Amicus Curiae Brief — Alaska, et al., Applicants v. Department of Education, et al.

No. 24A11

_________________________ _______________________

IN THE

Supreme Court of the United States

STATES OF ALASKA, SOUTH CAROLINA, AND TEXAS,

Applicants,

v.

DEPARTMENT OF EDUCATION, ET AL.,

Respondents.

_________________________ ________________________

On Application to the Honorable Neil M. Gorsuch, Associate Justice of

the Supreme Court of the United States and Circuit Justice for the

Tenth Circuit, for Vacatur of Stay of Preliminary Injunction

AMICI CURIAE BRIEF OF THE NEW CIVIL LIBERTIES ALLIANCE, THE CATO INSTITUTE,

THE MACKINAC CENTER FOR PUBLIC POLICY, AND DEFENSE OF FREEDOM INSTITUTE

FOR POLICY STUDIES IN SUPPORT OF APPLICANTS’ REQUEST FOR VACATUR OF STAY

Sheng Li

Counsel of Record

Russell G. Ryan

Markham S. Chenoweth

NEW CIVIL LIBERTIES ALLIANCE

1225 19th St. NW, Suite 450

Washington, DC 20036

(202) 869-5210

Sheng.li@ncla.legal

Patrick J Wright

MACKINAC CENTER FOR PUBLIC POLICY

140 West Main Street

Midland, MI 48640

(989) 631-0900

wright@Mackinac.org

Clark M. Neily III

CATO INSTITUTE

1000 Massachusetts Ave., NW

Washington, DC 20001

(202) 218-4631

cneily@cato.org

Donald A. Daugherty, Jr.

DEFENSE OF FREEDOM INSTITUTE FOR

POLICY STUDIES

1455 Pennsylvania Avenue, NW

Suite 400

Washington, DC 20004

(414) 559-6902

Don.Daugherty@dfipolicy.org

July 16, 2024

Counsel for Amici Curiae

TABLE OF CONTENTS

TABLE OF CONTENTS ............................................................................................................ i

TABLE OF AUTHORITIES ..................................................................................................... ii

INTEREST OF THE AMICI CURIAE ................................................................................... 4

INTRODUCTION AND SUMMARY...................................................................................... 5

ARGUMENT ................................................................................................................................ 8

I.

APPLICANT STATES HAVE STANDING IN THEIR CAPACITY AS PSLF-QUALIFYING

EMPLOYERS..................................................................................................................... 8

II. THE 1993 HEA AMENDMENTS DO NOT AUTHORIZE SAVE ..................................... 11

A.

The 1993 HEA Amendments Require Repayment Rather than

Cancellation of Student-Loan Debt ................................................................... 11

B.

The Department’s Contrary Interpretation Results in an

Unconstitutional Delegation of Legislative Power ........................................ 16

III. SAVE IS ARBITRARY AND CAPRICIOUS UNDER OHIO V. EPA ................................... 18

CONCLUSION .......................................................................................................................... 23

i

TABLE OF AUTHORITIES

Page(s)

CASES

ABA v. U.S. Dep’t of Educ.,

370 F. Supp. 3d 1 (D.D.C. 2019) .......................................................................................... 9

Am. Power & Light Co. v. SEC,

329 U.S. 90 (1946) ................................................................................................................. 16

Biden v. Nebraska,

143 S.Ct. 2355 (2023) ............................................................................................................. 5

CFPB v. Cmty. Fin. Servs. Ass’n of Am., Ltd.,

601 U.S. 416 (2024)............................................................................................................... 12

Dep’t of Transp. v. Ass’n of Am. R.Rs.,

575 U.S. 43 (2015) ................................................................................................................. 16

Gundy v. United States,

588 U.S. 128 (2019)............................................................................................................... 16

Int’l Union v. OSHA,

938 F.2d 1310 (D.C. Cir. 1991)..................................................................................... 17, 18

Jarkesy v. SEC,

34 F.4th 446 (5th Cir. 2022) ............................................................................................... 17

Mexican Gulf Fishing Co. v. United States Dep't of Com.,

60 F.4th 956 (5th Cir. 2023) ............................................................................................... 22

Mistretta v. United States,

488 U.S. 361 (1989)............................................................................................................... 16

NRDC v. Perry,

940 F.3d 1072 (9th Cir. 2019)............................................................................................. 22

Ohio v. EPA,

No. 23A349, 2024 WL 3187768 (U.S. June 27, 2024) ................................... 7, 19, 21, 22

Sherley v. Sebelius,

610 F.3d 69 (D.C. Cir. 2010) ............................................................................................... 10

Sherley v. Sebelius,

689 F.3d 776 (D.C. Cir. 2012) ............................................................................................. 18

