Application — Department of Education, et al., Applicants v. Myra Brown, et al.

Supreme Court briefDec 2, 2022

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APPENDIX

Court of appeals order denying stay pending

appeal (5th Cir. Nov. 30, 2022) ........................... 1a

District court order (N.D. Tex. Nov. 10, 2022) .............. 2a

District court final judgment

(N.D. Tex. Nov. 10, 2022) ................................ 28a

Memorandum re: Waivers Relating to PandemicConnected General Loan Discharge

(Sept. 27, 2022) ........................................ 29a

Notice of Debt Cancellation Legal Memorandum

(Aug. 30, 2022) ......................................... 30a

Memorandum re: Pandemic-Connected General Loan

Discharge and Payment Pause (Aug. 24, 2022) .............. 33a

Memorandum re: Pandemic-Connected Loan

Cancellation (Aug. 24, 2022) ............................. 35a

Case: 22-11115

Document: 00516562438

Page: 1

Date Filed: 11/30/2022

United States Court of Appeals

for the Fifth Circuit

___________

No. 22-11115

___________

Myra Brown; Alexander Taylor,

Plaintiffs—Appellees,

versus

United States Department of Education; Miguel

Cardona, Secretary, U.S. Department of Education, in his official capacity

as the Secretary of Education,

Defendants—Appellants.

______________________________

Appeal from the United States District Court

for the Northern District of Texas

USDC No. 4:22-CV-908

______________________________

Before Elrod, Graves, and Ho, Circuit Judges.

Per Curiam:

IT IS ORDERED that appellants’ opposed motion for stay pending

appeal is DENIED.

IT IS FURTHER ORDERED that this matter is expedited to the

next available randomly designated regular oral argument panel. The Clerk

is directed to issue a schedule for expedited briefing thereafter.

(1a)

Case 4:22-cv-00908-P Document 37 Filed 11/10/22

Page 1 of 26 PageID 539

UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF TEXAS

FORT WORTH DIVISION

MYRA BROWN, ET AL.,

Plaintiffs,

No. 4:22-cv-0908-P

U.S. DEPARTMENT OF EDUCATION,

ET AL.,

Defendants.

ORDER

The Constitution vests “all legislative powers” in Congress. This

power, however, can be delegated to the executive branch. But if the

executive branch seeks to use that delegated power to create a law of

vast economic and political significance, it must have clear congressional

authorization. If not, the executive branch unconstitutionally exercises

“legislative powers” vested in Congress. In this case, the HEROES Act—

a law to provide loan assistance to military personnel defending our

nation—does not provide the executive branch clear congressional

authorization to create a $400 billion student loan forgiveness program.

The Program is thus an unconstitutional exercise of Congress’s

legislative power and must be vacated. 1

1 The Court expresses no opinion on whether the Program constitutes sound or

unsound public policy—a consideration inappropriate for the Court to contemplate—

as it falls outside the Court’s task of merely interpreting the law. See Harris v. Harris,

72 Va. (31 Gratt.) 13, 32 (1878) (“‘Compassion,’ said an eminent Virginia chancellor,

‘ought not to influence a judge, in whom, acting officially, apathy is less a vice than

sympathy.’” (quoting Chancellor George Wythe, Commentary on Field’s Ex’x v.

Harrison & Wife, Wythe’s Reports 282 (Minor’s Ed. 1794))); see also Letter from

Thomas Jefferson to Edmund Pendelton (Aug. 26, 1776), reprinted in 1 THE PAPERS OF

THOMAS JEFFERSON 505 (Julian P. Boyd, ed. 1950) (“Let mercy be the character of the

law-giver, but let the judge be a mere machine. The mercies of the law will be dispensed

equally and impartially to every description of men; those of the judge, or of the

executive power, will be the eccentric impulses of whimsical, capricious designing

men.”).

Case 4:22-cv-00908-P Document 37 Filed 11/10/22

Page 2 of 26 PageID 540

BACKGROUND

A. Title IV of the Higher Education Act

The Department of Education (“Department”) offers two types of

financial aid to help students pay for their college education—grants

and loans. 2 Grants do not have to be repaid. Id. But loans do. Id. Title

IV of the Higher Education Act of 1965 (“HEA”) covers the

administration of three types of federal student loans: (1) Direct Loans;

(2) Federal Family Education Loans (“FFEL”); and (3) Perkins Loans.

See 20 U.S.C. § 1070.

With Direct Loans, the federal government provides loans directly to

borrowers, who are responsible for repaying the government. See 20

U.S.C. § 1087a. With FFEL, the federal government pays lenders to offer

student loans, and the federal government guarantees their repayment.

20 U.S.C. § 1071. With Perkins Loans, colleges loan money to students,

and the federal government guarantees their repayment. § 1087aa. The

HEA also provides how to pay these loans, repayment options, and loan

forgiveness. See, e.g., 34 C.F.R. § 685.219; 20 U.S.C. §§ 1098e;

1087e(d)(1); 1078(b)(9)(A)(v).

B. Prior Attempts to Provide Loan Forgiveness

With rising college costs, federal student-loan debt has skyrocketed

to more than $1.61 trillion with 43 million borrowers. 3 As a result, there

have been multiple attempts to enact legislation to help alleviate

student-loan debt. For example, in 2019, Senator Elizabeth Warren

introduced a bill to provide $50,000 in debt forgiveness for those who

make under $100,000. See S. 2235, 116th Cong. (2019). Similarly,

Representative Al Lawson introduced a bill to forgive the outstanding

loan balance of all borrowers who make under $100,000 individually or

$200,000 if married and filing taxes jointly. See H.R. 2034, 117th Cong.

(2021). But both bills failed.

2 See Types of Aid, U.S. DEP’T OF EDUC., https://bit.ly/3S51Heu (last visited Nov.

7, 2022).

3 Federal Student Loan Portfolio, U.S. DEP’T OF EDUC., https://bit.ly/3qYd5Nm (last

visited Nov. 7, 2022).

Case 4:22-cv-00908-P Document 37 Filed 11/10/22

Page 3 of 26 PageID 541

The executive branch has also recently explored its ability to forgive

student loans. Specifically, the Trump administration considered its

statutory authority under the Higher Education Relief Opportunities for

Students Act of 2003 (“HEROES Act”) to forgive student loans due to

the COVID-19 pandemic. But the Department concluded that it lacked

such authority. 4 House speaker Nancy Pelosi agreed with the

Department’s conclusion: “People think that the president of the United

States has the power for debt forgiveness. . . He does not. He can

postpone, he can delay, but he does not have that power. That has to be

[accomplished through] an act of Congress.” 5

President Biden, however, promised to “forgive all undergraduate

tuition-related federal student debt from two- and four-year public

colleges and universities for debt-holders earning up to $125,000” while

campaigning for the presidency. 6 After becoming president, Biden

instructed the Department to prepare a memorandum exploring

possible legal avenues to justify a loan forgiveness program. 7

The Department did so but changed its tune—concluding that the

HEROES Act allows the executive branch to create a loan-forgiveness

program to address the financial harms of the COVID-19 pandemic. 8

The next day, the White House announced that the President would

“fulfill [his] campaign commitment” by providing debt forgiveness to

millions of borrowers. 9

4 See Reed Rubinstein, Memorandum to Betsy DeVos Secretary of Education, U.S.

DEP’T OF EDUC. OFF. OF THE GEN. COUNS.

https://bit.ly/3LBA36n.

(Jan.

12,

2021,

5:46

PM),

5 Lauren Camera, Pelosi: Biden Lacks Authority to Cancel Student Debt, U.S.

NEWS. & WORLD REPORT (July 28, 2021, 3:16 PM), https://tinyurl.com/33ex63de.

6 Joe Biden, Joe Biden Outlines New Steps to Ease Economic Burden on Working

People, MEDIUM (Apr. 9, 2020), https://tinyurl.com/3cbw4zh2.

7 See L. Egan, Biden to Review Executive Authority to Cancel Student Debt, NBC

NEWS (Apr. 1, 2021, 1:36 PM), https://nbcnews.to/3dD85dV.

8 See Use of the HEROES Act of 2003 to Cancel the Principal Amounts of Student

Loans, 2022 WL 3975075 (O.L.C.), at *1 (Aug. 23, 2022).

9 See FACT SHEET: President Biden Announces Student Loan Relief for Borrowers

Who Need It Most, THE WHITE HOUSE (Aug. 24, 2022), https://bit.ly/3dATj7p.

Case 4:22-cv-00908-P Document 37 Filed 11/10/22

Page 4 of 26 PageID 542

C. The HEROES Act

The HEROES Act grants the Secretary of Education (“Secretary”)

the authority to “waive or modify any statutory or regulatory provision

applicable to the student financial assistance programs under title IV of

the Act [20 U.S.C. 1070 et seq.] as the Secretary deems necessary in

connection with a war or other military operation or national

emergency.” § 1098bb(a)(1) (alteration in original). “The term ‘national

emergency’ means a national emergency declared by the President of the

United States.” § 1098ee(4).

The waiver or modification must also “be necessary to ensure that”

certain objectives are achieved. § 1098bb(a)(2). The first of those

objectives is “to ensure that . . . recipients of student financial assistance

under title IV of the [HEA] who are affected individuals are not placed

in a worse position financially in relation to that financial assistance

because of their status as affected individuals.” § 1098bb(a)(2)(A). The

HEROES Act defines “affected individuals” to include people who reside

or are employed “in an area that is declared a disaster area by any

Federal, State, or local official in connection with a national emergency”

or who “suffered direct economic hardship as a direct result of a war or

other military operation or national emergency, as determined by the

Secretary.” § 1098ee(2)(C)–(D).

The second objective provides that “administrative requirements

placed on affected individuals . . . are minimized, to the extent possible

without impairing the integrity of the student financial assistance

programs, to ease the burden on such students and avoid inadvertent,

technical violations or defaults.” § 1098bb(a)(2). 10 If the objectives of

§ 1098bb(a)(2) are met, “[n]otwithstanding section 1232 of this title and

section 553 of title 5, the Secretary shall, by notice in the Federal

HEROES Act provides three additional objectives. § 1098bb(a)(2)(C)–(E).

None of which are at issue or relevant to the Court’s analysis.

10 The

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D. Student-Loan Program

The Secretary invoked its authority under the HEROES Act to create

a loan-forgiveness program (“Program”) that would address the

financial harms of the COVID-19 pandemic. 11 The Secretary contends

that COVID-19 pandemic was declared a national emergency by

President Trump in 2020 and thus a “national emergency” under the

HEROES Act. Id. And according to the Secretary, every portion of the

country is a “disaster area due to COVID-19,” and “every person with a

federal student loan under title IV of the HEA” is an affected individual.

Id.

Because the Secretary deemed the objectives of § 1098bb(a)(2) met,

the Secretary provided notice of the waivers and modifications in the

Federal Register. Id. The notice provided that the Secretary modifies “20

U.S.C. 1087, which applies to the Direct Loan Program under 20 U.S.C.

1087a and 1087e; 20 U.S.C. 1087dd(g); and 34 CFR part 674, subpart D,

and 34 CFR 682.402 and 685.212” to provide the debt relief for certain

borrowers who qualify. Id. A borrower qualifies if he (1) individually

makes under $125,000 or $250,000 if married and filing taxes jointly

and (2) has Direct, Perkins, or FFEL loans that are not commercially

held. Id. If a borrower qualifies, the Program provides $20,000 in debt

forgiveness to those who have received a Pell Grant and $10,000 to those

who did not. Id.

E. Procedural History

1. Plaintiffs’ Lawsuit

Plaintiffs Myra Brown and Alexander Taylor both have student

loans. ECF No. 1 at 3–4. Brown is ineligible for any debt forgiveness

under the Program because her loans are commercially held. Id. at 3.

And Taylor is ineligible for the full $20,000 in debt forgiveness under

the Program because he did not receive a Pell Grant. Id. at 3–4. Because

Brown loses out on $20,000 in debt forgiveness and Taylor loses out on

11 No.

2022-22205,

Fed.

Reg.

61512

(Oct.

12,

2022),

https://www.federalregister.gov/documents/2022/10/12/2022-22205/federal-studentaid-programs-federal-perkins-loan-program-federal-family-education-loan-programand.

Case 4:22-cv-00908-P Document 37 Filed 11/10/22

Page 6 of 26 PageID 544

$10,000, they disagree with the lines drawn for the Program’s eligibility

criteria. Id. at 2–3.

Brown and Taylor, however, could not voice their disagreement

because the Program did not undergo notice-and-comment rulemaking

procedures under the Administrative Procedure Act (“APA”). 12 As a

result, Plaintiffs sued the Department and Secretary, seeking vacatur

of the Program or nationwide injunctive relief for two reasons. First,

they allege that the Program violates the APA’s notice-and-comment

requirements. ECF No. 1 at 13–14. Second, they also contend that the

Secretary lacks the authority to implement the Program under the

HEROES Act. Id. at 4–5.

The same day Plaintiffs sued, they moved to enjoin the Department

“from enforcing, applying, or implementing the Program.” ECF No. 4 at

14. Shortly after, Defendants filed their opposition to Plaintiffs’ motion.

ECF No. 24.

2. Defendants’ Motion to Dismiss for Lack of Jurisdiction

Along with opposing Plaintiffs’ Motion for Preliminary Injunction,

Defendants moved to dismiss for lack of jurisdiction, contending that

Plaintiffs lack standing. See ECF Nos. 24 at 8–12; 25. And while not

mentioned in their motion, Defendants at the preliminary-injunction

hearing insinuated that not only do Plaintiffs lack standing, but nobody

has standing to challenge the Program. ECF No. 32 at 57–58.

3. Notice of the Court’s Intent to Rule on the Merits

Because of the prejudice Plaintiffs would experience if the Court

delays ruling on the merits, 13 no material facts are in dispute, and the

issues here are pure questions of law, the Court—out of an abundance

of caution—provided the Parties notice of the Court’s intent to advance

12 No.

2022-22205,

Fed.

