Biden files Supreme Court petition to overturn Eighth Circuit injunction on student loan forgiveness

As indicated here, the Eighth Circuit last month granted an emergency motion by Republican officials in six states to temporarily suspend the Biden administration’s student loan forgiveness program while they appeal the dismissal of their challenge by a federal judge in Missouri, who found they lacked standing to sue. On November 18, the Biden administration responded by filing a request for cancellation of the injunction with the Supreme Court, asking the Court to either quash the injunction or, in the alternative, interpret the application as a motion for certiorari before judgment, grant the motion, and prepare the case for a exposition and argument always accelerated this term. The administration backed its request for expedited relief by arguing, “The flawed Eighth Circuit injunction leaves millions of economically vulnerable borrowers in limbo, uncertain about the size of their debt and unable to make financial decisions.” with a clear understanding of their future repayment obligations.

Background

The states of Arkansas, Iowa, Kansas, Missouri, Nebraska and South Carolina sued the President, Secretary of Education (Secretary) and Department of Education (Department) in District Court for the Eastern District of Missouri, alleging that the student loan cancellation plan exceeds the Secretary’s authority and is arbitrary and capricious. On October 20, 2022, the District Court dismissed the lawsuit for lack of Article III standing. Specifically, the court rejected Missouri’s argument that it had standing because the Missouri Higher Education Loan Authority (MOHELA), a nonprofit entity that administers federal loans, would suffer financial harm from the plan. The court found that MOHELA retains financial independence from the state and therefore Missouri lacks the ability to sue for harm to MOHELA. The following day, the Eighth Circuit introduced an “administrative stay prohibiting the [Department] to discharge any student loan debt under the [c]cancellation program.

Three weeks later, the Eighth Circuit granted the states a nationwide injunction pending appeal.

Application Highlights

In its motion, the administration argues that the injunction is improper because the administration is likely to succeed on the merits, in particular, arguing that the defendant states lack standing. “Here, Missouri has chosen to structure MOHELA as a separate legal entity from the [s]tat – more specifically, as a corporation with the ability to “sue and be sued” in its own name. …Even though the alleged financial harm to MOHELA would establish standing for MOHELA, therefore, it would not establish standing for the State of Missouri.

Insofar as the Court is considering the merits, the Administration argues that the purpose of the Higher Education Student Aid Opportunities Act 2003 (HEROES Act) is to authorize the Secretary to grant student loan assistance to at-risk borrowers due to a national emergency, and the secretary did just that. “The Secretary reasonably believes[ed]’the relief’ needed to ensure ‘that a subset of those affected – namely low-income people – ‘are not placed worse off ‘in relation to their student loan obligations’ due to their status as data subjects’, that’s to say, due to the effects of the COVID-19 pandemic. The administration further argues that the secretary’s action was not arbitrary or capricious, but rather based on past experience with student loan borrowers returning to repayment after emergency-related forbearance. “The Secretary found that when loan repayment obligations resume, many low-income borrowers “will be at increased risk of delinquency and default” due to the effects of the pandemic.”

The Biden administration further argues that the Eighth Circuit’s national relief is too broad. While the Eighth Circuit claimed to have granted universal relief because it could “discern no practicable avenue” to craft a narrower remedy that would provide full relief, the administration argues that such a avenue was obvious. The Court of Appeal could have simply prohibited the secretary from discharging the loans which are managed by MOHELA. While this relief would not affect the remaining states, the administration argues that would not be an issue because the Eighth Circuit did not find that the remaining states had standing or suffered irreparable harm from the plan.

Relief requested

The administration concluded by asking the Court to set aside, or at least reduce, the injunction pending appeal. In the alternative, the administration invited the Court to interpret the motion as a motion for certiorari before judgment, and argued in favor of an expedited statement and argument that term on the following issues: (1) whether the respondent States have standing under Article III; and (2) whether the student loan cancellation plan exceeds the authority of the secretary or is arbitrary or capricious.

Go forward

The student loan forgiveness plan is on hold indefinitely as the administration awaits the Supreme Court’s decision on its request as well as the Fifth Circuit’s decision on its appeal of a Texas federal court’s ruling declaring the plan was unconstitutional.