Whitman v. Am. Trucking Ass’ns.,

531 U.S. 457 (2001)............................................................................................................... 16

Yakus v. United States,

321 U.S. 414 (1944)......................................................................................................... 16, 18

ii

STATUTES

20 U.S.C. § 1078-10 .................................................................................................................. 12

20 U.S.C. § 1087e .............................................................................................. 7, 8, 9, 11, 12, 13

20 U.S.C. § 1098e .......................................................................................................... 12, 14, 15

31 U.S.C. § 1301 ........................................................................................................................ 12

College Cost Reduction and Access Act of 2007,

Pub. L. 110-84, 121 Stat. 784 (2007)................................................................................. 14

Health Care and Education Reconciliation Act of 2010,

Pub. L. No. 111-152, 124 Stat. 1029 (2010)..................................................................... 15

Omnibus Budget Reconciliation Act of 1993,

Pub. L. 103-66, 107 Stat. 312 (1993)................................................................................... 6

OTHER AUTHORITIES

Adam Looney,

Biden’s Income-Driven Repayment plan would turn student loans into

untargeted grants,

Brookings, September 15, 2022 ......................................................................................... 13

Barack Obama,

Remarks by the President in State of the Union Address, Speech given before

Congress, January 27, 2010................................................................................................ 15

Cong. Rsch Serv.,

The Federal Direct Student Loan Program (1995)........................................................ 14

DFI,

Comment on the Department’s Notice of Proposed Rulemaking (Feb. 10, 2023) .. 20

Hearing of the Senate Committee on Labor and Human Resources to Amend the

Higher Education Act of 1965,

103rd Cong. (1993) ................................................................................................................ 13

Matthew Chingos, et al.,

Few College Students Will Repay Student Loans under the Biden

Administration’s Proposal,

Urban Institute, January 19, 2023 ................................................................................... 13

REGULATIONS

34 C.F.R. § 685.219 ................................................................................................................ 8, 9

Improving Income Driven Repayment for the William D. Ford Federal Direct

Loan Program and the Federal Family Education Loan (FFEL) Program,

88 Fed. Reg. 43,820 (July 10, 2023) ...................................................... 6, 11, 15, 17, 20, 21

iii

INTEREST OF THE AMICI CURIAE 1

The New Civil Liberties Alliance (“NCLA”) is a nonpartisan, nonprofit civil

rights organization devoted to defending constitutional freedoms from the

administrative state’s depredations. The “civil liberties” of the organization’s name

include rights at least as old as the U.S. Constitution itself, such as jury trial, due

process of law, and the right to have laws made by the nation’s elected lawmakers

through constitutionally prescribed channels (i.e., the right to self-government).

NCLA is keenly interested in this case because it involves a profoundly troubling

assertion of administrative power and raises critically important issues of

constitutional and administrative law. NCLA was one of many commenters that

objected to the proposed Department of Education (“Department”) rule that

ultimately established the Saving on a Valuable Education (“SAVE”) student-loan

plan, which is the central focus of this case.

The Cato Institute is a nonpartisan public policy research foundation founded

in 1977 and dedicated to advancing the principles of individual liberty, free markets,

and limited government. Toward that end, Cato’s Robert A. Levy Center for

Constitutional Studies publishes books and studies about legal issues, conducts

conferences, produces the annual Cato Supreme Court Review, and files

amicus briefs in federal courts across the country, including in Biden v. Nebraska.

1 No counsel for a party authored this brief in whole or in part, and no counsel or

party made a monetary contribution intended to fund the preparation or submission

of this brief. No person other than amici or their counsel made a monetary

contribution to its preparation or submission.

4

The Mackinac Center for Public Policy is a Michigan-based, nonpartisan

research and educational institute advancing policies fostering free markets, limited

government, personal responsibility, and respect for private property. The Center is

a § 501(c)(3) organization founded in 1987.

Defense of Freedom Institute for Policy Studies (“DFI”) is a national nonprofit

organization dedicated to defending and advancing freedom and opportunity for every

American family, student, entrepreneur, and worker and to protecting the civil and

constitutional rights of Americans at school and in the workplace. Founded by former

senior leaders of the U.S. Department of Education in 2021, DFI contributes its

expertise to policy and legal debates concerning federal student-loan programs,

including by submitting a comment to the Department warning that its proposed

SAVE plan failed to consider the true cost of the plan and to comply with applicable

law.

INTRODUCTION AND SUMMARY

On June 30, 2023, before the ink dried on this Court’s decision in Biden v.