Reg.

61512

(Oct.

12,

2022),

https://www.federalregister.gov/documents/2022/10/12/2022-22205/federal-studentaid-programs-federal-perkins-loan-program-federal-family-education-loan-programand.

13 See Aila Slisco, Student Loan Debt Relief Checks Could Be Mailed in “Two

(Oct.

27,

2022,

8:52

PM),

Weeks,”

Biden

Says,

NEWSWEEK

https://www.newsweek.com/student-loan-debt-relief-checks-could-mailed-two-weeksbiden-says-1755288 (stating that on November 3, 2022, President Biden proclaimed

that checks could be sent to those who applied for the Program within “two weeks”).

Case 4:22-cv-00908-P Document 37 Filed 11/10/22

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Plaintiffs’ Motion for Preliminary Injunction to a determination on the

merits under Federal Rule of Civil Procedure 65. See ECF No. 33. The

notice provided the Parties an opportunity to object to this advancement.

Id. Plaintiffs did not object. See ECF No. 34. But Defendants did and

contend that proceeding to the merits is improper. See ECF No. 35.

Thus, this case presents three issues. First, whether proceeding to

the merits is appropriate. Second, whether the Court has jurisdiction.

And third, whether Plaintiffs are entitled to relief. The Court addresses

each in turn.

LEGAL STANDARD

A preliminary injunction is an “extraordinary remedy” and will be

granted only if the movants carry their burden on four requirements.

Nichols v. Alcatel USA, Inc., 532 F.3d 364, 372 (5th Cir. 2008). The

movants must show: “(1) a substantial likelihood of success on the

merits; (2) a substantial threat of irreparable injury; (3) the threatened

injury to the movant outweighs the threatened harm to the party sought

to be enjoined; and (4) granting the injunctive relief will not disserve the

public interest.” City of Dall. v. Delta Airlines, Inc., 847 F.3d 279, 285

(5th Cir. 2017) (quotation omitted). “The decision to grant or deny a

preliminary injunction is discretionary with the district court.” Miss.

Power & Light Co. v. United Gas Pipe Line Co., 760 F.2d 618, 621 (5th

Cir. 1985).

Summary judgment is appropriate if “there is no genuine dispute as

to any material fact and the movant is entitled to judgment as a matter

of law.” FED. R. CIV. P. 56(a). A fact is “material” if it could change the

outcome of the litigation. Anderson v. Liberty Lobby, Inc., 477 U.S. 242,

248 (1986). And a dispute about a material fact is “genuine” if “the

evidence is such that a reasonable jury could return a verdict for the

nonmoving party.” Id. The Court views the evidence in the light most

favorable to the nonmovant but need not comb through the record in

search of evidence creating a genuine issue of material fact. See

Malacara v. Garber, 353 F.3d 393, 405 (5th Cir. 2003).

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ANALYSIS

A. Proceeding to the Merits is Appropriate

Under Federal Rule of Civil Procedure 65, “[b]efore or after beginning

the hearing on a motion for a preliminary injunction, the court may

advance the trial on the merits and consolidate it with the hearing.” FED.

R. CIV. P. 65(a)(2) (emphasis added). But if “the eventual outcome on the

merits is plain at the preliminary injunction stage, the judge should,

after due notice to the parties, merge the stages and enter a final

judgment.” Curtis 1000, Inc. v. Suess, 24 F.3d 941, 945 (7th Cir. 1994)

(emphasis added). Courts typically require that the parties “receive

clear and unambiguous notice [of the court’s intent to consolidate the

trial and the hearing] either before the hearing commences or at a time

which will still afford the parties a full opportunity to present their

respective cases.” Univ. of Tex. v. Camenisch, 451 U.S. 390, 395 (1981)

(quoting Pughsley v. 3750 Lake Shore Drive Coop. Bldg., 463 F.2d 1055,

1057 (7th Cir. 1972)) (alteration in original). Courts may also consolidate

without giving the parties notice if the lack of notice is not prejudicial to

either party. See Wohlfahrt v. Mem’l Med. Ctr., 658 F.2d 416, 418 (5th

Cir. 1981).

If consolidation is appropriate, a district court may convert a

plaintiff’s preliminary-injunction motion into a motion for summary

judgment. H & W Indus., Inc. v. Formosa Plastics Corp., USA, 860 F.2d

172, 177 (5th Cir. 1988). “Summary judgment serves as ‘the mechanism

for deciding, as a matter of law, whether the agency action is . . .

consistent with the APA.’” O.A. v. Trump, 404 F. Supp. 3d 109, 125

(D.D.C. 2019).

Here, the Court provided the parties notice and an opportunity to

object. ECF No. 33. Defendants objected, contending that advancing to

a determination on the merits is improper for three reasons. ECF No.

35.

First, Defendants contend that Plaintiffs fail to meet the burden of

proof at the summary-judgment stage to establish standing. Id. at 1–2.

But if this were true, Defendants would not be prejudiced by proceeding

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Page 9 of 26 PageID 547

to the merits because the Court would rule in Defendants favor and

dismiss the case for lack of standing. This argument thus fails.

Second, Defendants have not had an opportunity to conduct

jurisdictional discovery to examine Plaintiffs’ intent to participate in

any comment process and the substance of their comments. But

assuming discovery revealed a fact issue as to Plaintiffs’ intent to

participate in any comment process and the substance of their

comments, those issues are not material to standing or the merits. Thus,

because these facts—even if resolved in Defendants’ favor—would not

“change the outcome of the lawsuit,” this objection is similarly meritless.

Sweetin v. City of Tex. City, 48 F.4th 387, 391 (5th Cir. 2022).

Third, Defendants have not yet produced the data underlying the

Secretary’s decision. ECF No. 35 at 3–4. Like Defendants’ second

objection, the data underlying the Secretary’s decision is not material.

Plaintiffs’ central arguments are whether the Secretary lacks the

authority for the Program and whether the Program had to go through

notice-and-comment procedures before the Secretary implemented the

Program. The data underlying the Secretary’s decision—while part of

the administrative record—is not material to either issue. See Sierra

Club v. U.S. Fish & Wildlife Serv., 245 F.3d 434, 441 (5th Cir. 2001)

(stating that an issue of statutory construction is “a task which we are

competent to perform without the administrative record”); Alphapointe

v. Dep’t of Veterans Affs., 475 F. Supp. 3d 1, 12 (D.D.C. 2020) (stating

that resolving the plaintiffs’ notice-and-comment challenge “requires no

obvious need for the administrative record”).

The cases on which Defendants rely are not to the contrary. In each

case, the issue was whether the agency’s actions were “arbitrary and

capricious,” which concerns the reasonability of an agency’s decisionmaking process. See ECF No. 35 at 3–4; Citizens to Pres. Overton Park,

Inc. v. Volpe, 401 U.S. 402, 414 (1971), abrogated by Califano v. Sanders,

430 U.S. 99, 105 (1977); Dep’t of Com. v. New York, 139 S. Ct. 2551, 2564

(2019). Plaintiffs bring no such claim. See ECF No. 3. Nor does the data

underlying the Secretary’s decision have any bearing on any of

Plaintiffs’ claims. So even if the data underlying the Secretary’s decision

created a fact issue, that fact issue would not be material as it would not

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Page 10 of 26 PageID 548

“change the outcome of the lawsuit.” Sweetin, 48 F.4th at 391.

Defendants’ third argument thus fails.

Thus, because Defendants identify no reason for delaying a judgment

in this case, the prejudice resulting to Plaintiffs if the Court delays

ruling on the merits, no material facts are in dispute, and the issues

here are pure questions of law, the Court converts Plaintiffs’

preliminary-injunction motion to a determination on the merits.

B. Jurisdiction

For the Court to reach the merits, Plaintiffs must establish the

Court’s jurisdiction. See Lujan v. Defs. of Wildlife, 504 U.S. 555, 561

(1992). Article III of the Constitution limits federal-court jurisdiction to

“cases” and “controversies.” U.S. CONST. art. III, § 2. To satisfy this

requirement, a plaintiff must establish that he has standing—a

“personal stake” in the lawsuit. See Davis v. Fed. Election Comm’n, 554

U.S. 724, 732–33 (2008). At the summary-judgment stage, a plaintiff

must provide evidence of “specific facts” to establish standing. Id. Mere

allegations will not suffice. Lujan, 504 U.S. at 560

1. Standing

Standing contains three requirements. Lujan, 504 U.S. at 560. First,

there must be a concrete injury in fact that is not conjectural or

hypothetical. Whitmore v. Arkansas, 495 U.S. 149, 149 (1990). Second,

there must be causation—a fairly traceable connection between a

plaintiff’s injury and the complained-of conduct of the defendant. Simon

v. E. Ky. Welfare Rts. Org., 426 U.S. 26, 41–42 (1976). Third, there must

be redressability—a likelihood that the requested relief will redress the

alleged injury. See Lujan, 504 U.S. at 562. These three requirements

constitute the core of Article III’s case-or-controversy requirement. See

FW/PBS, Inc. v. Dallas, 493 U.S. 215, 231 (1990). But these

requirements are relaxed when a plaintiff asserts a deprivation of a

procedural right coupled with an associated concrete interest. See Texas

v. United States, 809 F.3d 134, 150–51 (5th Cir. 2015).

Defendants insinuate that nobody has standing to challenge the

Program—stating, “Article III of the Constitution imposes limitations

on the judiciary. And sometimes the result is that there is executive or

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Page 11 of 26 PageID 549

legislative action for which there isn’t an appropriate plaintiff.” ECF No.

32 at 57. Defendants’ main contention, however, is that Plaintiffs lack

standing. ECF No. 24 at 8. Thus, the Court first addresses whether

anybody has standing to challenge the Program. And if so, whether

Plaintiffs have standing.

a. Defendants’ Contention that No One Has Standing to

Challenge the Program is Incorrect

Defendants seem to argue that no one has standing to challenge the

Program because where the government is providing a benefit, nobody

is harmed by the existence of that benefit. ECF No. 32 at 57–58. And

according to Defendants, “sometimes the result is that there is executive

or legislative action for which there isn’t an appropriate plaintiff.” Id. at

57 (emphasis added). The Court must disagree. The Supreme Court has

recognized that a plaintiff has standing to challenge a government

benefit in many cases. See, e.g., Ne. Fla. Chapter of Associated Gen.

Contractors of Am. v. City of Jacksonville, 508 U.S. 656, 666 (1993)

(holding that plaintiffs who did not qualify for government benefits had

standing); Bowsher v. Synar, 478 U.S. 714, 721, (1986) (holding that the

failure to receive benefits is enough to confer Article III standing).

Because Defendants’ contention that no one has standing to challenge

the Program because it confers a benefit is incorrect, the Court next

turns to whether Plaintiffs have standing.

b. Plaintiffs Have Standing

Injury in fact

Plaintiffs allege that their concrete injury is the deprivation of their

procedural right under the APA to provide meaningful input on any

proposal from the Department to forgive student-loan debt and their

accompanying economic interest in debt forgiveness. ECF No. 4 at 12.

As for Plaintiffs’ alleged deprivation of their procedural right, the

APA requires agencies administering their delegated authority to follow

certain procedures. See 5 U.S.C. § 553. These procedures obligate

agencies to subject their substantive rules to a notice-and-comment

period unless an exception applies. Id. A plaintiff is deprived of “a

procedural right to protect its concrete interests” if an agency violates

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Page 12 of 26 PageID 550

the APA’s procedural requirements. Texas v. EEOC, 933 F.3d 433, 447

(5th Cir. 2019) (citing Summers v. Earth Island Inst., 555 U.S. 488, 496

(2009)). But a bare assertion of a procedural right violation is not enough

to confer Article III standing. See Shrimpers & Fishermen of RGV v. Tex.

Comm’n on Env’t Quality, 968 F.3d 419, 426 (5th Cir. 2020). A plaintiff

must instead show a concrete injury stemming from that procedural

violation. Id.

Defendants dispute Plaintiffs’ alleged injuries for two reasons. First,

they argue that Plaintiffs could not have suffered a procedural

deprivation based on the lack of a notice-and-comment period because

the HEROES Act expressly exempts the APA’s notice-and-comment

requirement. ECF No. 24 at 8–9. Plaintiffs dispute this and argue that

because the HEROES Act does not authorize the Program, the Program

was promulgated in violation of the APA’s notice-and-comment

requirement. ECF No. 26 at 6–7. Because the Court must “assume, for

purposes of the standing analysis, that [Plaintiffs are] correct on the

merits of [their] claim that the [Program] was promulgated in violation

of the APA,” Plaintiffs have successfully alleged the deprivation of a

procedural right. EEOC, 933 F.3d at 447.

Second, Defendants assert, even if Plaintiffs have established the

violation of a procedural right, there is no accompanying concrete

interest stemming from that violation. ECF No. 24 at 9–11. They

contend that Plaintiffs’ “unhappiness that some other borrowers are

receiving a greater benefit than they are” is not a concrete interest. Id.

But this is untrue. Plaintiffs do not argue that they are injured because

other people are receiving loan forgiveness. Their injury—no matter how

many people are receiving loan forgiveness—is that they personally did

not receive forgiveness and were denied a procedural right to comment

on the Program’s eligibility requirements. Plaintiffs need to prove only

the existence of an associated “concrete interest,” not a guarantee of

concrete harm due to the procedural violation. EEOC, 933 F.3d at 447.

A benefit or legal-entitlement guarantee is not a prerequisite to

successfully establishing standing in the event of a procedural-right

violation. See, e.g., Teton Historic Aviation Found. v. U.S. Dep’t of Def.,

785 F.3d 719, 724 (D.C. Cir. 2015). A “plaintiff suffers a constitutionally

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cognizable injury by the loss of an opportunity to pursue a benefit even

though the plaintiff may not be able to show that it was certain to receive

that benefit had it been accorded the lost opportunity.” Id.

