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Financial Services Law Insights and Observations

Supreme Court asked to stay judgment holding that HEROES Act does not authorize the creation of the DOE’s student debt relief plan

Courts Student Lending DOJ Department of Education Administrative Procedure Act Debt Relief Consumer Finance U.S. Supreme Court Appellate Fifth Circuit Eighth Circuit HEROES Act

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Recently, the DOJ filed an application on behalf of the Department of Education (DOE) asking the U.S. Supreme Court to stay a judgment entered by the U.S. District Court for the Northern District of Texas in an action related to whether the agency’s student debt relief plan violated the Administrative Procedure Act’s (APA) notice-and-comment rulemaking procedures. As previously covered by InfoBytes, the district court held that while the HEROES Act expressly exempts the APA’s notice-and-comment obligations, the district court stressed that the HEROES Act “does not provide the executive branch clear congressional authorization to create a $400 billion student loan forgiveness program,” and, moreover, does not mention loan forgiveness. On December 1, the U.S. Court of Appeals for the Fifth Circuit denied the DOE’s motion for stay pending appeal.

In its application, the DOE argued that the plaintiffs never asserted that the debt relief plan exceeded the education secretary’s statutory authority. Instead, the DOE argued, the plaintiffs alleged only that they were improperly denied the opportunity to comment on the plan, stressing that while the district court recognized that the HEROES Act expressly exempts the APA’s notice-and-comment obligations, it went further by holding that the plan went beyond the secretary’s authority. “The district court profoundly erred by raising and deciding a claim that respondents did not assert and could not have asserted,” the DOE stressed, further adding that the plaintiffs did not claim that providing debt relief to other borrowers would inflict injury on them. Beyond this, the secretary’s plan “falls squarely within the plain text of his statutory authority,” the DOE asserted. The DOE requested that the Supreme Court stay the district court’s judgment, or in the alternative, defer the application pending oral argument and treat it as a petition for certiorari before judgment, grant the petition, and hear the case along with a second separate action, discussed below, involving a challenge to an injunction that temporarily prohibits the Secretary of Education from discharging any federal loans under the agency’s student debt relief plan.

As previously covered by InfoBytes, on December 1, the Supreme Court agreed to hear the Biden administration’s appeal of an injunction entered by the U.S. Court of Appeals for the Eighth Circuit. The 8th Circuit held that “the equities strongly favor an injunction considering the irreversible impact the Secretary’s debt forgiveness action would have as compared to the lack of harm an injunction would presently impose,” and pointed to the fact that the collection of student loan payments and the accrual of interest have both been suspended. (Covered by InfoBytes here.) The 8th Circuit’s opinion followed a ruling issued by the U.S. District Court for the Eastern District of Missouri, which dismissed an action filed by state attorneys general from Nebraska, Missouri, Arkansas, Iowa, Kansas, and South Carolina for lack of Article III standing after concluding that the states—which attempted “to assert a threat of imminent harm in the form of lost tax revenue in the future”— failed to establish imminent and non-speculative harm sufficient to confer standing. In an unsigned order, the Supreme Court deferred the Biden administration’s application to vacate, pending oral argument. Oral arguments are scheduled for February 28, 2023.