Nebraska, 143 S.Ct. 2355 (2023), which invalidated the Department’s plan to cancel

$430 billion in federal student loans by unlawfully rewriting the HEROES Act of

2003, the Secretary of Education announced a new and equally unlawful debtcancellation scheme. 2 Ten days later, the Department published a final rule

establishing the so-called SAVE repayment plan, entitled Improving Income Driven

2 See Department of Education, Secretary Cardona Statement on Supreme Court

Ruling on Biden Administration’s One Time Student Debt Relief Plan (June 30,

2023).

5

Repayment for the William D. Ford Federal Direct Loan Program and the Federal

Family Education Loan (FFEL) Program, 88 Fed. Reg. 43,820 (July 10, 2023). SAVE

rewrites 1993 amendments to the Higher Education Act, Omnibus Budget

Reconciliation Act of 1993, Pub. L. 103-66, 107 Stat. 312, 347–48 (1993) (“1993 HEA

Amendments”), to transform loan-repayment plans that Congress authorized into

loan-cancellation plans that Congress did not authorize and that would wipe out $475

billion of debt owed to the U.S. Treasury. The district court preliminarily enjoined

SAVE because it concluded Applicants “are likely to prevail” on their claim that “the

SAVE Plan exceeds the Secretary’s authority under the HEA.” App.29a. A divided

Tenth Circuit panel stayed that injunction in an unreasoned decision. App.1a.

The Court should vacate that stay that reinstates the district court’s injunction

because Applicant States are likely to succeed on the merits by showing that the 1993

HEA Amendments do not authorize SAVE. That law merely allows the Department

to establish repayment plans over a longer period so individual monthly payments

could be smaller for lower-income borrowers. Nothing in the 1993 HEA Amendments’

text nor legislative history suggests Congress granted the Department discretion to

design plans like SAVE that prioritize the cancellation of loans instead of their

repayment. Indeed, if the 1993 law granted such power, it would be unconstitutional

because it contains no intelligible principle to guide the Department’s discretion

regarding how generous it can make repayment plans. Otherwise, the Department

could design a plan that resulted in virtually all federal student loans being cancelled,

6

or none at all, or anything in between. Such unfettered discretion clearly violates the

Constitution’s vesting of all legislative powers in Congress.

The States are further likely to succeed on the merits given the Court’s recent

decision in Ohio v. EPA, No. 23A349, 2024 WL 3187768, at *9 (U.S. June 27, 2024).

The Department estimated the amount of debt that SAVE would cancel, i.e., its

budgetary cost, by assuming that $430 billion would already be cancelled under the

previous debt-cancellation plan that this Court invalidated a year ago, thereby

excluding that $430 billion entirely from its cost calculation for SAVE. Amicus DFI

and others warned in their public comments during the Department’s rulemaking

that the amount cancelled would be much higher if this Court struck down the

HEROES Act plan. The Department ignored those legitimate concerns and

promulgated SAVE without any reconsideration of how much debt it would cancel,

even after this Court halted the previous HEROES Act scheme. Such refusal to

address legitimate concerns over how much debt a debt-cancellation rule would

cancel is arbitrary and capricious and justifies a stay of the challenged rule under

Ohio.

Finally, Applicant States indisputably suffer concrete and irreparable injuries

because of the Department’s unlawful conduct. In addition to injuries set forth in

their application, SAVE further injures the States by undermining the competitive

advantages Congress bestowed on them through the Public Service Loan Forgiveness

(“PSLF”) program, which incentivized student-loan borrowers to seek and maintain

employment with state government agencies. See 20 U.S.C. § 1087e(m)(3)(B)(i)

7

(creating PSLF incentives for workers in “public service” jobs). Loss of that

competitive advantage would inflict a concrete injury against the States in their

capacity as employers needing to recruit and retain college-educated employees. This

competitive injury, which the States raised below, confers subject-matter jurisdiction

that allows the Court to halt the Department’s unconstitutional attempt to rewrite

laws and cancel debt owed to the Treasury.

ARGUMENT

I. APPLICANT STATES HAVE STANDING IN THEIR CAPACITY AS PSLF-QUALIFYING

EMPLOYERS

The district court correctly held that Applicant States have standing because

SAVE injures their state instrumentalities that service federal loans. App.56a-72a.

But even if that were not so, the States would still have standing in their capacity as

public-service employers. As the States argued below, SAVE injures them as

employers by undermining recruitment, shrinking the PSLF-subsidized labor pool,

and increasing labor costs. See Dkt. 57 (First Amended Complaint) ¶¶ 103-115; see

also Dkt. 24 at 10.

Congress established PSLF in 2007 to encourage individuals who owe

outstanding student-loan debt to seek and maintain employment with public-service

employers, including state-government agencies. 20 U.S.C. § 1087e(m)(3)(B)(i). PSLF

does this by promising borrowers that their outstanding loan balances will be

completely cancelled after 120 monthly payments (10 years) while working at

qualifying employers. Id.; see also 34 C.F.R. § 685.219. Because of PSLF, all else being

equal, working for a qualifying employer is more financially advantageous to student8

loan borrowers than working at the same pay (or even higher pay) at a nonqualifying

employer.