Plaintiffs have a concrete interest in having their debts forgiven to a

greater degree. Brown is ineligible for the Program because her loans

are commercially held. And Taylor is ineligible for the full $20,000 in

debt forgiveness under the Program because he did not receive a Pell

Grant in college. Brown and Taylor’s inability to obtain the full benefit

of debt forgiveness under the Program flows directly from the Program’s

eligibility requirements. Thus, Defendants’ procedural error of not

providing for a notice-and-comment period—which the Court must

assume as true for standing—deprived Plaintiffs of “a non-illusory

opportunity to pursue [the] benefit” of greater debt forgiveness and an

opportunity to advocate for the expansion of the eligibility criteria of the

Program. Ecosystem Inv. Partners v. Crosby Dredging, LLC, 729 F.

App’x 287, 292 (5th Cir. 2018).

The first requirement of Article III standing is thus met.

ii.

Causation

Second, Plaintiffs argue that their injury is traceable to Defendants’

actions because Plaintiffs lost the chance to obtain more debt

forgiveness, which flows directly from Defendants’ promulgation of the

Program’s eligibility requirements that failed to undergo a notice-andcomment period. ECF No. 4 at 11–13. Defendants do not contest this

argument. And the Court agrees with Plaintiffs.

A plaintiff only has standing if he can assert a “personal injury fairly

traceable to the defendant’s allegedly unlawful conduct.” California. v.

Texas, 141 S. Ct. 2104, 2117 (2021). An injury is fairly traceable if a

plaintiff’s “lost chance” to pursue a benefit flows directly from the

procedural violation. Ecosystem Inv. Partners, 729 F. App’x at 293.

Plaintiffs contend that they lost their chance to pursue debt forgiveness

by Defendants’ failure to offer a chance to comment on the Program’s

eligibility requirements. “This injury—denial of the opportunity to

participate—is more than fairly traceable to [the agency’s] alleged

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inaction (failure to publish for notice and comment).” Nat’l Treasury

Emps. Union v. Newman, 768 F. Supp. 8, 10 (D.D.C. 1991).

Thus, the second requirement of Article III standing is met.

iii.

Redressability

Third, Plaintiffs contend that there is at least some possibility that

Defendants would reconsider the eligibility requirements of the

Program if it were enjoined or vacated, which fulfills the lighter

redressability requirement that applies when a procedural injury is

alleged. ECF No. 26 at 3–4. The Court agrees. To establish standing, a

plaintiff must normally prove that a favorable ruling would redress its

entire injury at the hands of a defendant. See Clapper v. Amnesty Intern.

USA, 568 U.S. 398, 409 (2013). But “when a litigant is vested with a

procedural right, that litigant has standing if there is some possibility

that the requested relief will prompt the injury-causing party to

reconsider the decision that allegedly harmed the litigant.”

Massachusetts v. EPA, 549 U.S. 497, 518 (2007) (emphasis added). Even

if this lighter standard applies, a plaintiff must still show that it is

“likely, as opposed to merely speculative, that a favorable decision will

redress the [injury].” S. Christian Leadership Conf. v. Sup. Ct. of State

of La., 252 F.3d 781, 788 (5th Cir. 2001).

In response, Defendants argue that Plaintiffs’ alleged injury will not

be redressed by a favorable decision of the Court because enjoining or

vacating the Program will not provide Plaintiffs any loan forgiveness.

ECF No. 24 at 11. But Defendants misread the redressability

requirement in the context of procedural injuries. Plaintiffs need only

prove that there is some possibility that Defendants will reconsider the

confines of the Program if it is struck down in its current form. See Tex.

v. United States, 787 F.3d 733, 754 (5th Cir. 2015). And “enjoining the

implementation of [the Program] until it undergoes notice and comment

could prompt [the Secretary] to reconsider its decision, which is all a

litigant must show when asserting a procedural right.” Id. at 753–54.

Because Plaintiffs satisfy all three Article III standing requirements,

they may challenge Defendants’ conduct on the merits. As a result, the

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Court denies Defendants’ Motion to Dismiss for Lack of Jurisdiction

(ECF No. 25).

2. Judicial Review

When a party challenges the legality of agency action, the Court must

also ensure that the agency action at issue is reviewable under the APA.

Data Mktg. P’ship, LP v. U.S. Dep’t of Lab., 45 F.4th 846, 853 (5th Cir.

2022). An agency action is reviewable if (1) there has been a final agency

action and (2) the plaintiff’s injury is within the zone of interests of the

statute allegedly violated. See 5 U.S.C. § 704; Match–E–Be–Nash–She–

Wish Band of Pottawatomi Indians v. Patchak, 567 U.S. 209, 224 (2012).

Neither party disputes that the Program is reviewable under the APA.

Still, judicial review implicates jurisdiction. Data Mktg. P’ship, 45 F.4th

at 853. As a result, the Court must consider whether the Program is

reviewable under the APA to ensure that it does “not exceed the scope

of [its] jurisdiction.” Henderson v. Shinseki, 562 U.S. 428, 434 (2011).

a. Final Agency Action

Finality is a “jurisdictional prerequisite of judicial review.” Data

Mktg. P’ship, 45 F.4th at 853 (quotation omitted). The APA provides a

right to judicial review of “final agency action” unless the statute

precludes judicial review or the action falls under agency discretion. 5

U.S.C. § 701(a). To meet the limited agency exception, there must be

“no meaningful standard against which to judge the agency’s exercise of

discretion.” Lincoln v. Vigil, 508 U.S. 182, 191 (1993) (quotation

omitted). Actions that fall under agency discretion are rare and only

apply when the standard of review is unclear. 14

The text of the HEROES Act does not preclude judicial review, and

the Secretary’s action falls within the Act’s plain text, which authorizes

waivers or modifications of various student-loan provisions. 20 U.S.C.

14 See, e.g., Lincoln, 508 U.S. at 191 (1993) (holding that an agency’s use of lump-

sum appropriation funds with no designation fell within the agency’s discretion);

Franklin v. Massachusetts, 505 U.S. 788, 817, (1992) (holding that an agency’s decision

to fire employee fell within the agency’s discretion); Heckler v. Chaney, 470 U.S. 821,

830, (1985) (holding that an agency’s decision not to enforce their own policy fell within

the agency’s discretion).

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§ 1098bb(a)(1). This provides a clear standard of review. Thus, neither

exception in § 701(a) applies here.

Finality requires two things: (1) the action must be the ending result

or “consummation” of the entire agency decision-making process—not a

tentative or intermediate step in the process—and (2) the action must

determine rights or obligations that produce legal consequences. U.S.

Army Corps of Eng’rs v. Hawkes Co., 578 U.S. 590, 597, 599 (2016).

Both conditions of finality are present. First, in the Secretary’s

notice, the Department spells out its decision-making process, legal

basis for the decision, and intent to proceed with the Program. Nothing

in the waiver’s text reflects that the decision to implement the Program

is provisional or still under review. Second, the action—the Program—

forgives around eight million individuals a portion of their legallybinding student loan obligations, costing over $400 billion. This action

affects the rights and obligations of millions of loan recipients and

carries sweeping legal consequences for federal student-loan programs

by changing the terms of the HEA.

The Agency’s action is thus final.

b. Zone of Interests

Along with the finality requirement, the Court may review an agency

action only if a plaintiff’s interests are “arguably within the zone of

interests to be protected or regulated by the statute that he says was

violated.” Patchak, 567 U.S. at 224. A plaintiff with Article III standing

satisfies the requirement unless their “interests are so marginally

related to or inconsistent with the purposes implicit in the statute that

it cannot reasonably be assumed that Congress intended to permit the

suit.” Thompson v. N. Am. Stainless, LP, 562 U.S. 170, 177 (2011)

(quotation omitted). But doing so is not “especially demanding,” and “the

benefit of any doubt goes to the plaintiff.” Patchak, 567 U.S. at 225.

Here, Plaintiffs have Article III standing. And because the Secretary

considers Plaintiffs “affected individuals” under the HEROES Act and

are federal loan recipients excluded from the Program, they satisfy the

zone-of-interest test. The Court may thus review the agency’s

implementation of the Program.

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C. Summary Judgment

Article I of the Constitution allows Congress to “delegate” some of its

legislative powers to administrative agencies. U.S. CONST. art. I, § 8, cl.

3; see Mistretta v. United States, 488 U.S. 361, 372 (1989). When

administering their delegated authority, agencies must comply with the

APA’s procedural and substantive requirements. See 5 U.S.C. § 553. The

procedural requirements obligate agencies to subject their substantive

rules to notice and comment unless an exception applies. See 5 U.S.C. §

553. The substantive requirements “‘requires courts to hold unlawful

and set aside agency action’ that is ‘in excess of statutory jurisdiction,

authority, or limitations.’” See Texas v. United States, 50 F.4th 498, 525

(5th Cir. 2022) (quoting 5 U.S.C. § 706(2)(C)).

Plaintiffs argue that the Program violates the APA’s procedural and

substantive requirements. The Court addresses each in turn.

1. APA’s Procedural Requirements

Plaintiffs argue that the Program violates the APA’s procedural

requirements because it did not go through notice and comment before

implementation. ECF No. 4 at 13.

The APA requires agencies to subject their substantive rules to

notice and comment. See 5 U.S.C. § 553. Substantive rules “grant rights,

impose obligations, or produce other significant effects on private

interests.” Avoyelles Sportsmen’s League, Inc. v. Marsh, 715 F.2d 897,

908 (5th Cir. 1983) (quoting Batterton v. Marshall, 648 F.2d 694, 701–

02 (D.C. Cir. 1980)). A substantive rule is usually unenforceable if it does

not undergo notice and comment. Id. But if the agency’s authorizing

statute expressly exempts the agency’s rules from notice and comment,

the rule is enforceable. 5 U.S.C. § 559.

Plaintiffs argue that the Program is a substantive rule because it

‘“grants rights’ by promising to eliminate individuals’ debt if they meet

certain requirements and ‘imposes obligations’ on the Department to

forgive debt for those who meet the requirements.” See ECF No. 4 at 14

(quoting W & T Offshore, Inc. v. Bernhardt, 946 F.3d 227, 237 (5th Cir.

2019)). They rely on Bernhardt to support their argument. But this

reliance is misplaced. In Bernhardt, the agency’s statutory authority did

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not exempt the agency from notice-and-comment requirements of the

APA. 946 F.3d at 237. The statutory authority here does:

“Notwithstanding section 1232 of this title and section 553 of Title 5, the

Secretary shall by notice in the Federal Register, publish the waivers or

modifications of statutory and regulatory provisions the Secretary

deems necessary to achieve the purposes of this section.”

§ 1098bb(b)(1). 15

Plaintiffs, however, argue that § 1098bb(b)(1) “applies only when the

waiver or modifications are ‘authorized’ under Section 1098bb(a)” and

that the Program is not “authorized” by § 1098bb(a). ECF No. 26 at 7.

Whether the HEROES Act authorizes the Program pertains to the

APA’s substantive requirements. But as a procedural matter, the

Secretary may waive or modify any provision without notice and

comment under the HEROES Act. All the APA requires is that the

Secretary publish the modifications of title IV of the HEA, which the

Secretary has done here.

Thus, because the Program was issued under the HEROES Act,

which exempts notice and comment, the Program did not violate the

APA’s procedural requirements. Whether the HEROES Act authorized

the Program is a different story.

2. APA’s Substantive Requirements

Plaintiffs contend that the Secretary lacks the authority to

implement the Program under the HEROES Act. ECF Nos. 4 at 16; 34

at 4. When reviewing an agency’s interpretation of its statutory

authority, courts have generally applied the framework established in

Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S.

15 Whether

§ 1098bb(b)(1) exempts notice and comment turns on the word

“notwithstanding.” But a dictionary definition of “notwithstanding” does not answer

that question as “[d]rafters often use nothwithstanding in a catchall provision, where

its supposed referent is unclear.” See A. SCALIA & B. GARNER, READING LAW: THE

INTERPRETATION OF LEGAL TEXTS 126 (2012) (emphasis in original). “A dependent

phrase that begins with notwithstanding indicates that the main clause that it

introduces or follows derogates from the provision to which it refers.” Id. Thus,

“notwithstanding is a fail-safe way of ensuring that the clause it introduces will

absolutely, positively prevail.” Id. at 127. Here, “notwithstanding” in § 1098bb(b)(1)

means without obstruction from the notice and comment requirements. Plaintiffs do

not dispute this meaning.

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837, 843–44 (1984). Under Chevron, if a statute is ambiguous about the

issue, courts defer to the agency’s interpretation of the statute if it is

“reasonable.” Entergy Corp. v. Riverkeeper, Inc., 556 U.S. 208, 218

(2009)). In recent years, however, the Supreme Court has chipped away

at Chevron—giving back “the benefit of doubt about the meaning of an

ambiguous law to the individual” instead of the government. Buffington

v. McDonough, No. 21-972, 2022 WL 16726027, at *5 (U.S. Nov. 7, 2022)

(cleaned up).

The most recent example of Chevron’s fall is the crystallization of the

long-developing major-questions doctrine in West Virginia. v. EPA, 142

S. Ct. 2587 (2022). 16 The doctrine provides that when an agency seeks

to resolve a major question, a “merely plausible textual basis for the

agency action” is not enough. Id. at 2609. “The agency instead must

point to ‘clear congressional authorization’ for the power it claims. Id.

(quoting Utility Air Reg. Grp. v. EPA, 573 U.S. 302, 324 (2014)).

