The executive branch is not easy to forgive student loans

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The Minister of Education’s legal authority for comprehensive loan forgiveness is unclear.

Earlier this month, White House chief of staff Ron Klein testified that President Joseph R. Biden requested Minister of education Miguel Cardona prepare a policy memorandum that clarifies whether the secretary has legal authority to forgive student loan arrears of up to $ 50,000 per borrower. To answer this query, Cardona and his staff will have to dig into a legal swamp worthy of a law school exam.

At first glance, the question seems simple. Everyone agrees that the Minister of Education has the power to make adjustments to federal student loans. The debate revolves around the precise meaning of the provisions Higher Education Law 1965 (HEA), which empowers the Secretary to “consent to change” and “compromise, refuse or release” amounts due on certain student loans. These forces are often referred as the “compromise authority of the Secretary”.

Supporters of broad executive power to forgive student loans see in these provisions unbridled discretion, that is plenary compromise power… According to this view, the secretary can forgive any amount of student debt, including the debts of borrowers who are quite capable of repaying their loans.

An alternative – and traditional – view is that these provisions only provide restrained the right to compromise available where borrowers are disadvantage financial ability to service their student loans or other equity considerations justifying debt cancellation. The parameters of limited authority for compromise are not clearly defined. For example, from a traditional perspective, it is not clear to what extent the COVID-19 pandemic could be considered a factor requiring forgiveness for the affected borrowers. However, supporters of this interpretation stress the importance of some individual determination to justify forgiveness.

The language of foreign economic activity itself is ambiguous. Those who prefer the full authority of compromise may focus on more open language, such as the words “release” and “refuse”. For traditionalists, the predominance of the word “compromise” in various parts of foreign economic activity proposes demanding at least some compromise that is not found in veiled forgiveness.

Likewise, the word “change” can mean modest change, although it can also be understood as complete forgiveness. This uncertainty may lead some lawyers to conclude that the courts must rely on the clerk’s own interpretation of language, allowing Cardone to exercise the power of full compromise.

However, there are at least four contextual considerations: to weight against this conclusion.

First, Congress has authorized numerous student loan write-off programs. They have been defined in fairly clear and precise terms, limiting the conditions under which the secretary is authorized to forgive student loans to the various characteristics of the borrower and the terms of the loan. Over the years, education ministers have sometimes pushed the boundaries of these restrictions, but they have always continued provided that statutory restrictions are mandatory. However, in terms of total compromise, explicit restrictions in these statutory programs would be viewed as optional, as the Minister of Education supposedly has every right to ignore any legislative restrictions on loan forgiveness.

Second, there is no direct historical support for the proposal that Congress intended to give the education secretary the power to compromise when he originally passed regulatory language allowing the secretary to change and grant loans. These compromise provisions were adopted back in 1965 when Congress imported the language it adopted shortly after World War II to administer the Veterans Administration (VA) loan guarantee programs. In response to reasonable requests for legislative power to resolve claims administratively rather than in cooperation with the US Department of Justice, Congress granted a compromise loan to the VA first and then to the US Department of Education.

In 1966, Congress passed Federal law on the collection of claims (FCCA), a more general law that governs all federal agencies and establishes a clearer system for resolving disputes with the federal government, including provisions that explicitly state how agencies should deal with financially restricted counterparties.

The FCCA adds another wrinkle to the debate over the Department of Education’s authority to compromise. On the one hand, supporters of the limited authority of compromise see the FCCA as an indication of how Congress in the mid-1960s. expected the executive must begin debt collection: namely, they must aggressively pursue claims, but allow commercially reasonable settlement when circumstances warrant.

On the other hand, proponents of the full right to compromise argue that the absence of specific restrictions on the HEA provisions demonstrates the intention of Congress to give the Department of Education more power to compromise. But there is no direct evidence in the history of HEA legislation that Congress got it The compromise powers of the Minister of Education should have such far-reaching implications, and of course such an interpretation would not be necessary to achieve the efficiency goals that were introduced to ensure the compromise powers. Moreover, the experts who at the time were tasked with overseeing federal tax collection practices directly abdicated the possibility that agencies with independent powers of compromise, such as the Department of Education, can unilaterally cancel debts.