By offering these incentives to student-loan borrowers in the job market,

Congress purposefully gave qualifying public-service employers a valuable advantage

over nonqualifying employers in competing to recruit and retain college-educated

talent. PSLF benefits public-service employers “by providing significant financial

subsidies to the borrowers they hire,” thereby “increasing recruitment and lowering

labor costs.” ABA v. Dep’t of Educ., 370 F. Supp. 3d 1, 19 (D.D.C. 2019). The

Department’s own regulations acknowledge that PSLF was expressly created for the

benefit of public-service employers. 34 C.F.R. § 685.219(a). So, government action

that eliminates or reduces state employers’ PSLF competitive advantage inflicts an

economic injury that confers standing.

States are PSLF-qualifying employers and thus are among the employers that

Congress

intended

to

benefit

through

PSLF

incentives.

See

20

U.S.C.

§ 1087e(m)(3)(B)(i). State agencies rely on the ability to offer loan forgiveness to

attract employees who would otherwise take higher-paying private-sector jobs. SAVE

undermines PSLF benefits that States rely on by cancelling all debt for borrowers

who take out $12,000 or less after they make 10 years of monthly payments. 88 Fed.

Reg. at 43,820. Because these borrowers get their entire loan balance forgiven after

10 years, regardless of where they work (or whether they work at all), they have no

incentive under PSLF to seek or continue employment with public-service employers

like state agencies.

9

Consider a recent graduate who stands to earn $10,000 in PSLF forgiveness on

top of his normal salary after working ten years at a state agency, which works out

to extra compensation of $1,000 per year. This PSLF-deferred compensation means

it costs the state agency, for example, only $59,000 annually in salary and benefits to

offer $60,000 in effective annual compensation, as compared to for-profit employers

that are not PSLF-eligible. But SAVE cancels the same graduate’s $10,000 loan

balance after ten years of monthly payments, even if he never holds a public-service

job. The state agency no longer benefits from PSLF’s $1,000 per year wage subsidy in

its competition against for-profit employers to recruit that graduate. To remain

equally competitive as an employer, the agency’s labor cost must increase by $1,000

per year to match the effective compensation it provided to the employee before

SAVE. While the magnitude of this increase is different—and more complex to

calculate—if present value, tax effects, inflation, and the like were considered, the

direction of the effect remains the same: state agencies’ labor costs rise. Being forced

by the Department’s unlawful action to “invest more time and resources” to

successfully recruit employees “is an actual, here-and-now injury.” Sherley v.

Sebelius, 610 F.3d 69, 74 (D.C. Cir. 2010).

Such injury extends to retention of employees. Consider next a current state

employee who had an original loan balance of $10,000 and has been making monthly

payments while working in public service for the past eight years. Without SAVE,

she would have a financial incentive to stay in public service for two more years so

she can get the remaining balance of her loans forgiven under PSLF. However,

10

because of SAVE, she would get her debt canceled after two more years of monthly

payments regardless of where she works. She can thus switch to a higher-paying, forprofit job without any negative repercussions on her eligibility for debt cancellation.

SAVE thus completely negates recruitment and retention benefits that PSLF

confers on state employers with respect to borrowers affected by the ten-year

forgiveness provision. The loss of this competitive advantage in the labor market

inflicts direct and immediate competitive harm on the States as employers, which

satisfies the injury-in-fact requirement for Article III standing.

II. THE 1993 HEA AMENDMENTS DO NOT AUTHORIZE SAVE

A. The 1993 HEA Amendments Require Repayment Rather than Cancellation of

Student-Loan Debt

The Department claims SAVE is authorized by the 1993 HEA Amendments,

which states in relevant part that “income contingent repayment shall be based on

the [borrower’s] adjusted gross income,” and would “not … exceed 25 years.” 20 U.S.C.

§ 1087e(d)(1)(D), 1087e(e)(2). According to the Department, this language allows it to

design an income-contingent repayment plan with low monthly payments so that very

little debt will have been repaid by the end of the repayment period, at which point

the substantial remaining balance is cancelled. 88 Fed. Reg. at 43,827 (statute

requires “only that payments must be set based upon the borrower’s annual adjusted

gross income[.]”). There is no limiting principle. If the Department’s position were

accepted, it could, for instance, set the monthly payment cap at 1 percent of income

over $1 million, so that nearly all loans would be cancelled rather than repaid at the

end of the repayment term.