Plaintiffs contend that the Program fails under the major-questions

doctrine. The Court thus addresses whether the doctrine applies. And if

so, whether there is “clear congressional authorization” for the

Program. 17

a. The Major-Questions Doctrine Applies

The major-questions doctrine applies if an agency claims the power

to make decisions of vast “economic and political significance.” Id. at

2607–14. It is unclear what exactly constitutes “vast economic

significance.” But courts have generally considered an agency action to

be of vast economic significance if it requires “billions of dollars in

spending.” King v. Burwell, 576 U.S. 473, 485 (2015). For example, the

Supreme Court in Alabama Association of Realtors v. Department of

16 The major-questions doctrine’s precise relationship to the Chevron framework is

unclear, as the Court did not mention Chevron in that case. Defendants stated at the

preliminary-injunction hearing that Chevron does not apply if the major-questions

doctrine applies. See ECF No. 32. Nor does either party mention Chevron in their

briefs. For those reasons, the Court reasons that Chevron is not applicable here. But

even if it were applicable, the major questions doctrine compels the same result—the

Secretary lacks “clear congressional authorization” to implement the Program—

regardless of how the major-questions doctrine fits into the Chevron framework.

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Health & Human Services reasoned that an economic impact of $50

billion was of vast economic significance. 141 S. Ct. 2485, 2489 (2021).

Similarly, the Fifth Circuit in BST Holdings, L.L.C v. OSHA held that

$3 billion in compliance costs was enough to trigger the major-questions

doctrine. 17 F. 4th 604, 617 (5th Cir. 2021). Because the Program will

cost more than $400 billion—over 100 times more than the amount in

BST Holdings and 20 times more than the amount in Alabama

Association of Realtors—it has vast economic significance.

An agency action is politically significant if Congress has been

“engaged in robust debates” over bills authorizing something like the

agency’s action. West Virginia., 142 S. Ct. at 2620–21 (Gorsuch, J.,

concurring). And if Congress “considered and rejected” such bills, “that

too may be a sign that an agency is attempting to work around the

legislative process to resolve for itself a question of great political

significance.” Id. (cleaned up). For example, in NFIB v. OSHA, the

Supreme Court held that the major-questions doctrine applied when

various vaccine mandate bills considered by Congress had failed, and an

agency sought to mandate COVID-19 vaccines for millions of Americans.

142 S. Ct. 661, 662–66 (2022).

Similarly, Congress has introduced multiple bills to provide student

loan relief to those who make under a certain amount. See S. 2235, 116th

Cong. (2019); H.R. 2034, 117th Cong. (2021). And all have failed. A bill

was also introduced—to respond to the economic impact of COVID-19—

that provided the Secretary the authority to “cancel or repay” federal

student loans up to “$10,000 [of] the outstanding balance” for certain

borrowers. See H.R. 6800, 116th Cong. § 150117(h). But this bill also

failed. Thus, considering Congress’s extensive consideration of various

bills attempting to forgive student loans and failure to pass such bills,

the Program is of vast political significance.

Oddly enough, Defendants do “not deny that this is a case of economic

and political significance.” ECF No. 24 at 22. Instead, they argue that

the doctrine does not apply because “this case involves the disbursement

of a federal benefit to individuals, not the kind of expansive regulation

of private parties that have previously triggered the doctrine.” Id. at

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23. 18 But this statement is untrue. See Kentucky v. Biden, 23 F.4th 585,

606–08 (6th Cir. 2022) (applying the major-questions doctrine to vaccine

mandate for federal employees); Georgia v. President of the U.S., 46

F.4th 1283, 1295–96 (11th Cir. 2022) (same). And even if this were true,

the Court would not presume that the doctrine does not apply to an

agency decision of vast economic and political significance because it

involves the disbursement of a federal benefit. Instead, the Court must

“presume that ‘Congress intends to make major policy decisions itself,

not leave those decisions to agencies.’” West Virginia, 142 S. Ct. at 2609

(quoting U.S. Telecom Ass’n v. FCC, 855 F.3d 381, 419 (D.C. Cir. 2017)).

Thus, because the Program is an agency action of vast economic and

political significance, the major-questions doctrine applies.

b. The Secretary Lacks “Clear Congressional Authorization” to

Implement the Program

Because the major-questions doctrine applies, the Government’s

assertion of authority is treated with “skepticism.” West Virginia, 142 S.

Ct. at 2614. “To overcome that skepticism, the Government must . . .

point to clear congressional authorization” permitting its action. Id.

(cleaned up). To do so, Defendants point to the HEROES Act. But the

text of the Act points the other way for at least three reasons. See

Aldridge v. Williams, 44 U.S. (3 How.) 9, 24 (1845) (“The law as it passed

is the will of the majority of both houses, and the only mode in which

that will is spoken is in the act itself; and we must gather their intention

from the language there used.”).

First, the HEROES Act does not mention loan forgiveness. If

Congress provided clear congressional authorization for $400 billion in

student loan forgiveness via the HEROES Act, it would have mentioned

loan forgiveness. The Act allows the Secretary only to “waive or modify”

provisions of title IV. The Secretary then uses that provision to rewrite

18 The Court finds it telling that Defendants—rather than addressing Plaintiffs’

arguments that the major-questions doctrine applies—copied and pasted their entire

major-questions doctrine section from another lawsuit challenging the Program.

Compare ECF No. 24 at 22–26, with Nebraska v. Biden, No. 4:22-CV-1040-HEA, ECF

No. 27 at 29–35.

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title IV portions to provide for loan forgiveness. 19 But “enabling

legislation” like the HEROES Act is not an “open book to which the

agency may add pages and change the plot line.” West Virginia, 142 S.

Ct. at 2609 (2022); U.S. Fleet Servs. Inc. v. City of Fort Worth, 141 F.

Supp. 2d 631, 644 (N.D. Tex. 2001) (Mahon, J.) (refusing to engage in an

exercise of “legal jingoism” requiring the court to insert words into a law

or rule to arrive at a particular party’s interpretation). Agencies may

“not seek to hide elephants in mouseholes.” West Virginia, 142 S. at 2622

(Gorsuch, J., concurring) (quoting Whitman v. Am. Trucking Ass’ns, Inc.,

531 U.S. 457, 468 (2001)).

Second, the portions of the HEROES Act Defendants rely on fail to

provide clear congressional authorization for the Program. Defendants

rely on the COVID-19 pandemic as their justification for the Program.

They contend that the HEROES Act allows the Secretary the authority

to address the financial hardship of the COVID-19 pandemic. Indeed,

the COVID-19 pandemic falls within the HEROES Act’s definition of an

emergency. § 1098ee(4). But it is unclear whether the Program is

“necessary in connection with [that] national emergency.”

§ 1098bb(a)(1). The COVID-19 pandemic was declared a national

emergency almost three years ago and declared weeks before the

Program by the President as “over.” 20 Thus, it is unclear if COVID-19 is

still a “national emergency” under the Act.

Defendants contend that in ten years, they could still use the

HEROES Act to forgive student loan debt because of the COVID-19

pandemic if the Secretary deems it “necessary.” ECF No. 32, at 69–70.

But a legislative provision with “broad or general language” will not

19 As the Texas Supreme Court recognized 130 years ago:

When the purpose of a legislative enactment is obvious from the language

of the law itself, there is nothing left to construction. In such case it is vain

to ask the courts to attempt to liberate an invisible spirit, supposed to live

concealed within the body of the law, and thus interpret away the manifest

legislative intention by embracing subjects not fairly within the scope of

the statute.

Dodson v. Bunton, 17 S.W. 507, 508 (Tex. 1891).

20 60

Minutes (@60Minutes),

https://tinyurl.com/2s35maau.

TWITTER

(Sept.

18,

2022,

7:09

PM),

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supply a clear statement. Id. at 2623. The Department’s reliance on its

ability to modify provisions of title IV “as the Secretary deems necessary

in connection with a . . . national emergency” is the very language that

does not supply a clear statement. See, e.g., Ala. Ass’n of Realtors, 141

S. Ct. at 2489 (“It is hard to see what measures [the Government’s]

interpretation would place outside the CDC’s reach, and the

Government has identified no limit in [42 U.S.C.] § 361(a) beyond the

requirement that the CDC deem a measure ‘necessary.”) (emphasis

added).

Third, “the agency’s past interpretations of the relevant statute” is

another clue that the Secretary lacks clear congressional authorization

for the Program. West Virginia., 142 S. Ct. at 2625 (Gorsuch, J.,

concurring). “When an agency claims to have found a previously

‘unheralded power’ in a rarely invoked statutory provision, its assertion

generally warrants “a measure of skepticism.” Id. (quoting Utility Air,

573 U. S., at 324). The Department has not “relied on the HEROES Act

or any other statutory, regulatory, or interpretative authority for the

blanket or mass cancellation. . . of student loan principal balances,

and/or the material change of repayment amounts or terms.” See

Memorandum to Betsy DeVos Secretary of Education at 6.

Thus,

because

the

Department

lacks

“clear

congressional

authorization” for the Program under the HEROES Act, the Court

grants summary judgment in favor of Plaintiffs.

c. Vacatur is the Appropriate Remedy

Next, the appropriate remedy. Plaintiffs seek two types of relief—

vacatur of the Program and nationwide injunctive relief. “Vacatur [of an

agency action] retroactively undoes or expunges a past [agency] action

. . . . Unlike an injunction, which merely blocks enforcement, vacatur

unwinds the challenged agency action.” Data Mktg. P’ship, 45 F.4th at

859 (quoting Driftless Area Land Conservancy v. Valcq, 16 F.4th 508,

522 (7th Cir. 2021)) (alterations and ellipsis in original). While “[i]t is

not beyond the power of a court, in appropriate circumstances, to issue

a nationwide injunction,” these circumstances do not justify such a

remedy. Texas v. United States, 809 F.3d 134, 188 (5th Cir. 2015).

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Instead, “the ordinary practice is to vacate unlawful agency action.”

Data Mktg. P’ship, 45 F.4th at 859 (quoting United Steel v. Mine Safety

& Health Admin., 925 F.3d 1279, 1287 (D.C. Cir. 2019)). Vacatur is

authorized by 5 U.S.C. § 706, which requires the Court to decide “all

relevant questions of law [and] interpret constitutional and statutory

provisions” and “hold unlawful and set aside” agency action “not in

accordance with law,” “in excess of statutory jurisdiction,” or “short of

statutory right.” Because “under our Constitution, the people’s elected

representatives in Congress are the decisionmakers here—and they

have not clearly granted the agency the authority it claims for itself,”

the Program is unlawful. West Virginia, 142 S. Ct. at 2626 (2022)

(Gorsuch, J., concurring). The Court thus applies the “default rule” and

vacates the Program. See Data Mktg. P’ship, 45 F.4th at 859–60.

Sometimes courts—though authorized by the APA to vacate an

agency action—exercise their discretion to remand the action for

adjustments or another agency review. See, e.g., Texas v. United States,

50 F.4th at 529. In deciding whether to sidestep complete vacatur, courts

consider “(1) the seriousness of the deficiencies of the action, that is, how

likely the agency will be able to justify its decision on remand; and

(2) the disruptive consequences of the vacatur.” Id. If there is a small

defect or deficiency that is quickly curable or an existing complex agency

program that requires major winddown efforts, a court may remand

without vacating the entire action. See, e.g., Lion Health Servs., Inc. v.

Sebelius, 635 F.3d 693, 703 (5th Cir. 2011) (remanding to the agency to

recalculate amounts owed in a manner consistent with the statute).

Both factors weigh against remand. First, the agency’s misstep is not

correctible on remand—it is a complete usurpation of congressional

authorization implicating the separation of powers required by the

Constitution. Second, the Program does not require a significant

administrative winddown period, as loan forgiveness has not started.

Thus, remand is not the appropriate remedy.

For those reasons, vacatur of the Program is the appropriate remedy.

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CONCLUSION

This case involves the question of whether Congress—through the

HEROES Act—gave the Secretary authority to implement a Program

that provides debt forgiveness to millions of student-loan borrowers,

totaling over $400 billion. Whether the Program constitutes good public

policy is not the role of this Court to determine. 21 Still, no one can

plausibly deny that it is either one of the largest delegations of

legislative power to the executive branch, or one of the largest exercises

of legislative power without congressional authority in the history of the

United States.

In this country, we are not ruled by an all-powerful executive with a

pen and a phone. Instead, we are ruled by a Constitution that provides

for three distinct and independent branches of government. As

President James Madison warned, “[t]he accumulation of all powers,

legislative, executive, and judiciary, in the same hands, whether of one,

a few, or many, and whether hereditary, self-appointed, or elective, may

justly be pronounced the very definition of tyranny.” THE FEDERALIST

NO. 47.

The Court is not blind to the current political division in our country.

But it is fundamental to the survival of our Republic that the separation

of powers as outlined in our Constitution be preserved. And having

interpreted the HEROES Act, the Court holds that it does not provide

“clear congressional authorization” for the Program proposed by the

Secretary.

Thus, Plaintiffs’ Motion for Summary Judgment (ECF No. 3) is

GRANTED and Defendants’ Motion to Dismiss (ECF No. 25) is

21 Under our system of government, public policy is typically made by the Congress

through a negotiated-and-reasoned process among the members, with input from the

President, and based on how Congress legislated, those members would then be held

accountable by their constituents each election cycle. See Speaker Sam Rayburn,

quoted in D.B. Hardeman & Donald C. Bacon, RAYBURN: A BIOGRAPHY 429 (1987) (“A

[politician] who is not willing to get out and defend what he has done will ultimately

find himself in poor shape politically.”). As President Lyndon Johnson was found of

admonishing Congress, “Come now, let us reason together.” JOHN BARTLETT, FAMILIAR

QUOTATIONS 872 (15th ed. 1980).

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DENIED. And the Court DECLARES UNLAWFUL and VACATES

the Program.

SO ORDERED on this 10th day of November 2022.

Mark T. Pittman

UNITED STATES DISTRICT JUDGE

Case 4:22-cv-00908-P Document 38 Filed 11/10/22

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UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF TEXAS

FORT WORTH DIVISION

MYRA BROWN, ET AL.,

Plaintiffs,

No. 4:22-cv-0908-P

U.S. DEPARTMENT OF EDUCATION,

ET AL.,

Defendants.