The third challenge to the full authority argument for compromise resting with the US Constitution, which grants Congress the exclusive right to dispose of the wallet in accordance with Appropriation clause and the exclusive right to dispose of state property in accordance with Property regulations… Recognizing congressional prerogatives over federal resources, the courts have demanded that the executive power to spend federal dollars be directly allocated to agencies, rather than inferred from ambiguous laws or indirectly. In recent years, this principle has become confirmed as of particular importance in the area of ​​benefits, which includes the vast majority of student loans, where Congress does not regularly review spending decisions through annual appropriations.

But when did Congress explicitly allow the Secretary of Education to spend federal resources by forgiving student loan claims due to solvent borrowers? In fact, the advocates of total power to compromise must defend the thesis that Congress in 1965 effectively authorized the spending of what could exceed $ 1 trillion in public resources over the next several years, giving the secretary unlimited power to compromise. At the very least, this empowerment was not explicit and far from clear.

The lack of clarity continues to affect fiscal policy today. In a recently passed incentive bill, for example, Congress included federal income tax waiver provisions for cancellation of student loan debt. Congressional Budget Office scored this provision only cost the federal government tens of millions of dollars. If, however, the Registrar has and acts under full authority to compromise here, the actual value of that tax provision would be be tens and even hundreds of billions of dollars.

The fourth problem faced by advocates of full power to compromise stems from the Department of Education’s own rules, which the agency corrected in 2016 include FCCA standards for the forgiveness of loans to the Department’s lending programs. Thus, even if the Secretary were free by law to take a different approach to student loan forgiveness, the Department would presumably currently be bound by its own rules setting limits incompatible with the power to compromise. Advocates of widespread loan forgiveness assembled arguments as to why these rules should not be understood as if they were speaking. But having these rules can hinder the Department’s ability to defend a broad pardon in court.

In short, the question of the Secretary’s authority to forgive student loans is a complex one. A plausible textual interpretation of the legislative language in favor of the full authority of the compromise exists, but it must be balanced by a fairly significant amount of contextual considerations pointing towards the limited authority of the compromise.

How, then, does Cardone proceed? Undoubtedly, some proponents will argue for a secretary in front and advocate for the authority of full compromise based on textual arguments.

Admittedly, student debt has become a major burden for many borrowers. A growing percentage of such debt was already non-performing when the pandemic broke out, and non-compliance can only increase after the current moratorium on payments expires. One cannot help but sympathize with the full-power supporters who seek the most extensive forms of assistance, especially after the Trump administration’s willingness to advance legal positions with a much weaker legislative base.

On the other hand, there will be significant political and legal risks associated with a reckless move forward, and it is likely that this initiative could be blocked in court for many years, only to be resolved by a not quite sympathetic Supreme Court. And, of course, there is also – perhaps the old-fashioned – notion that agencies should try to promote Best reading bylaws is not the one that most suits the president’s preferences.

If we advised the secretary, we would recommend that this issue is resolved – at least initially – in the rule-making process. At a minimum, the rulemaking process can clarify the extent to which the secretary intends to comply with FCCA requirements in the future.

Equally important, the rulemaking process will give the Department the opportunity to develop a student loan forgiveness program that includes a certain degree of personalized solutions. In particular, if such a program were promoted through rulemaking through notices and comments, the Registrar would be better equipped to defend his position as a reasonable interpretation of limited compromise authority and would generally avoid the doctrinal problems associated with defending full compromise authority.

In an ideal world, Congress might well be asked to address this issue through legislative clarifications. But given the challenges facing Washington, DC and the obstacles to any form of legislative action, the executive’s response to student debt relief has its appeal. However, this relief is best phrased as an exercise of limited power to compromise, exercised through the creation of rules with notices and comments.

Howell Jackson

Howell Jackson James S. Reed, Jr., Professor of Law at Harvard University.

Colin Mark

This essay is based on an article by the authors available on the Internet as “Can the executive forgive a student loan without further action by Congress?

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