11

This boundless interpretation runs afoul of the 1993 law’s plain text, which

calls for “repayment” of debt with no mention of any authorization to cancel debt owed

to the Treasury. See 20 U.S.C. § 1087e. Any cancellation of federal student-loan debt

gives away “money otherwise destined for the general fund of the Treasury” and thus

involves an appropriation of funds. CFPB v. Cmty. Fin. Servs. Ass’n of Am., Ltd., 601

U.S. 416, 425 (2024). Congress made clear that a “law may be construed to make an

appropriation out of the Treasury … only if the law specifically states that an

appropriation is made[.]” 31 U.S.C. § 1301(d). Hence, when Congress authorizes debt

forgiveness, it uses explicit language. See, e.g., 20 U.S.C. §§ 1078-10(b) (“The

Secretary shall … assume[] the obligation to repay a qualified loan” for qualifying

teachers); 1087e(m)(1) (“The Secretary shall cancel the balance of interest and

principal due …” for borrowers who satisfy PSLF); 1098e(b)(7) (“the Secretary shall

repay or cancel any outstanding balance …” of eligible borrowers).

The lack of similarly explicit language in the 1993 income-contingent

repayment provisions confirms that Congress did not authorize the Department to

establish repayment plans that are designed to cancel debt. 3 Rather, the 1993 law

requires the Department to establish plans that provide for repayment of debt, albeit

3 The States rely on the Major Questions Doctrine to make a similar argument that

a clear statement is needed to authorize the mass cancellation of student loans. Br.

at 16-20. Amici agree but note that it is not necessary to invoke the Major Questions

Doctrine because 31 U.S.C. § 1301(d) already states that a clear statutory statement

is needed to authorize the expenditure of funds from the Treasury to pay for studentloan debt cancellation.

12

along a longer time horizon, “not to exceed 25 years,” 20 U.S.C. § 1087e(d)(1)(D), so

that monthly payments can be smaller for borrowers with lower income.

Then-Deputy Secretary of Education Madeline Kunin explained to Congress

in 1993 that income-contingent repayment would be cost-neutral in the long run: “As

to what the cost of [these plans] would be, we see it as a wash” because the

government “would eventually get paid” and “[t]here would be interest charged on

that, so it isn’t like [borrowers] are getting a free ride.” Hearing of the Senate

Committee on Labor and Human Resources to Amend the Higher Education Act of

1965, 103rd Cong. 48 (1993). 4 Cost neutrality is obviously incompatible with granting

the Department authority to design a repayment plan that ends up forgiving most

loans. 5 To be sure, Deputy Secretary Kunin acknowledged that some small portion of

loans might become uncollectable at the end of the payment period and “the Secretary

will make some designation as to when you call it quits and [borrowers] are forgiven.”

Id. As any participant in the loan industry knows, writing off some bad loans is an

unavoidable part of the business. But such write-offs are not the goal—repayment is.

An income-contingent repayment plan contains two essential variables: the

monthly payment cap; and the repayment term. If the term is short, then monthly

4 Available at: https://files.eric.ed.gov/fulltext/ED363187.pdf.

5 Analysts at the Brookings Institution and the Urban Institute estimate that SAVE

would cancel 50 percent or more of participants’ student-loan debt. Adam Looney,

Biden’s Income-Driven Repayment plan would turn student loans into untargeted

grants, Brookings, September 15, 2022. Matthew Chingos, et al., Few College

Students Will Repay Student Loans under the Biden Administration’s Proposal,

Urban Institute, January 19, 2023.

13

payments must be higher to ensure repayment. And if the term is long, then monthly

payments may be lowered. By limiting the maximum term to 25 years, Congress also

limited the extent to which the Department could lower monthly payments—they

cannot be so low that repayment is Sanot feasible within the 25-year term. Consistent

with this understanding, the Department’s original income-contingent plan allowed

a borrower’s monthly payment to be capped at 20 percent of income above the federal

poverty line. Cong. Rsch Serv., The Federal Direct Student Loan Program 10 (1995). 6

A lower cap, like the one offered under SAVE, would result in a plan that is not

designed to achieve repayment within the maximum 25-year terms. It would

impermissibly prioritize debt cancellation over the statutory text requiring the

Department to ensure debt “repayment.”

Subsequent legislation reinforces this conclusion. Because the original

income-contingent repayment plan based on the 1993 HEA Amendments was seen as

insufficiently generous, Congress enacted the College Cost Reduction and Access Act

of 2007 (“CCRA”), Pub. L. 110-84, 121 Stat. 784 (2007), which authorized incomebased repayment plans that reduce monthly payments to 15 percent of income above

150 percent of the poverty line. 20 U.S.C. § 1098e(a). Unlike the 1993 law, CCRA

contained explicit language authorizing loan cancellation after 25 years of payments.