FINAL JUDGMENT

This Final Judgment is issued pursuant to Federal Rule of Civil

Procedure 58. Per the Order entered on November 10, 2022:

It is ORDERED AND ADJUDGED that Final Judgment is entered

in favor of the Plaintiffs.

Plaintiffs’ Motion for Summary Judgment (ECF No. 3) is GRANTED

and Defendants’ Motion to Dismiss (ECF No. 25) is DENIED.

The Court DECLARES UNLAWFUL and VACATES the Program.

The Clerk is DIRECTED to transmit a true copy of this Final

Judgment to the Parties.

SO ORDERED on this 10th day of November 2022.

Mark T. Pittman

UNITED STATES DISTRICT JUDGE

Case: 4:22-cv-01040-HEA Doc. #: 27-1 Filed: 10/07/22 Page: 27 of 48 PageID #: 696

29a

THE SECRETARY OF EDUCATION

WASHINGTON, DC 20202

DATE:

September 27, 2022

MEMORANDUM TO:

Dr. Nasser Paydar

Assistant Secretary for Postsecondary Education

Richard Cordray

Chief Operating Officer

Federal Student Aid

A~/

FROM:

Miguel A. Cardona, Ed.D. .

Secretary of Education ~

SUBJECT:

Waivers Relating to Pandemic-Connected General Loan Discharge

On August 24, 2022, I notified Richard Cordray, Chief Operating Officer of Federal Student Aid,

that I had determined to exercise my discretion under the HEROES Act to issue waivers and

modifications necessary to (1) discharge up to $20,000 in federal student loan balances for

borrowers who meet certain conditions and (2) take all administrative steps necessary to

implement that determination.

In the interim, the Department has developed a comprehensive strategy to implement that

determination. As such, today I am issuing waivers and modifications to the provisions of 20

U.S.C. 1087, which applies to the Direct Loan Program under 20 U.S.C. 1087a and 1087e; 20

U.S.C. 1087dd(g); and 34 CFR part 674, subpart D, §§ 682.402 and 685.212 to provide that,

notwithstanding any other statutory or regulatory provision, the Department will discharge the

balance of a borrower's loans up to a maximum of: (a) $20,000 for borrowers who qualified for

Pell Grants at the time they received the loans and had an Adjusted Gross Income ("AGI") below

$125,000 for an individual taxpayer or $250,000 for borrowers filing jointly or as a Head of

Household for the 2020 or 2021 Federal tax years; or (b) up to a maximum of $10,000 for

borrowers who are eligible under those income thresholds but did not qualify for a Pell Grant at

the time they received the loans. This waiver is applicable to borrowers with outstanding Direct

Loans, FFEL loans held by the Department or subject to collection by a guaranty agency, and

Perkins Loans held by the Department prior to July 1, 2022, and who are determined to be

eligible by the Department.

Please take all necessary actions to implement these waivers and modifications and to provide

notice of these waivers and modifications in the Federal Register.

400 MARYLAND AVE., S.W., WASHINGTON, DC 20202

www.ed.gov

30a

Federal Register / Vol. 87, No. 167 / Tuesday, August 30, 2022 / Notices

khammond on DSKJM1Z7X2PROD with NOTICES

information collection requirements and

minimize the public’s reporting burden.

It also helps the public understand the

Department’s information collection

requirements and provide the requested

data in the desired format. ED is

soliciting comments on the proposed

ICR that is described below. The

Department is especially interested in

public comments addressing the

following issues: (1) is this collection

necessary to the proper functions of the

Department; (2) will this information be

processed and used in a timely manner;

(3) is the estimate of burden accurate;

(4) how might the Department enhance

the quality, utility, and clarity of the

information to be collected; and (5) how

might the Department minimize the

burden of this collection on the

respondents, including through the use

of information technology. Please note

that written comments received in

response to this notice will be

considered public record.

Title of Collection: Health Education

Assistance Loan (HEAL) Program Regs.

OMB Control Number: 1845–0125.

Type of Review: Extension without

change of a currently approved

collection.

Respondents/Affected Public:

Individuals and Households; State,

Local, and Tribal Governments.

Total Estimated Number of Annual

Responses: 129,945.

Total Estimated Number of Annual

Burden Hours: 24,120.

Abstract: This is a request for an

extension of OMB approval of

information collection requirements

associated with the Health Education

Assistance Loan (HEAL) Program

regulations for reporting, recordkeeping

and notifications, currently approved

under OMB No. 1845–0125. There has

been no change to the regulatory

language. The previous filing totals were

incorrectly summed and the correct

totals are presented here.

Dated: August 24, 2022.

Kun Mullan,

PRA Coordinator, Strategic Collections and

Clearance Governance and Strategy Division,

Office of Chief Data Officer, Office of

Planning, Evaluation and Policy

Development.

[FR Doc. 2022–18591 Filed 8–29–22; 8:45 am]

BILLING CODE 4000–01–P

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DEPARTMENT OF EDUCATION

Notice Inviting Publishers To Submit

Tests for a Determination of Suitability

for Use in the National Reporting

System for Adult Education

AGENCY: Office of Career, Technical, and

Adult Education, Department of

Education.

ACTION: Notice.

SUMMARY: The Secretary of Education

invites publishers to submit tests for

review and approval for use in the

National Reporting System for Adult

Education (NRS) and announces the

date by which publishers must submit

these tests. This notice relates to the

approved information collection under

OMB control number 1830–0567.

DATES: Deadline for transmittal of

applications: October 1, 2022.

ADDRESSES: Submit your application by

email to NRS@air.org.

FOR FURTHER INFORMATION CONTACT: John

LeMaster, U.S. Department of

Education, 400 Maryland Avenue SW,

Room 11152, Potomac Center Plaza,

Washington, DC 20202–7240.

Telephone: (202) 245–6218. Email:

John.LeMaster@ed.gov.

If you are deaf, hard of hearing, or

have a speech disability and wish to

access telecommunications relay

services, please dial 7–1–1.

SUPPLEMENTARY INFORMATION: The

Department’s regulations for Measuring

Educational Gain in the National

Reporting System for Adult Education,

34 CFR part 462 (NRS regulations),

include the procedures for determining

the suitability of tests for use in the

NRS.

There is a review process that will

begin on October 1, 2022. Only tests

submitted by the due date will be

reviewed in that review cycle. If a

publisher submits a test after October 1,

2022, the test will not be reviewed until

the review cycle that begins on October

1, 2023.

Criteria the Secretary Uses: In order

for the Secretary to consider a test

suitable for use in the NRS, the test

must meet the criteria and requirements

established in 34 CFR 462.13.

Submission Requirements:

(a) In preparing your application, you

must comply with the requirements in

34 CFR 462.11.

(b) In accordance with 34 CFR 462.10,

the deadline for transmittal of

applications in this fiscal year is

October 1, 2022.

sent email message and the email

attachments as proof that you submitted

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your application by 11:59 p.m. local

time on October 1, 2022.

(d) We do not consider applications

submitted after the application deadline

date to be timely for the October 1,

2022, review cycle. If an application is

submitted after the October 1, 2022,

deadline date, the application will be

considered timely for the October 1,

2023, deadline date.

Accessible Format: On request to the

program contact person listed under FOR

FURTHER INFORMATION CONTACT,

individuals with disabilities can obtain

this document and an application

package in an accessible format. The

Department will provide the requestor

with an accessible format that may

include Rich Text Format (RTF) or text

format (txt), a thumb drive, an MP3 file,

braille, large print, audiotape, or

compact disc or other accessible format.

Electronic Access to This Document:

The official version of this document is

the document published in the Federal

edition of the Federal Register and the

Code of Federal Regulations at

www.govinfo.gov. At this site you can

view this document, as well as all other

documents of this Department

published in the Federal Register, in

text or Portable Document Format

(PDF). To use PDF you must have

Adobe Acrobat Reader, which is

available free at the site.

You may also access documents of the

Department published in the Federal

feature at www.federalregister.gov.

Specifically, through the advanced

search feature at this site, you can limit

your search to documents published by

the Department.

Authority: 29 U.S.C. 3292.

Amy Loyd,

Assistant Secretary for Career, Technical, and

Adult Education.

[FR Doc. 2022–18624 Filed 8–29–22; 8:45 am]

BILLING CODE 4000–01–P

DEPARTMENT OF EDUCATION

Notice of Debt Cancellation Legal

Memorandum

AGENCY: Office of the General Counsel,

Department of Education.

ACTION: Notice.

SUMMARY: The Department publishes

this memorandum on the Secretary’s

legal authority to cancel student debt on

a categorical basis.

FOR FURTHER INFORMATION CONTACT:

Brian Siegel, U.S. Department of

Education, Office of the General

Counsel, 400 Maryland Avenue SW,

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Federal Register / Vol. 87, No. 167 / Tuesday, August 30, 2022 / Notices

room 6E–105, Washington, DC 20202.

Telephone: (202) 987–1508. Email:

brian.siegel@ed.gov.

If you are deaf, hard of hearing, or

have a speech disability and wish to

access telecommunications relay

services, please dial 7–1–1.

SUPPLEMENTARY INFORMATION: The

Department publishes this

memorandum on the Secretary’s legal

authority to cancel student debt on a

categorical basis. The debt relief

memorandum is in Appendix A of this

notice.

Accessible Format: On request to the

program contact person listed above

under FOR FURTHER INFORMATION

CONTACT, individuals with disabilities

can obtain this document in an

accessible format. The Department will

provide the requestor with an accessible

format that may include Rich Text

Format (RTF) or text format (txt), a

thumb drive, an MP3 file, braille, large

print, audiotape, or compact disc, or

other accessible format.

Electronic Access to This Document:

The official version of this document is

the document published in the Federal

edition of the Federal Register and the

Code of Federal Regulations at

www.govinfo.gov. At this site you can

view this document, as well as all other

documents of this Department

published in the Federal Register, in

text or Portable Document Format

(PDF). To use PDF you must have

Adobe Acrobat Reader, which is

available free at the site.

You may also access documents of the

Department published in the Federal

feature at www.federalregister.gov.

Specifically, through the advanced

search feature at this site, you can limit

your search to documents published by

the Department.

Miguel A. Cardona,

Secretary of Education.

Appendix A—Debt Cancellation Legal

Memorandum

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TO: Miguel A. Cardona Secretary of

Education

FROM: Lisa Brown General Counsel

DATE: August 23, 2022

SUBJECT: The Secretary’s Legal Authority for

Debt Cancellation

Introduction

For the past year and a half, the Office of

General Counsel (‘‘OGC’’), in consultation

with our colleagues at the Department of

Justice Office of Legal Counsel, has

conducted a review of the Secretary’s legal

authority to cancel student debt on a

categorical basis. This review has included

assessing the analysis outlined in a publicly

disseminated January 2021 memorandum

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signed by a former Principal Deputy General

Counsel. As detailed below, we have

determined that the Higher Education Relief

Opportunities for Students (‘‘HEROES’’) Act

of 2003 grants the Secretary authority that

could be used to effectuate a program of

targeted loan cancellation directed at

addressing the financial harms of the

COVID–19 pandemic. We have thus

determined that the January 2021

memorandum was substantively incorrect in

its conclusions.

Given the significant public interest in this

issue, and the potential for public confusion

caused by the public availability of the

January 2021 memorandum, I recommend

making this memorandum publicly available

and publishing it in the Federal Register, so

as to provide the general public with notice

of the Department’s interpretation of the

HEROES Act, consistent with statutory

requirements. See 5 U.S.C. 552(a).1

I. The Secretary’s HEROES Act Authority

The HEROES Act, first enacted in the wake

of the September 11 attacks, provides the

Secretary broad authority to grant relief from

student loan requirements during specific

periods (a war, other military operation, or

national emergency, such as the present

COVID–19 pandemic) and for specific

purposes (including to address the financial

harms of such a war, other military

operation, or emergency). The Secretary of

Education has used this authority, under

both this and every prior administration

since the Act’s passage, to provide relief to

borrowers in connection with a war, other

military operation, or national emergency,

including the ongoing moratorium on student

loan payments and interest.2

Specifically, the HEROES Act authorizes

the Secretary to ‘‘waive or modify any

statutory or regulatory provision applicable

to the student financial assistance programs’’

if the Secretary ‘‘deems’’ such waivers or

modifications ‘‘necessary to ensure’’ at least

one of several enumerated purposes,

including that borrowers are ‘‘not placed in

1 The Office of Legal Counsel has made its own

analysis of the Secretary’s authority, which will be

published in tandem with this memorandum’s

recommended publication.

2 See Federal Student Aid Programs (Student

Assistance General Provisions, Federal Perkins

Loan Program, William D. Ford Federal Direct Loan

Program, and Federal-Work Study Programs), 85 FR

79,856, 79,856 (Dec. 11, 2020) (‘‘Secretary [DeVos]

is issuing these waivers and modifications under

the authority of the HEROES Act[.]’’); Federal

Student Aid Programs (Student Assistance General

Provisions, Federal Perkins Loan Program, Federal

Family Education Loan Program, and the Federal

Direct Loan Program), 77 FR 59,311, 59,312 (Sept.

27, 2012) (‘‘In accordance with the HEROES Act,

. . . Secretary [Duncan] is providing the waivers

and modifications of statutory and regulatory

provisions applicable to the student financial

assistance programs[.]’’); Federal Student Aid

Programs (Student Assistance General Provisions,

Federal Perkins Loan Program, Federal Direct Loan

Program, Federal Family Education Loan Program

and the Federal Pell Grant Program), 68 FR 69,312,

69,312 (Dec. 12, 2003) (‘‘Secretary [Paige] is issuing

these waivers and modifications under the

authority of section 2(a) of the Higher Education

Relief Opportunities for Students (HEROES) Act of

2003[.]’’).

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a worse position financially’’ because of a

national emergency. 20 U.S.C. 1098bb(a)(1),

(2)(A).

