Monday, October 24, 2022

Standing, Merits, and Politics in the Legal Challenges to Student Loan Forgiveness

by Michael C. Dorf

On Thursday, Justice Barrett swiftly and rightly rejected the emergency petition by Wisconsin taxpayers challenging President Biden's student loan forgiveness plan. The petition was procedurally absurd. It claimed that the taxpayers had standing because by forgiving debts owed to the federal government, Biden would increase the federal deficit, which in turn would require more revenue to close the gap, which in turn would increase their tax liability.

The main difficulty with this theory is that the Supreme Court long ago rejected the idea that taxpayers have standing qua taxpayers. (That's different from challenging a tax one claims is itself illegal, although even then, a federal statute requires one to pay the tax and then sue for a refund in the tax court.) There's an exception to the no-taxpayer-standing rule that allows for taxpayer standing to challenge direct expenditures alleged to violate the First Amendment's Establishment Clause, but in recent years the Court has narrowed that exception nearly to the vanishing point, and, in any event, the Wisconsin challengers did not allege anything resembling an Establishment Clause violation. Instead, their petition said that "no Supreme Court decision has slammed the door on application of [the exception to the no-taxpayer-standing rule] outside of the Establishment Clause context."

That's wrong, but even if it were right, it would hardly have entitled the Wisconsin taxpayers to an emergency order, which requires, among other things, a showing of a likelihood of success upon full consideration; the fact (if it is a fact, which it isn't) that current precedent does not completely foreclose a claim hardly means that the claim will likely succeed.

Accordingly, Justice Barrett was right to reject the petition without first referring it to the full Court. Under Supreme Court Rule 23.4, the petitioners still have the option of going to a second Justice of their choosing. (They went to Barrett first because she's the 7th Circuit Justice, but they can go to any Justice second.) But if that second Justice follows the law, he (let's be realistic, they're not going to Sotomayor, Kagan, or Jackson) should also swiftly deny the petition.

So the case as presented to SCOTUS was a loser. But the Wisconsin case is not the only challenge to the loan forgiveness plan. Barely was the (electronic) ink dry on Justice Barrett's rejection of the Wisconsin case when, on Friday, the Eighth Circuit issued what it misleadingly called an "administrative stay" but was actually a temporary injunction against implementation of the debt forgiveness program pending briefs due later today and tomorrow. That order came in a case brought by Nebraska, Missouri, Arkansas, Iowa, Kansas and South Carolina. The district judge dismissed it for lack of standing, but presumably the appeals court thinks the states could have standing and a good chance of winning on the merits. After a few more preliminaries, I'll say something about those underlying merits and about the political/ideological stakes.

Whether the district judge ruled correctly on standing in the states' case depends on how successful the administration was in tweaking the debt forgiveness program. Some states hold some of the debt owed by student borrowers. So do some private lenders. In addition, private loan processors stand to lose revenue they would have otherwise received by the cancellation of debt. And as initially set forth, the loan forgiveness program would actually have increased the payments owed by a small number of people. Each of these parties could be said to have suffered a conventional "pocketbook injury" warranting standing to challenge the debt cancellation policy.

However, the Biden administration has been modifying the program since it was first announced so as to avoid the threat of any plaintiff having standing. At least some of these modifications will make some number of borrowers ineligible for debt relief, which is no doubt a hardship for those borrowers. But apparently the administration concluded that if a court were to reach the merits in a case in which a plaintiff has standing, there's a substantial chance that such a court would find the program as a whole illegal. 

We will learn soon enough whether the Eighth Circuit and perhaps the Supreme Court believe that the program's tweaks eliminated the possibility of a justiciable challenge. If not, the merits will be in play.

What are those merits? The states' complaint includes some criticism of the loan forgiveness program on policy grounds--essentially arguing that it unfairly prioritizes relatively well-off college graduates over relatively worse-off lower-wage workers who did not go to college and that the program is fiscally irresponsible as well as a driver of inflation. Whatever the merits of those criticisms, they do not speak to the program's legality. The core legal argument is that Congress did not clearly delegate to the president the power to forgive student debt, and forgiving debt is not an inherent power of the president.

Is that persuasive? The administration invokes a federal statutory provision that authorizes the Secretary of Education to "waive or modify any statutory or regulatory provision applicable to the student financial assistance programs . . . as the Secretary deems necessary in connection with a . . . national emergency." The provision was enacted post-9/11 with the primary goal of providing temporary debt relief for persons serving in the armed forces, but its language is broader than the immediate circumstances that occasioned enactment and so could plausibly be construed to cover the Biden plan.

Whether a SCOTUS bent on reining in delegations would broadly construe the statute or defer to a broad construction by the administration is not clear, however. One could imagine that the Court would say that "waive or modify" does not include forgiving debt entirely. Or the conservative super-majority might say that with Biden himself having declared the COVID pandemic over, there is no relevant "national emergency." Or the Court might say that student debt forgiveness is the sort of "major question" that requires clearer statutory authorization for executive action. In light of these possibilities, it's easy to see why the administration concluded that litigation on the merits poses a substantial risk of invalidation and thus the most prudent course was to modify the program to prevent any potentially successful challenger from having standing. But now we see that even the prudent course might not save the program.

Meanwhile, the ideological stakes of the litigation appear to be mixed. We see Republican state attorneys general finding a sympathetic audience in Republican-dominated federal courts for their effort to block executive action by a Democratic administration. In that respect, the case is similar to the litigation brought against DACA, OSHA's vaccination rules, and other actions by the Obama and Biden administrations. In the short run, then, conservatives want the litigation to succeed, while progressives want it to fail. 

But the longer-run ideological valence is less clear. In various contexts--especially civil rights and environmental litigation--progressives have typically opposed narrow standing rules of the sort that the Biden administration now invokes in the debt forgiveness litigation.

As to the merits, in one sense the Biden administration's argument for construing the grant of emergency power broadly aligns with the standard progressive case against a robust non-delegation doctrine and likewise against the Roberts Court's expansion of the major questions doctrine. Conservatives want to use their version of administrative and constitutional law to hobble the administrative state. Progressives want to resist such efforts, with respect to student debt forgiveness and in other settings.

However, loan forgiveness and, for that matter, DACA, are somewhat unusual exercises of executive power. DACA is, at its core, a policy of enforcement forbearance. In one important way, so is the loan forgiveness program: the government will forbear insistence on payment of a debt. And while enforcement forbearance in the immigration and student debt contexts serves progressive ends, in other contexts and under a Republican administration, forbearance can serve conservative ends. Progressives should be wary of legal standards that make it difficult to sue a future Republican administration that adopts policies of forbearing enforcement of environmental, labor, civil rights, and other laws that progressives favor.

Perhaps my worry is naive in assuming that whatever the courts say when Republican attorneys general sue a Democratic administration will have any bearing on future cases by Democratic attorneys general (and/or other progressive litigants) against a Republican administration. Perhaps we have reached the point of shameless hypocrisy in which the real rule of law as practiced (though not acknowledged) is that Republican appointees to the bench favor broad standing rules and restrictive substantive rules for challenges to polices of a Democratic administration but narrow standing rules and permissive substantive rules for challenges to policies of a Republican administration--and vice-versa. If so, then there's little cost to advancing arguments that could in theory boomerang against one in a future case, but there's also little likelihood that such arguments will persuade jurists whose case-specific ideological druthers drive their legal analysis.