Id. at §1098e(b)(7). Believing even more generosity was needed, President Obama

urged Congress in his 2010 State of the Union address to lower the payment cap to

“only 10 percent of their income [above 150 percent of the poverty line]” and to shorten

6 Available at: https://files.eric.ed.gov/fulltext/ED378875.pdf.

14

the payment period so “all of their debt will be forgiven after 20 years.” Barack

Obama, Remarks by the President in State of the Union Address, Speech given before

Congress, at 5, January 27, 2010. 7 Congress obliged and enacted these 10-percent

and 20-year proposals in the Health Care and Education Reconciliation Act of 2010,

Pub. L. No. 111-152, 124 Stat. 1029, § 2213 (2010) (HCERA), codified at 20 U.S.C. §

1098e(e).

The 2007 CCRA and the 2010 HCERA make no sense if the 1993 HEA

Amendments already authorized the Department to unilaterally design a more

generous repayment plan like SAVE. SAVE reduces monthly payments to only five

percent of income in excess of 225 percent of the poverty line, 88 Fed. Reg. at 43,820,

resulting in far more debt being cancelled instead of being repaid at the end of the

20-year repayment period as compared to HCERA. It also reduces the payment period

to only 10 years for certain borrowers, id., which further increases the amount of debt

cancelled rather than repaid. If the Department could have promulgated this plan

since 1993, as it now claims, then why did President Obama press Congress to enact

legislation to authorize less generous income-based repayment? The obvious answer

is that the 1993 law was never before understood to allow the Department to establish

a repayment plan that is more generous than what Congress explicitly authorized by

HCERA.

7 Available at: https://www.govinfo.gov/content/pkg/DCPD-201000055/pdf/DCPD-

201000055.pdf.

15

B. The Department’s Contrary Interpretation Results in an Unconstitutional

Delegation of Legislative Power

The Department’s contrary interpretation of the 1993 HEA Amendments to

authorize SAVE must be rejected as an unconstitutional delegation of legislative

power. “Article I, § 1, of the Constitution vests all legislative powers herein granted

… in a Congress of the United States. This text permits no delegation of those

powers.” Whitman v. Am. Trucking Ass’ns, 531 U.S. 457, 472 (2001) (cleaned up).

Accordingly, “Congress … may not transfer to another branch ‘powers which are

strictly and exclusively legislative.’” Gundy v. United States, 588 U.S. 128, 135 (2019)

(quoting Wayman v. Southard, 23 U.S. (10 Wheat.) 1, 42–43 (1825)). The Supreme

Court’s more recent formulation of that longstanding rule states that Congress may

grant regulatory power to an agency only if it provides an “intelligible principle” by

which the agency must exercise it. Mistretta v. United States, 488 U.S. 361, 372

(1989) (quoting J.W. Hampton, Jr., & Co. v. United States, 276 U.S. 394, 409 (1928)).

While the intelligible-principle test has been criticized as too lax, 8 it still

demands the articulation of objective principles that allow courts to test whether the

agency has faithfully executed Congress’ command. Am. Power & Light Co. v. SEC,

329 U.S. 90, 105 (1946); Yakus v. United States, 321 U.S. 414, 426 (1944) (delegation

would be unconstitutional if “it would be impossible in a proper proceeding to

ascertain whether the will of Congress has been obeyed”). Thus, a statute that

8 Dep’t of Transp. v. Ass’n of Am. RRs, 575 U.S. 43, 77 (2015) (Thomas, J., concurring)

(Explaining that the intelligible-principle “test [that courts] have applied to

distinguish legislative from executive power largely abdicates [the judiciary’s] duty

to enforce that prohibition [against legislative delegation].”).

16

delegates to an agency “unfettered discretion” to make policy choices is

unconstitutional. Jarkesy v. SEC, 34 F.4th 446, 460–61 (5th Cir. 2022), affirmed on

other grounds sub nom., SEC v. Jarkesy, 2024 WL 3187811 (U.S. June 27, 2024); see

also Int’l Union v. OSHA, 938 F.2d 1310, 1317 (D.C. Cir. 1991).

Here, the Department claims that the 1993 HEA Amendments conferred

unfettered discretion on the Secretary to invent whatever student-loan repayment

plans he wishes. The Department says the explicit minimum-payment provisions

that Congress enacted in 2007 and updated in 2010 do not bind it. Instead, the

Department can design a repayment plan with even lower monthly payments and a

shorter repayment period such that very little debt will have been repaid by the end

of the repayment period, at which point the substantial remaining balance is

cancelled.

In the Department’s view, “[t]he statute … gives the Secretary discretion as to

how much a borrower must pay, specifying only that payments must be set based

upon the borrower’s annual adjusted gross income[.]” 88 Fed. Reg. at 43,827. It claims

the same 1993 text authorizes both the preexisting $15 billion REPAYE plan and the

new $475 billion SAVE plan, see App.26a, and presumably anything in between.