Several provisions of the HEROES Act

indicate that Congress intended the Act to

confer broad authority under the

circumstances, and for the purposes,

specified by the Act. First, the Act grants

authority ‘‘[n]otwithstanding any other

provision of law, unless enacted with

specific reference to this section.’’ Id.

§ 1098bb(a)(1). Second, the Act authorizes

the Secretary to waive or modify ‘‘any’’

statutory or regulatory provision applicable

to the student financial assistance programs.

Id. § 1098bb(a)(1), (a)(2). Third, the Act

expressly authorizes the Secretary to issue

such waivers and modifications as he ‘‘deems

necessary in connection with a war or other

military operation or national emergency.’’

Id. § 1098bb(a)(1). The Supreme Court has

recognized that, in empowering a federal

official to act as that official ‘‘deems

necessary’’ in circumstances specified by a

statute, Congress has granted the official

broad discretion to take such action.3 This

authority is not, however, boundless: it is

limited, inter alia, to periods of a war, other

military operation, or national emergency (id.

§ 1098bb(a)(1)), to certain categories of

eligible individuals or institutions (id.

§ 1098ee(2)), and to a defined set of purposes

(id. § 1098bb(a)(2)(A)–(E)).

In present circumstances, this authority

could be used to effectuate a program of

categorical debt cancellation directed at

addressing the financial harms caused by the

COVID–19 pandemic. The Secretary could

waive or modify statutory and regulatory

provisions to effectuate a certain amount of

cancellation for borrowers who have been

financially harmed because of the COVID–19

pandemic. The Secretary’s determinations

regarding the amount of relief, and the

categories of borrowers for whom relief is

necessary, should be informed by evidence

regarding the financial harms that borrowers

have experienced, or will likely experience,

because of the COVID–19 pandemic. But the

Secretary’s authority can be exercised

categorically to address the situation at hand;

it does not need to be exercised ‘‘on a caseby-case basis.’’ Id. § 1098bb(b)(3). That is, he

is not required to determine or show that any

individual borrower is entitled to a specific

amount of relief, and he instead may provide

relief on a categorical basis as necessary to

address the financial harms of the pandemic.

II. The January 2021 Memorandum

On January 7, 2021, Secretary DeVos

resigned from her position as Secretary of

Education, effective January 8, 2021. On

January 13, a news outlet published a

memorandum signed January 12 by the thenPrincipal Deputy General Counsel, addressed

to ‘‘Betsy DeVos[,] Secretary of Education.’’ 4

3 Webster v. Doe, 486 U.S. 592, 600 (1988) (statute

authorizing action when an agency head ‘‘shall

deem such [action] necessary or advisable’’ ‘‘fairly

exudes deference’’ to agency head and ‘‘strongly

suggests that its implementation was ‘committed to

agency discretion by law’ ’’ (second emphasis

added) (some quotation marks omitted)).

4 Michael Stratford, Trump Administration Tries

to Hamstring Biden on Student Loan Forgiveness,

Politico (Jan. 13, 2021).

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Two substantively identical versions of that

memorandum were posted to the website of

the Office of Postsecondary Education, dated

January 12 and January 18 (collectively, the

‘‘January 2021 memorandum’’). Having

reviewed the memorandum in consultation

with the Office of Legal Counsel, we have

determined that although it accurately

describes the core features of the HEROES

Act, its ultimate conclusions are unsupported

and incorrect.5 As such, it should be

rescinded.

As an initial matter, the bulk of the January

2021 memorandum’s discussion of HEROES

Act authority describes and quotes the key

provisions of the HEROES Act. The

memorandum explains that the HEROES Act

provides the Secretary ‘‘authority to provide

specified [6] waivers or modifications to Title

IV federal financial student aid program

statutory and regulatory requirements

because of the declared National

Emergency,’’ identifies that declared

emergency as the COVID–19 national

emergency declared on March 18, 2020, and

characterizes this authority as ‘‘narrowly

cabined’’ to achieving five enumerated

purposes, including ‘‘ensur[ing] that . . .

recipients of student financial assistance

under title IV of the Act who are affected

individuals are not placed in a worse

position financially in relation to that

financial assistance because of their status as

affected individuals.’’ Jan. 2021 Mem. at 5–

The memorandum goes on to read in

purported limitations on the scope of relief

that may be afforded that are contrary to the

clear text of the Act. The memorandum

5 In addition to determining that the conclusions

contained in the January 2021 memorandum were

substantively incorrect, we have determined that

the memorandum was issued in contravention of

then-effective Department processes for issuing

significant guidance. An Interim Final Rule issued

by the Department on October 5, 2020, pursuant to

Executive Order 13,891, established additional

procedures for the issuance of guidance documents.

See Rulemaking and Guidance Procedures, 85 FR

62,597 (Oct. 5, 2020); see also Exec. Order No.

13,891, 84 FR 55,235 (Oct. 9, 2019). That rule

established new requirements for the issuance of

guidance and ‘‘significant guidance,’’ defining the

latter term to include guidance documents that

‘‘[r]aise novel, legal, or policy issues arising out of

legal mandates [or] the President’s priorities.’’ 85

FR at 62,608. The public dissemination of the

January 2021 memorandum violated a number of

provisions of this rule, including that guidance

must be ‘‘accessible through the Department’s

guidance portal,’’ and that, barring compelling

cause, all significant guidance may be published

only after a 30-day public comment period and

review by the Office of Management and Budget

under Executive Order 12,866 of September 30,

1993. Id. That rule was rescinded in September

2021, 86 FR 53,863 (Sept. 29, 2021), but it was in

effect at the time of the January 2021

memorandum’s publication. Thus, OGC has

determined that the January 2021 memorandum

was not properly promulgated.

6 We read the term ‘‘specified’’ as acknowledging

statutory limits on HEROES Act authority,

including the enumerated purposes of 20 U.S.C.

1098bb(b)(1), and not as suggesting any atextual

limitations on the Act’s clear grant of authority to

waive or modify ‘‘any’’ statutory or regulatory

provision applicable to student aid programs,

provided other HEROES Act requirements are met.

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advances three primary arguments in support

of a conclusion that ‘‘Congress never

intended the HEROES Act as authority for

mass cancellation, compromise, discharge, or

forgiveness of student loan principal

balances, and/or to materially modify

repayment amounts or terms.’’ Jan. 2021

Mem. at 6.

First, the memorandum recites certain

statutory limits on the Secretary’s authority,

including the HEROES Act’s statutory

definition of individuals eligible for relief, 20

U.S.C. 1098ee(2), and the enumerated

purposes for which waivers or modifications

may be issued, id. § 1098bb(a)(2).

The memorandum is correct that such

statutory provisions exist but provides no

support for the suggestion that these

provisions impose limitations beyond their

clear terms. See Jan. 2021 Mem. at 6.

Second, the memorandum points to the

HEROES Act’s references to avoiding

‘‘defaults’’ and a ‘‘cross-cite’’ to a separate

provision of the Higher Education Act

relating to the ‘‘return’’ of student loan funds,

concluding that these provisions ‘‘provide a

strong textual basis for concluding Congress

intended loans to be repaid.’’ Id. But these

provisions—which identify as allowable

purposes issuing waivers or modifications to

avoid defaults and granting relief from

certain requirements that borrowers return

certain payments—in no way impose a

requirement that any exercise of HEROES Act

authority must ensure that every borrower is

left with a remaining balance on their loan.

The reference to ‘‘defaults’’ authorizes the

Secretary to ‘‘avoid’’ defaults; it does not

require that he preserve their possibility. And

the Higher Education Act provisions

regarding the ‘‘return’’ of overpayments relate

only to specific processes and calculations

under which students are required to return

grant and loan assistance if they withdraw

from their school, see 20 U.S.C. 1091b; there

is no conceivable reading of this provision

that reflects a congressional intent that all

borrowers, including those not covered by

the section 1091b overpayment provisions,

are required to repay their loans in full.

Third, the memorandum concludes that

the authority to ‘‘waive or modify any

statutory or regulatory provision’’ is limited

to the definition of ‘‘modify’’ that was

adopted for an unrelated telecommunications

statute, and ‘‘does not authorize major

changes.’’ Jan. 2021 Mem. at 6. The

memorandum draws its definition of modify

from MCI Telecomms. Corp. v. Am.

Telephone & Telegraph Co., 512 U.S. 218,

225 (1994). In that case, the statutory

provisions under review applied no clear

limiting principle to a grant of modification

authority to the FCC; the statute allowed

modifications ‘‘in [the FCC’s] discretion and

for good cause shown.’’ Id. at 224 (quoting 47

U.S.C. 203 (1988 ed. and Supp. IV)). Here,

the HEROES Act itself clearly speaks to the

scope of modification authority: the Secretary

may make those modifications as may be

‘‘necessary to ensure’’ specific enumerated

purposes. 20 U.S.C. 1098bb. The Secretary

may not make modifications going beyond

that limit, but nor is he restricted to a degree

of modifications that would fall short of

‘‘ensur[ing]’’ the enumerated purposes are

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achieved. Moreover, the HEROES Act

broadly authorizes the Secretary to act as he

‘‘deems necessary’’ to ‘‘waive or modify’’ any

statutory or regulatory provision applicable

to the student aid program. The January 2021

memorandum’s interpretation of ‘‘modify’’

would read the Act to authorize the Secretary

to waive entirely or to make non-major

changes in the relevant statutory or

regulatory provisions, but not authorize the

Secretary to do anything in between. That

interpretation is illogical, and nothing in the

HEROES Act’s broad grant of authority

supports such a reading.

We have discussed these and other aspects

of the January 2021 memorandum with the

Office of Legal Counsel, and we further find

persuasive the discussion of the January 2021

memorandum offered in the Office of Legal

Counsel’s memorandum, which will be

published in tandem with this

memorandum’s recommended publication.

Conclusion

For the reasons detailed above, I

recommend that you (1) determine that the

January 2021 memorandum is formally

rescinded as substantively incorrect and (2)

authorize publication in the Federal Register

and public posting of this memorandum as

the Department’s interpretation of the

HEROES Act.

[FR Doc. 2022–18731 Filed 8–29–22; 8:45 am]

BILLING CODE 4000–01–P

DEPARTMENT OF ENERGY

Proposed Agency Information

Collection

AGENCY: Bonneville Power

Administration, Department of Energy.

ACTION: Submission for Office of

Management and Budget (OMB) review;

comment request.

SUMMARY: The Department of Energy

(DOE), Bonneville Power

Administration (BPA), invites public

comment on a collection of information

that BPA is developing for submission

to OMB pursuant to the Paperwork

Reduction Act of 1995. The proposed

collection, Contractor Safety, will be

used to manage portions of the Safety

program that are related to contractors.

These collection instruments allow for

compliance with Occupational Safety

and Health Administration (OSHA)

requirements.

DATES: Comments regarding this

proposed information collection must

be received on or before October 31,

2022. If you anticipate any difficulty in

submitting comments within that

period, contact the person listed in the

FOR FURTHER INFORMATION CONTACT

section as soon as possible.

ADDRESSES: Written comments and

recommendations for the proposed

information collection should be sent

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DELIBERATIVE / PRE-DECISIONAL / CONFIDENTIAL

UNITED STATES DEPARTMENT OF EDUCATION

THE UNDER SECRETARY

DATE:

August 24, 2022

TO:

Miguel A. Cardona, Ed.D.

Secretary of Education

FROM:

James Kvaal

Under Secretary of Education

SUBJECT:

Pandemic-Connected Loan Cancellation

In March 2020, Congress determined that, in light of the COVID-19 pandemic, it was necessary

to provide relief to student loan borrowers by suspending certain payments and collections

activity, and temporarily setting certain interest rates to zero percent. Under the authority granted

to the Secretary of Education by the Higher Education Relief Opportunities for Students Act of

2003 (“HEROES Act”), you previously extended this relief through August 31, 2022.

This payment pause has delivered substantial relief to millions of loan borrowers, seeking to

ensure that they are not in a worse position financially due to the pandemic. However, when loan

payments resume, many borrowers will be at heightened risk of loan delinquency and default

that could offset the benefits provided by the pause and leave borrowers worse off than they were

before the pandemic. As outlined in the attached analysis prepared by your advisors, many

borrowers will experience challenges in the transition back to repayment. Additional steps are

needed to address these challenges and reduce the likelihood of delinquency and default to

ensure that borrowers are not in a worse position financially due to the pandemic with regard to

their ability to repay their loans.

In order to ensure that borrowers subject to the payment pause are not placed in a worse position

financially by the COVID-19 national emergency as they restart payments, I recommend that

you exercise your discretion under the HEROES Act to issue waivers and modifications

necessary to effectuate the following actions:



Discharge $10,000 of federal student loan balances for borrowers with individual

incomes of under $125,000 or household incomes of under $250,000 during tax years

2020 or 2021. These discharges would be limited to loans that were originally

outstanding as of June 30, 2022, and that are currently subject to the payment pause,

including Direct Loans, Federal Family Education Loans held by the Department or by

guaranty agencies, and Federal Perkins Loans held by the Department.



Discharge an additional $10,000 in federal student debt for borrowers who meet these

requirements and who also received a Pell Grant at some point in the past.

400 MARYLAND AVE., S.W., WASHINGTON, DC 20202

www.ed.gov

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Page 2



Take the administrative steps needed to implement this discharge initiative, including the

collection, maintenance, use, and dissemination of borrower information necessary to

establish eligibility for the discharge under the relevant criteria and provide benefits

under the initiative automatically to as many borrowers as possible utilizing income

information available to the Department in compliance with applicable law.



Develop a simple process for borrowers to attest to their incomes and for FSA to verify

the income of a sample of those borrowers.

Based on current economic and public health conditions, and to provide time to successfully

implement these measures needed to ensure that borrowers are not placed in a worse position

financially due to the pandemic, I also recommend that you extend those waivers and

modifications specified in the December 11, 2020, Federal Register notice (85 Fed. Reg. 79856),

that relate to the payment and collection of, and accumulation of interest on, federal student

loans, and also extend the corresponding pause for Federal Family Education Loan Program

loans held by guaranty agencies, as discussed in Dear Colleague Letter GEN-21-03 through

December 31, 2022. Because this extension is expected to be the final extension of the payment

pause, I further recommend that you direct FSA to take all necessary steps to restart loan

payments after December 31, 2022.

