so much, Hal, that's professor Harold

Krent of the Chicago Kent College of Law. The Supreme Court will once again weigh the Consumer Financial Protection Bureau's fate, focusing on whether the agency's independent funding violates the Constitution. This week, the High Court elected to hear the Biden administration's appeal of an October decision from the US Court of Appeals for the Fifth Circuit that found the agency's

independent funding through the Federal Reserve was unconstitutional. A ruling upholding the Fifth Circuits finding would wreak havoc on the agency's operations. At the very least, the CFPB would find paying bills difficult, and its prior rules, enforcement actions, and settlements could become potentially invalid. Joining me is Alan Denson

a partner. It's struck and struck in Levan. The Fifth Circuit Court of Appeals throughout never enforced pay day lending rule explain why it did that, what its reasoning was. Put it into one sentence. It has to do with the unification of the purse and the sword, and that

actually comes from directly from the opinion itself. And what that phrase covers is this idea that Congress, through appropriations and the executive should not be under one hell, so an executive agency should not be able to fund itself, and that is what the FSA was able to successfully argue and convents. The fifth circuit of is that it's improper for an agency to be able to set its

budget and determine what it's funding. Is that power belongs to the Congress under Article one of the Constitution, and that violates separation of powers principle. That's the reasoning and rationale of that. That's circum in a nutshell. Is that a novel legal argument. It is no court has ever reached that position before, and it's the bureaus structure is

also not necessarily novel in comparison to other agencies. In fact, there are other financial regulators who are similarly structured like the bureau who are not funded through appropriation who have a single director. Great example of that would be the occ for example, which is a sister regulator of the CSPB on the FEC countful. The Bureau is certainly not unique in that it is dependently funded and has the sole director structure, which is a big thing that Circuit

seems to take issue with. I think what does make them unique is that they're able to request a budget of an up to amount. That's unique, But that not the reason why the Fifth Circuit says it reached a decision. It really has to do with this fundamental structure that the Circuit beliefs, or the panel beliefs that an agency should not be independent outside of congressional appropriation. So the Fifth Circuit thinks that the funding scheme for the CFPB

is unconstitutional. That's right. Are there any other circuit courts who've ruled on this and come to different conclusions? Yeah, the DC Circuit early in the Bureau's history, ruled on it, and the Ninth Circuit I believe, has also ruled on that argument. So there is a flood. What does it tell you that the Supreme Court declined to put this case on an expedited schedule, as the administration asked, I think that it means this THESPB is going to face

continued uncertainty. I think that that's a bad sign for the agency, and I do think that they're going to give this ruling a really close look. I mean, the Court in its current form has done taking a hard look at the administrative enforcement regime on multiple front in recent terms, whether it be the Federal Trade Commission, whether

it be the EPA. Through this Major Questions doctrine that was decided last year, they're really a fresh look being taken at some of the things that those of us in government enforcement work have taken for granted for decades. The Solicitor General said the ruling has affected more than half the bureau's twenty two enforcement cases, giving defendants an argument for dismissal, and threatens the validity of virtually all

past CFPB actions. Can you explain what she means there? Well, if the bureau is unconstitutional and its funding, it means that every action it is taking as a result of that funding is problematic and as an ultra virea's act, So that would mean current rulemakings are invalid because those are prepared by CFPB staff members who are funded outside

of the congressional appropriations process. It would mean that past settlements that companies entered into were shepherded along, were forced along by by employees who are funded outside of congressional appropriation and and it means that current investigations are funded illegally in the fifth circuits to view and so there really is not anything that the Bureau can do that doesn't require the expenditure of funds. Did the Solicitor General ask for this decision to be held in abeyance until

the Supreme Court decides? Or are defendants going to start, you know, arguing that this ruling allows dismissal of their cases. Virtually every defendant who is in litigation right now with the CSPB and plenty of others who are in investigations are already making that argument, whether they're in the Fifth

Circuit or not. And so it really does affect everything the Bureau is doing from an enforcement posture, because if you're a defendant in one of these investigations or or litigation, people people want to bring every defend to their side that they can and and this is certainly one that is that is live and is currently problematic for the bureau. Will that be part of the Supreme Court's consideration the number of cases that could be affected by this, I'm

not sure. I mean, they could either take of a real politic approach that would that would be looking for a practical result. You know, we've already got rules in place and settlements that have happened and employees that have been paid. Um, you know, we can't really unwine that.

So what find the middle ground? Or the Court could also, um say, we have a really important philosophical point that we want to express here, and we're bound by the Constitution and we're interpreting the Constitution, and so we're not going to change our ruling based on what the consequences would be. And so they're I think there's kind of two approaches there. It's unclear what the what the Court

would do. So the Court could say the Fifth Circuit is correct, and that would mean the end of the CFPB. Not necessarily. They could say the Fifth Circuit is correct, and we're going to rewrite the statute. We're going to strike the portion of the Dot Frank Act that how the CFCB is funded, and and then that would make them subject to congressional appropriation. They I mean they could, they could effectively rewrite the statute and that's certainly within

their authority or strike the offending portion. And there's a severability clause and the DoD Frank Act which which would allow that. So the Supreme Court already dealt one major blow to the CFPB's independent in twenty twenty. Remind us about that. So it's it's the sail law case, and it had to do with the removability of the director of the CSCB, which, as I mentioned before, the single director. There's not a commission, and that's the sole political appointee

in the office. And the Court in that case ruled that a provision in the dot Frank Act that allowed the CSCB director to be removed only for cause. They said that that portion was offensive to the Constitution, again violating separation of powers doctrine, and struck that from the statute and that now the CSTB Director here forward will be removable at will, and and it became immediately effective.

You referred to this before, But could this case have implicated nations for the Federal Reserve Board, the FDIC, and the Controller of the Currency. It could I mean if the Court UM right a very broad opinion UM and similar language to the Fifth Circuit, that could be used to argue against the the OCC, FED, FDIC, who have similar funding structures. UM. The one thing that differentiates the FED and the FDIC is that they are they have

governing bodies, either a board or commissions and UM. And that's different from the OCC and CFCB, who have single director structures. But UM. But that that is one way

that the Court could rule. And the Court could also just make a very narrow decision that would go against the CFPB specifically, would find something unique about the bureau and in limit it's ruling to that, or it could say, you know, we we think this was wrongly decided, and we're not going to say anything about the other agencies, but we know that this case against the CFPB was wrongly decided. Finally, will this case be a test of how far the justices are willing to go to constrain

the so called administrative state? I do think so, but I don't think it's the furthest that the Court has been asked to go. I mean the West Virginia versus EPA case, and this this major questions doctrine that was developed in the last term was a was a pretty far it was a pretty far out there opinion in decision. And I don't think that any of us in the consumer financial services bar that follows this kind of thing.

It's all that happening. And I think that there's a lot of application of that case to CFPB and financial regulator type positions, and I think you'll see more of those challenges coming. So I think that West Virginia versus EPA, perhaps it's a bigger opinion than whatever comes out of this SA case and we'll have longer reaching implications. Thanks

for being on the Bloomberg Law Show. Alan, that's Alan Denson a partner, It's Struck and Struck in Levan and that's it for this edition of the Bloomberg Law Show. Remember you can always get the latest legal news on our Bloomberg Law Podcast. You can find them on Apple Podcasts, Spotify, and at www dot Bloomberg dot com, slash podcast Slash Law, and remember to tune in to The Bloomberg Law Show every week night at ten pm Wall Street Time. I'm June Grosso and you're listening to Bloomberg