REPAYE and SAVE represent neither the floor nor ceiling of the Department’s

discretion. If the only requirement is for payments to be based on income, as the

Department claims, then it could lower the payment cap to just one percent of income

above $1 million, which would result in zero payments from the vast majority of

borrowers. Nearly all student-loan debt would remain unpaid and then cancelled

17

after 20 years. The Department’s capacious view would also allow it to reduce the

payment period to 10 years or even shorter to further maximize debt cancellation.

Conversely, it could promulgate a payment cap equal to 100 percent of income above

$1, which would not reduce the monthly payments for any borrower. Such unfettered

discretion would plainly amount to an unconstitutional delegation of legislative

power. Int’l Union, 938 F.2d at 1317 (rejecting on nondelegation ground agency’s

assertion of authority “to require precautions that take the industry to the verge of

economic ruin … or to do nothing at all.”). Even the lax intelligible-principle test

cannot support the Department’s boundless interpretation because “it would be

impossible in a proper proceeding to ascertain whether the will of Congress has been

obeyed.” Yakus, 321 U.S. at 426. The Department’s view of the Secretary’s power is

therefore untenable and must be rejected.

III.

SAVE IS ARBITRARY AND CAPRICIOUS UNDER OHIO V. EPA

SAVE is also arbitrary and capricious because the Department promulgated it

without addressing comments concerning a significant aspect of the problem, namely

how much student-loan debt it will cancel. See Sherley, 689 F.3d at 784 (“[T]he

opportunity to comment is meaningless unless the agency responds to significant

points raised by the public.”). This Court recently granted a stay of the challenged

regulation in Ohio v. EPA because the agency offered no “reasonable response” to

18

comments that cast doubt on its cost-benefit analysis. 2024 WL 3187768, at *9. It

should do so here for the same reason.

In Ohio, EPA proposed a rule that it contended would “maximiz[e] costeffectiveness” because it would cover 23 States in a single emission regime. Id. at *4.

Commenters warned that some States could not be lawfully covered, and their

exclusion would invalidate EPA’s cost-effectiveness analysis based on covering all 23

States. Id. at *5. EPA provided no response and simply ignored these comments. Id.

After EPA promulgated its rule, as those commenters predicted, one court after

another issued stays that excluded a total of 12 States from coverage. Id. at *6. The

Supreme Court stayed EPA’s rule as to Ohio, Indiana, and West Virginia because

EPA failed to provide an adequate explanation to the commenters’ legitimate

concerns over cost-effectiveness and thereby instead ignored an important aspect of

the problem. Id. at *8.

Ohio is on all fours. Here, the Department’s January 2023 notice of proposed

rulemaking estimated SAVE would cancel $156 billion of student-loan debt over 10

years based on the assumption that over $400 billion of such debt would already be

cancelled under the HEROES Act, and thus would not be cancelled by SAVE.

App.25a–26a (citing 88 Fed. Reg. at 43,820). At the time, the HEROES Act scheme

had been stayed pending Supreme Court review of its legality. Amicus DFI filed a

comment warning that the Department “fail[ed] to take into account the increased

cost of [SAVE] if the Supreme Court strikes down the [HEROES Act] Debt

Cancellation Program.” See DFI, Comment on the Department’s Notice of Proposed

19

Rulemaking (Feb. 10, 2023) at 9 9; see also 88 Fed. Reg. 43,875 (acknowledging DFI’s

comment). With over $400 billion no longer being cancelled under the HEROES Act,

far more student-loan debt would be available for SAVE to cancel.

This Court struck down the HEROES Act loan-cancellation plan in Biden v.

Nebraska on June 30, 2023. The Department promulgated SAVE just ten days later

in a final rule that ignored Nebraska and falsely insisted that the HEROES Act plan

“remains before the Supreme Court.” 88 Fed. Reg. at 43,875. The Department

acknowledged DFI’s legitimate concerns that invalidation of HEROES Act loan

cancellation would dramatically increase SAVE’s cost, but explicitly declined to revise

its estimate because “the Department is confident in our authority to pursue

[HEROES Act] debt relief and is awaiting the Supreme Court’s ruling on the issue.”

Id. Such misplaced confidence was not a “reasoned response” required by the APA ten

days after this Court ruled against the Department. Ultimately, the Department did

not even attempt to estimate SAVE’s actual costs after this Court’s ruling in

Nebraska, let alone determine that they were still worth bearing. As in Ohio, the

Department’s failure to address DFI’s legitimate concern regarding the amount of

debt that SAVE will cancel is arbitrary and capricious.