If you approve these recommendations, please sign the attached memorandum to the Chief

Operating Officer of Federal Student Aid.

Attachments:

1. Rationale for Pandemic-Connected Loan Cancellation Program

2. Memorandum to Chief Operating Officer Cordray prepared for your signature

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Rationale for Pandemic-Connected Loan Discharge Program

August 24, 2022

Background

In March 2020, Congress determined that, in light of the COVID-19 pandemic, it was necessary to

provide relief to student loan borrowers by suspending certain payments and collections activity, and

temporarily setting certain interest rates to zero percent. Under the authority granted to the Secretary of

Education by the Higher Education Relief Opportunities for Students Act of 2003 (“HEROES Act”), the

Secretary previously extended this relief through August 31, 2022.

This payment pause has delivered substantial relief to millions of loan borrowers, seeking to ensure that

they are not in a worse position financially due to the pandemic. However, when loan payments resume,

many borrowers will be at heightened risk of loan delinquency and default that could offset the benefits

provided by the pause and leave borrowers worse off than they were before the pandemic. Many

borrowers will experience challenges in the transition back to repayment. Additional steps are needed to

address these challenges and reduce the likelihood of delinquency and default to ensure that borrowers are

not in a worse position financially due to the pandemic regarding their ability to repay their loans. As

detailed below, the Department of Education could mitigate these consequences by taking the following

steps:



Discharging $10,000 of federal student loan balances for borrowers with individual incomes of under

$125,000 or household incomes of under $250,000 during tax years 2020 or 2021. These discharges

would be limited to loans that were originally outstanding as of June 30, 2022, and that are currently

subject to the payment pause, including Direct Loans, Federal Family Education Loans held by the

Department or by guaranty agencies, and Federal Perkins Loans held by the Department.



Discharging an additional $10,000 in federal student debt for borrowers who meet these requirements

and who also received a Pell Grant at some point in the past.

This paper summarizes the basis for and key design elements of this proposal and presents relevant

considerations and evidence. It is not an exhaustive list of all the decisions required to operationalize a

pandemic-connected loan discharge program, nor is it a complete inventory of all pieces of supporting

evidence the Department considered.

II.

Analysis

A. Potential Harm to Borrowers from the Pandemic as Payments Restart

The student loan payment pause, initiated at the outset of the pandemic, protected borrowers from

financial harm by allowing them to forgo payments, preventing any interest accrual on their debts, and

halting all collections on student loans. Despite these measures, many student loan borrowers remain at

risk of being placed in a worse position financially as a result of the COVID-19 pandemic and its

associated economic effects. Historical evidence suggests that loans are at heightened risk of delinquency

and default as they exit forbearance. Economic conditions and surveys of borrowers suggest that, absent

additional relief, the harmful effects of the pandemic may make repayment more difficult for student loan

borrowers than it was before the pandemic, especially for lower income borrowers.

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1. Risk of Delinquency and Default Following Long Periods of Forbearance

Past experience with student loan borrowers transitioning back into repayment after long periods of

forbearance raise concerns about the potential for elevated risk of delinquency and default. Although

there is no exact analogue for the circumstances surrounding the current payment pause, the Department

has previously provided borrowers experiencing local and regional natural disasters, such as hurricanes,

earthquakes, or wildfires, with access to forbearances with similar provisions. When borrowers accessing

natural disaster forbearances transitioned back into repayment, there were documented spikes in student

loan defaults.1

Analysis of the outcomes of borrowers placed in mandatory administrative forbearances triggered by

Hurricanes Maria, Harvey, and Irma and the northern California wildfires in late 2017 show that,

compared to the calendar year before the disaster declaration, the incidence of default increases

substantially six quarters later. Specifically, only 0.3 percent of borrowers entered default in the calendar

year before the declaration, while 6.5 percent of borrowers entered default in the calendar year after they

exited mandatory administrative forbearance.2

Furthermore, Pell Grant recipients affected by these events experienced larger increases in default

compared to non-recipients after exiting mandatory administrative forbearance. While Pell Grant

recipients and non-recipients had similar probabilities of entering default in the calendar year prior to the

disaster declaration, 7 percent of Pell borrowers enter default in the calendar year after exiting mandatory

administrative forbearance compared to 5 percent of non-recipients.3

2. Current Economic Conditions Facing Borrowers

Borrowers themselves report that they will be less likely to keep up with repayments on their student loan

debt when payments resume, despite benefiting from the repayment pause and stimulus support during

the course of the pandemic. Among borrowers with income below $125,000 who had also been making

payments in 2019, a substantially higher number anticipate having trouble making full payments in the

future than reported not making regular payments before the pandemic. For example, of those with

income under $40,000. only 26 percent reported never or occasionally making full payments in 2019, but

51 percent in this group expect to have difficulty making full or even any payments in the future. Of those

with income between $40,000 and $75,000, 18 percent were unable to make full payments in 2019, but 36

percent expect to be unable to cover their monthly payments in the future. Similarly, for borrowers with

income between $75,000 and $125,000, 18 percent reported making occasional or no payments prior to

the pandemic, but 24 percent expect to make less than full payment when the pandemic forbearance

ends.4

Because borrowers expect increased payment difficulties, even after accounting for the benefits they

received from the repayment pause and stimulus, it is likely that the net effect of the pandemic—absent

Kaufman, Ben. "New Data Show Student Loan Defaults Spiked in 2019-A Warning to Industry and DeVos Amid

Economic Fallout," Student Borrower Prot. Ctr., Mar. 13, 2020.

Department of Education analysis of administrative data. These analyses are based on borrowers who had at least

one active Department of Education-held loan, were placed in mandatory administrative forbearance for at least one

day in the period spanning a week prior to the disaster start date and 90 days after this date, and who had an address

in a state (and county, when relevant) that was a federally declared disaster area.

Ibid. Information on income is not available for most borrowers placed in mandatory administrative forbearance

following these federally declared major disasters, thus a similar analysis exploring default rates among borrowers

with different incomes was not feasible.

Akana, Tom, and Dubravka Ritter. "Expectations of Student Loan Repayment, Forbearance, and Cancellation:

Insights from Recent Survey Data." Federal Reserve Bank of Philadelphia, 2022, Table 1.

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other compensatory actions—would be to increase delinquency rates further. If borrowers’ recollections

of past repayment success and expectations for future repayment capacity translate directly into their

future repayment success, borrowers’ delinquency rates will be higher than pre-pandemic levels when

those compensatory actions end, absent additional relief.

Research by the Consumer Financial Protection Bureau using credit bureau data provides evidence from

the balance sheets of student loan borrowers that substantiates the concerns reported by borrowers in the

above survey. While delinquencies on non-student debt among student loan borrowers dipped during

2020, delinquencies rose in the second half of 2021, and have since returned to pre-pandemic levels,

despite the fact that most student loans remained in forbearance.5 The authors suggest that non-student

debt delinquencies rose as pandemic interventions were retired. Borrowers who have defaulted on their

student loans are also more likely to be under water on other types of debt.6

For lower-income student loan borrowers, delinquency rates on non-student loan debt were higher in

February 2022 than in March 2020 before the start of the pandemic.7 These rising delinquency rates

suggests that these borrowers’ student loan delinquency rates also would have risen, had repayments not

been paused. In fact, we would expect difficulties keeping up with debt payments to be even higher if

individuals had not received the benefit of the repayment pause and other stimulus support. These

findings also suggest that, absent additional relief, when the student loan repayment pause ends, student

loan delinquency rates will follow a similar trajectory as other debt delinquency rates and increase.

Analyses of credit report data by the Federal Reserve Bank of New York comparing federally owned

loans (which benefitted from the pause) to federally guaranteed loans and private student loans (which did

not) concluded that borrowers with commercially held FFEL loans who were not protected by the

payment pause saw their delinquency rates return to pre-pandemic levels, despite other forms of

economic support.8 These borrowers’ delinquency rates would likely have been higher if not for this

support. The study concluded that, absent further relief, when payments resume, borrowers will likely

experience increased delinquencies on federal student loans and other types of debt beyond pre-pandemic

levels.9

The rise of inflation to levels not seen in 40 years also creates significant pressures on family budgets and

thus raises the risk of delinquency and default. Initially, COVID-induced supply-chain disruptions in

tandem with strong demand for consumer goods led inflation to begin to accelerate in the spring of 2021,

although other factors (such as Russia’s invasion of Ukraine) have also contributed recently.10 Research

also suggests that inflationary pressures are most acute for those with lower incomes, particularly as

prices are rising quickly for basic necessities, including energy, food, and shelter costs.11

Conkling, Thomas S., Christa Gibbs, and Vanessa Jimenez-Read. "Student Loan Borrowers Potentially At-Risk

When Payment Suspension Ends." Consumer Financial Protection Bureau Office of Research, forthcoming.

Blagg, Kristin. "Underwater on Student Debt: Understanding Consumer Credit and Student Loan Default." Urban

Institute, 2018.

Conkling, Thomas S., Christa Gibbs, and Vanessa Jimenez-Read. "Student Loan Borrowers Potentially At-Risk

When Payment Suspension Ends." Consumer Financial Protection Bureau Office of Research, forthcoming.

Goss, Jacob, Daniel Mangrum, and Joelle Scally. “Student Loan Repayment during the Pandemic Forbearance,”

No. 20220322. Federal Reserve Bank of New York, 2022.

Ibid.

LaBelle, Jesse, and Ana Maria Santacreu. "Global supply chain disruptions and inflation during the COVID-19

pandemic." Federal Reserve Bank of St. Louis Review (2022).

Argente, David, and Munseob Lee. "Cost of Living Inequality During the Great Recession." Journal of the

European Economic Association, 19.2, 2021, pp. 913-952. Also see, Larsen, Daryl, and Raven S. Molloy.

“Differences in Rent Growth by Income 1985-2019 and Implications for Real Income Inequality.” No. 2021-11-053, Board of Governors of the Federal Reserve System (US), 2021.

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Borrowers who go delinquent or default on their student loans suffer substantial negative penalties. The

Department reports loans more than 90 days delinquent or in default to the major national credit bureaus,

which has been shown to be correlated with a 50-to-90-point drop in borrowers’ credit scores.12 These

notations can remain on borrowers reports for up to seven years, making insurance, rent, and other

financial products less affordable and hinder borrowers’ ability to get a job.13 Borrowers who default lose

access to affordable repayment options and flexibilities at the same time their balances become due

immediately. Additionally, their accounts are subject to collection feeds and involuntary collections like

wage garnishment, Treasury offset, and litigation.

B. Pandemic-Connected Loan Discharge Will Reduce These Harms

1. Discharges Are Likely to Reduce Delinquency and Default Rates

An immediate discharge of loan balances would mitigate the financial harm caused by the pandemic for

millions of borrowers by eliminating debt entirely or reducing the monthly payment burden. Balance

elimination or reduction is likely to reduce delinquency and default and increase short- and long-term

repayment success.

Reducing student loan balances can improve borrowers’ ability to repay remaining debts. In a study of the

effects of private student loan discharges provided to borrowers in default, researchers found that

following debt discharges of approximately $8,000, borrowers reduced their total liabilities (excluding

student loans) by more than $4,500.14 Additionally, borrowers were less likely to be delinquent on other

accounts, file for bankruptcy, be subject to foreclosure, or default on mortgages or medical bills following

debt relief.15

Studies of mortgage modifications have shown that reducing monthly payments can have a significant

ameliorative effect on delinquency and foreclosure: lenders have found that payment reductions of

between about 20 percent and 30 percent were effective in reducing defaults.16 A study of the JPMorgan

Chase Institute’s short-term payment reduction program found that every 1 percent of payment reduction

reduced default rates by about 1 percent.17

Loan discharges can reduce delinquency and default risks even though borrowers have other options to

reduce monthly payments, like income-driven repayment (IDR) plans. Many borrowers who are eligible

for IDR plans are not yet enrolled. Recent research from the JPMorgan Chase Institute, for instance,

showed that 22 percent of their sample were eligible for IDR but not enrolled.18 The Federal Reserve

Bank of Philadelphia’s survey study notes that lower-income individuals were much less likely to expect

Blagg, Kristin. "Underwater on Student Debt: Understanding Consumer Credit and Student Loan Default." Urban

Institute, 2018.

Elliott, Diana and Ricki Granetz Lowitz. "What Is the Cost of Poor Credit?." Urban Institute, 2018; Corbae, Dean,

Andrew Glover, and Daphne Chen. "Can Employer Credit Checks Create Poverty Traps?" 2013 Meeting Papers,

No. 875, Society for Economic Dynamics, 2013.

Di Maggio, Marco, Ankit Kalda, and Vincent Yao. “Second Chance: Life Without Student Debt.” No. w25810,

National Bureau of Economic Research, 2019.

Ibid.

An, Xudong, et al. “Inequality in the Time of COVID-19: Evidence from Mortgage Delinquency and

Forbearance.” No. 21-09, Federal Reserve Bank of Philadelphia, 2021.

Ganong, Peter, and Pascal Noel. "Liquidity versus wealth in household debt obligations: Evidence from housing

policy in the great recession." American Economic Review, 110.10, 2020, pp. 3100-3138.

Greig, Fiona and Daniel M. Sullivan. “Income Driven Repayment: Who Needs Student Loan Payment Relief?”,

JP Morgan Chace Institute, June 2022.

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to make full payments notwithstanding the existence of IDR plans.19 The visibility of a student loan

discharge program, combined with the clear benefit to borrowers, will likely attract these borrowers to

apply in numbers that FSA’s efforts to increase enrollment in IDR have not.

Loan discharge may also indirectly reduce delinquency and default rates. The Department intends to use

the attention generated by loan discharges, and the likely applications filed by millions of borrowers, to

encourage borrowers to take advantage of other federal repayment benefits and protections like IDR.

Borrowers using income-driven repayment plans have significantly lower rates of default and delinquency

than borrowers who do not use those plans.20 The loan cancellation process will also require borrowers to

provide updated contact information that will improve targeted communications and interventions toward

borrowers at risk delinquency and default. An Urban Institute scholar recently recommended a similar

approach, making loan cancellation contingent on borrowers restarting payments, for similar reasons.21

2. Amount of Debt to Discharge

Given the Department’s goals, it should discharge an amount of debt necessary to significantly decrease

the rates of delinquency and default. Although discharging the entire loan amount would permanently

avoid this harm, lesser discharge amounts will mitigate the risk that delinquency and default rates will rise

above pre-pandemic levels.

If the Department forgave up to $20,000 in debt, the Department estimates that if all borrowers claimed

the relief they were entitled to, approximately 20 million borrowers would have their loan eliminated

entirely.22 Borrowers with low balances tend to have lower incomes and higher default rates.23 Thus, lowbalance borrowers are at particular risk of being in a worse financial position because of the pandemic

absent further relief.

Department estimates suggest that, if all borrowers claimed the benefits to which they are entitled, an

additional 23 million borrowers would see their balances reduced, with median debt falling from $29,400

to $13,600.24 The Department would reamortize borrowers’ remaining balances to reduce monthly

payments after applying the discharge.

The Department estimates the payment pause has saved the average borrower in repayment

approximately $233 a month.25 Among vulnerable borrowers, a similar $200 to $300 reduction in

monthly payments could be achieved by the proposal. As a result, for many borrowers, the balance

reduction provided by discharge would reduce monthly payments at similar levels to the relief provided

during the pause. For example, for a hypothetical borrower midway through loan repayment, the

Akana, Tom, and Dubravka, Ritter. "Expectations of Student Loan Repayment, Forbearance, and Cancellation:

Insights from Recent Survey Data." Federal Reserve Bank of Philadelphia, 2022, Table 1.

Conkling, Thomas S., and Christa Gibbs. "Borrower experiences on income-driven repayment." Consumer

Financial Protection Bureau Office of Research Reports Series, 19-10, 2019.

Chingos, Matthew. "How Forgiveness Could Support the Student Loan Restart." Urban Institute, 2022.

Department of Education estimates using administrative federal student aid data and imputed income from Census

data.

Scott-Clayton, Judith. “The looming student loan default crisis is worse than we thought.” Brookings Institution

Evidence Speaks Reports, Vol. 2, #34, 2018; Looney, Adam, and Constantine Yannelis. "A crisis in student loans?:

How changes in the characteristics of borrowers and in the institutions they attended contributed to rising loan

defaults." Brookings Papers on Economic Activity, 2015, no. 2, 2015, pp. 1-89.

Department of Education estimates using administrative federal student aid data and imputed income from Census

data.

Department of Education estimates using administrative federal student aid data.

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estimated reduction in median balances from $29,400 to $13,600 would result in an approximately $300

reduction in monthly payments.26

Studies of mortgage modification programs have shown that payment reductions of between 20 and 30

percent are effective at reducing the rate of delinquency.27 Using administrative data, the Department

estimates that if all borrowers claimed the benefits to which they were entitled, among borrowers who do

not receive full forgiveness, a maximum benefit of $10,000 in cancellation would lead to a median

reduction in payments of 31 percent, while a maximum benefit of $20,000 in cancellation (where the

additional relief is only available to Pell recipients) would lead to a median reduction in payments of 38

percent.28

C. Borrower and Loan Eligibility

3. Borrower Income Threshold

Many borrowers have been harmed by the pandemic and may be at greater risk of delinquency or default

than they were before the pandemic. However, not all borrowers are equally at risk of these outcomes.

Research shows that student loan repayment is correlated with income, and lower income borrowers are

more likely to experience delinquency and default.29

Borrowers who are either individuals with incomes under $125,000 or belong to households with incomes

under $250,000 are more likely than individuals above those thresholds to experience financial hardship

in making payments on their loans when payments resume.

Specifically, a borrower on the standard 10-year plan with an original balance of $29,400, a 5 percent interest rate,

and five years of payments remaining would see these benefits

An, Xudong, et al. “Inequality in the Time of COVID-19: Evidence from Mortgage Delinquency and

Forbearance.” No. 21-09, Federal Reserve Bank of Philadelphia, 2021; Ganong, Peter, and Pascal Noel. "Liquidity

versus wealth in household debt obligations: Evidence from housing policy in the great recession." American

Economic Review, 110.10, 2020, pp. 3100-3138.

These estimates would apply to a borrower who receives forgiveness but does not have their balance fully

discharged and who has made their scheduled payments on the 10-year standard repayment plan since entering

repayment.

Looney, Adam, and Constantine Yannelis. "A crisis in student loans?: How changes in the characteristics of

borrowers and in the institutions they attended contributed to rising loan defaults." Brookings Papers on Economic

Activity, 2015, no. 2, 2015, pp. 1-89.

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Inconsistent Payments

Evidence from the Federal Reserve Bank of Philadelphia’s Consumer Finance Institute COVID-19 Survey

of Consumers establishes the $125,000 income mark as a reasonable ceiling for discharge eligibility. As

would be expected, borrowers with lower incomes have a lesser ability to make consistent payments on

their loans. The survey shows that borrowers with incomes between $100,000 and $124,000 have rates of

payment inconsistency – that is, the percentage of respondents who reported making no or “occasional”

payments for their loans in 2019 – that are nearly double what they are for those with incomes between

$125,000 and $149,000 (see Figure 1).

Rates of regular repayment for borrowers earning $125,000 or above are roughly 14 percentage points (or

20%) above what they are for those earning between $100,000-$124,000.30 This suggests that the average

borrower earning above $125,000 entered the pandemic on firmer financial footing with regards to loan

payments, relative to those earning below the eligibility ceiling (see Figure 2).

Analyses based on unpublished data provided by the Federal Reserve Bank of Philadelphia.

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Future Payment Capacity

Lower-income borrowers are less likely to report being able to repay future loans, an indicator of risk of

delinquency or default. There is a break in repayment capacity at around $125,000. After forbearance,

nearly 20 percent of borrowers earning between $100,000 and$124,000 expect to experience difficulty

repaying loans, compared to 14 percent of those earning above $125,000 (see Figure 3).

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Financial Security

The financial insecurity of those with student loans falls as income rises, declining particularly steeply

above $125,000. Financial insecurity rates for borrowers with incomes between $100,000 and $124,000

are more than double those for borrowers with incomes between $125,000 and $149,000. Education loan

holders with incomes exceeding the discharge eligibility ceiling report more positive sentiments

concerning their financial security: only about 10 percent of borrowers with incomes greater than

$125,000 report financial insecurity (see Figure 4).31

Ibid.

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Income and the Pandemic

Survey data indicates that lower-income workers were disproportionately likely to become unemployed in

the beginning of the pandemic.32 In the summer of 2021, a Brookings analysis found that low-wage

earners were overrepresented among “displaced” workers (workers on “permanent” layoff, meaning they

lost their jobs and were not called back).33 A rich economic literature indicates that such unemployment

can have long-term scarring effects.34 Students who left school in 2020 and 2021 are also projected to

experience significant reductions in lifetime earnings.35

Because of this pattern of job loss, lower-income households also experienced greater material hardship

due to the pandemic.36 Compared with adults whose family employment was unaffected by the pandemic,

they were twice as likely to report food insecurity, nearly three times as likely to report problems paying

utility bills, and nearly four times as likely to report problems paying the rent or mortgage.

Adams-Prassl, Abi, et al. "Inequality in the Impact of the Coronavirus Shock: Evidence from Real Time Surveys."

Journal of Public Economics, 189, 104245, 2020; Despard, Mathieu, et al. “Covid-19 Job and Income Loss Leading

to More Hunger and Financial Hardship.” Brookings, 9 Mar. 2022.

Bateman, Nicole, and Martha Ross. "The pandemic hurt low-wage workers the most and so far, the recovery has

helped them the least." Brookings, 2021.

Mroz, Thomas A., and Timothy H. Savage. "The Long-term Effects of Youth Unemployment." Journal of Human

Resources, 41.2, 2006, pp. 259-293; Kahn, Lisa B. "The long-term labor market consequences of graduating from

college in a bad economy." Labour economics, 17.2, 2010, pp. 303-316; Schwandt, Hannes, and Till Von Wachter.

"Unlucky cohorts: Estimating the long-term effects of entering the labor market in a recession in large crosssectional data sets." Journal of Labor Economics, 37.S1, 2019, pp. S161-S198.

Friedman, John. “Lifetime Earnings Effects of the COVID-19 Recession for Students.” Opportunity Insights

Economic Tracker (2021).

Karpman, Michael, and Stephen Zuckerman. "Average Decline in Material Hardship During the Pandemic

Conceals Unequal Circumstances." Urban Institute, 2021.

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A literature review from the Department of Health and Human Services highlighted the disproportionate

job losses for low-wage workers and the wide-reaching impacts of job loss on material hardship and food

insecurity.37 The review emphasizes that among low-wage workers, women and people of color were

disproportionately impacted. The review notes that many COVID-19 relief measures initially missed, or

were insufficient for, low-income families.

4. Past Pell Receipt

A disproportionate number of Pell Grant borrowers are low-income. An analysis of Pell Grant borrowers

for whom the Department has income information (from a FAFSA application or an IDR application)

suggests that 99 percent of Pell Grant recipients have incomes below $125,000.38

Borrowers’ status as former Pell recipients provides independent and valuable measures of their risk of

delinquency and default, even in addition to current income. Rather than evaluating a borrower’s current

income, Pell Grant eligibility is based upon a broader set of data intended to be a more complete measure

of family financial resources at the time of application. Because Pell Grant eligibility is determined on

the basis of financial need, recipients typically have lower wealth and familial monetary resources at the

time of receiving the grant.

US Department of Health and Human Services, “The Impact of the First Year of the COVID-19 Pandemic and

Recession on Families with Low Incomes.” 2021.

Department estimates using administrative data on Pell Grant borrowers who submitted a FAFSA or IDR

application with 2020 or 2021 income information.

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Borrowers who received a Pell Grant in the past are at greater risk of delinquency and default, regardless

of current income. Forty-two percent of Pell recipients default on their loans at least once, compared to

just 18 percent of borrowers who never received a Pell Grant – a 24 percentage point difference. The

relationship holds even when controlling for a borrower’s imputed income. Indeed, at every band of

imputed income, Pell Grant recipients are roughly twice as likely to default on their loans as non-Pell

students.39

Moreover, the default rates for Pell Grant recipients with lower imputed income are especially high, with

at least one in three Pell recipients in every imputed income band below $125,000 defaulting at least

once. For borrowers with imputed incomes between $100,000 and $125,000, 32 percent of Pell Grant

recipients default at least once, compared to 13 percent of non-Pell Grant recipients.40

Among enrolled students, Pell Grant recipients were disproportionately likely to be financially harmed by

the pandemic. One recent study found that enrolled Pell Grant recipients were 20 percent more likely to

lose a job during the pandemic, 17 percent more likely to see a drop in earnings, and 65 percent more

likely to report facing food and housing insecurity than students who never received a Pell grant.41

Past experience suggests that past Pell recipients also struggle with their student loans at higher rates than

their peers. A study that focused on borrowers who entered repayment before and after the Great

Recession showed that Pell Grant recipients saw larger declines in repayment rates than non-Pell

recipients.42 As noted above, Pell Grant recipients also saw larger increases in default rates following

recent natural disaster forbearances.

5. Parental Income for Dependent Students

The federal government has long considered parents’ resources in allocating financial aid for enrolled

dependent students. For example, under the Higher Education Act, parental income is a factor in

dependent student borrowers’ eligibility for financial aid, including student loans. Congress has long

varied the origination terms of certain loans based upon families’ ability to repay by providing subsidized

student loans.

While current income is an effective indicator of former students’ capacity to repay, it is not adequate to

assess current students’ ability to repay because most current students have low incomes. In this context,

the Higher Education Act has long recognized that family income is a better indicator of capacity to repay

because it is strongly correlated with children’s expected income.

Each year, between 4 and 5 million borrowers enter repayment for the first time.43 The pandemic has also

caused additional borrowers to separate from school and enter repayment.44 In fact, hundreds of thousands

of borrowers leave mid-way through the semester or do not re-enroll the next semester. Additionally,

around 300,000 borrowers make payments on their loans while they are in school.45 Altogether, there is a

Department of Education estimates using administrative federal student aid data and imputed income from Census

data.

Ibid.

Rodríguez-Planas, Núria. "Hitting Where It Hurts Most: COVID-19 and Low-Income Urban College Students."

Economics of Education Review, 87, 102233, 2022.

Blagg, Kristin and Erica Blom. “Student debt repayment fell during the Great Recession. Borrowers from lowincome backgrounds saw the steepest decline.” Urban Institute, 2018.

US Department of Education, “Digest of Education Statistics 2021.” 2021, Table 332.50.

Saul, Stephanie. “College Enrollment Drops, Even as the Pandemic's Effects Ebb.” The New York Times, 26 May

2022.

Based on analysis of 2019 FSA student loan data.

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significant population of borrowers who were enrolled last year but will nonetheless be impacted by

resumption of payments.

6. Limitation to Existing Loans

The proposal would apply to loans that were outstanding on June 30, 2022, the end of the 2022-23

academic year. The terms of financial aid policies – such as the interest rate on new student loans and the

maximum Pell grant – typically change each July 1. Moreover, extending eligibility into the new

academic year risks generating incentives to borrow additional loans in anticipation of cancellation. It

would also create arbitrary results based upon a school’s academic schedule, the efficiency of its financial

aid office, and the order in which it processed a particular student’s financial aid awards.

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.