Available for download at: https://www.regulations.gov/comment/ED-2023-OPE0004-13325. The same point is made in comments filed by the Foundation for

Research

on

Equal

Opportunity,

available

for

download

at

https://www.regulations.gov/comment/ED-2023-OPE-0004-7963, the Bipartisan

Policy Center, available for download at https://www.regulations.gov/comment/ED2023-OPE-0004-13475,

Arnold

Ventures,

available

for

download

at

https://www.regulations.gov/comment/ED-2023-OPE-0004-13269,

the

National

Conference

of

State

Legislatures,

available

for

download

at

https://www.regulations.gov/comment/ED-2023-OPE-0004-13386.

9

20

Indeed, halting SAVE presents a far stronger case for emergency relief than

Ohio. Whereas there EPA merely ignored commenters’ (correct) predictions, the

Department here ignored reality, i.e., invalidation of the HEROES Act plan.

Additionally, there is no need to “dress[] up” DFI’s comment, see Ohio, 2024 WL

3187768, at *15 (Barrett, J., dissenting), because the Department explicitly

acknowledged that DFI called out its failure to account for its HEROES Act loancancellation plan being struck down. 88 Fed. Reg. at 43,875. Nor is there need for

“speculation” of Nebraska’s significant impact on the amount of debt SAVE would

cancel. See Ohio, 2024 WL 3187768, at *17 (Barrett, J., dissenting). Whereas Ohio

hypothesized that, “[p]erhaps there is some explanation why the number and identity

of participating States does not affect … cost-effective[ness],” id. at *8, there is no

room for debate here. The Department promulgated SAVE based on its pre-Nebraska

assumption that it would cost $156 billion, which is less than half of the $475 billion

post-Nebraska estimate that the district court relied on. See App.26a (citing Penn

Wharton, Biden’s New Income-Driven Repayment (“SAVE”) Plan: Budgetary Cost

Estimate Update, University of Pennsylvania (July 17, 2023)).

The Department argued below that its cost analysis cannot be arbitrary or

capricious because it was not required to conduct any cost-benefit analysis in the first

place. Dkt. 47 at 45. Not so. The “cost” at issue here is the amount of student-loan

debt that would be cancelled under a rule designed to cancel student-loan debt. That

is clearly an important aspect of the problem that the Department must address. See

Mexican Gulf Fishing Co. v. United States Dep’t of Com., 60 F.4th 956, 973 (5th Cir.

21

2023) (“important aspect of the problem … includes, of course, considering the costs

and benefits associated with the regulation.”) (citing Motor Vehicle Mfrs. Ass’n of U.S.

v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983) and Michigan v. EPA, 576

U.S. 743, 751 (2015)). The Department’s refusal to provide a reasoned response to

DFI’s legitimate concern over how much debt SAVE would cancel is arbitrary and

capricious.

The Department’s claim to have sent SAVE to the printer on June 14, before

Nebraska was decided, Dkt. 47 at 46, is also meritless because “agencies are free to

withdraw a proposed rule before it has been published in the Federal Register, even

if the rule has received final agency approval.” NRDC v. Perry, 940 F.3d 1072, 1077

(9th Cir. 2019). Such behavior suggests that the Department may have rushed out its

rule in advance of this Court’s Nebraska decision so it could evade the hard questions

raised by DFI and others. But an “agency’s desire to apply its rule expeditiously” does

not address a “concern so much as sidestep it.” Ohio, 2024 WL 3187768 at *8. Such

arbitrary and capricious conduct reinforces the need to vacate the Tenth Circuit’s

stay and reinstate the injunction.

22

CONCLUSION

For the foregoing reasons, Applicants are likely to succeed on the merits, and

the Court should grant their request to vacate the Tenth Circuit’s stay and reinstate

the district court’s preliminary injunction.

July 16, 2024

Respectfully submitted,

/s/ Sheng Li_________

Patrick J Wright

MACKINAC CENTER FOR PUBLIC POLICY

140 West Main Street

Midland, MI 48640

(989) 631-0900

wright@Mackinac.org

Sheng Li

Counsel of Record

Russell G. Ryan

Markham S. Chenoweth

NEW CIVIL LIBERTIES ALLIANCE

1225 19th St. NW, Suite 450

Washington, DC 20036

(202) 869-5210

Sheng.li@ncla.legal

Donald A. Daugherty, Jr.

DEFENSE OF FREEDOM INSTITUTE FOR

POLICY STUDIES

1455 Pennsylvania Avenue, NW

Suite 400

Washington, DC 20004

(414) 559-6902

Don.Daugherty@dfipolicy.org

Clark M. Neily III

CATO INSTITUTE

1000 Massachusetts Ave., NW

Washington, DC 20001

(202) 218-4631

cneily@cato.org

Counsel for Amici Curiae

23