# Student Loan Cancellation Under the HEROES Act > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/crs%3AR47505 ## Record - **Collection:** Congressional research report - **Document type:** CRS Report - **Published:** April 14, 2023 - **Citation:** R47505 ## Text Student Loan Cancellation Under the HEROES Act April 14, 2023 Congressional Research Service https://crsreports.congress.gov R47505 SUMMARY Student Loan Cancellation Under the HEROES Act On August 24, 2022, Secretary of Education Miguel Cardona announced that he would invoke the Higher Education Relief Opportunities for Students Act of 2003 (HEROES Act) to cancel up to $20,000 of federal student loan debts for borrowers who fell below certain income thresholds. The HEROES Act authorizes the Secretary to “waive or modify” statutory or regulatory provisions applicable to federal student financial assistance programs under Title IV of the Higher Education Act (HEA) of 1965 to ensure that borrowers are not placed in a worse position financially in relation to their student loans as a result of a war, other military operation, or national emergency. R47505 April 14, 2023 Edward C. Liu Legislative Attorney Sean M. Stiff Legislative Attorney During the course of the COVID-19 pandemic, which Presidents Trump and Biden both declared a national emergency, the Secretary of Education (Secretary) has used the HEROES Act to provide a number of flexibilities to both borrowers and schools that participate in HEA student loan programs. These flexibilities include a pause on federal student loan repayment, interest accrual, and involuntary collections during the entirety of the pandemic. Secretary Cardona has said that the cancellation policy is intended to address heightened risks of delinquency or default caused by the end of two years of loan repayment forbearance. However, the HEROES Act has not been used previously to cancel existing student loan balances. Estimates of the policy’s cost vary, but for its part, the Department of Education (ED) predicts a cost of $379 billion. Plaintiffs filed multiple lawsuits challenging the cancellation policy before any borrowers could obtain relief under it. Certain suits resulted in two federal court orders blocking implementation of the program. The Supreme Court agreed to review these two cases, Biden v. Nebraska and Department of Education v. Brown, and heard oral argument on February 28, 2023. The questions for which the Court granted certiorari generally can be divided into jurisdictional questions, that is, whether federal courts may hear the challenges to the cancellation policy, and merits questions, that is, assuming jurisdiction exists, whether the cancellation policy is lawful. With respect to the jurisdictional questions, the Court is considering whether the plaintiffs in the two cases have demonstrated that they have standing to sue to challenge the policy—that is, whether the plaintiffs have suffered an injury-infact that is fairly traceable to the policy and likely to be redressed by the remedies that the plaintiffs seek. In Biden v. Nebraska, the plaintiffs are several states. The Nebraska plaintiffs argue that the cancellation policy would result in financial harm and reduced state income tax revenues. The plaintiffs in Department of Education v. Brown are individual student loan borrowers. The Brown plaintiffs argue that they have been injured by the Secretary’s adoption of the policy without public participation in its design, resulting in policy eligibility criteria that limit debt relief for these borrowers. With respect to the cancellation policy’s lawfulness, the parties focus on how broadly or narrowly to read the HEROES Act’s waiver and modification authority, as well as whether the cancellation policy is sufficiently related to addressing the effects of the pandemic on student loan borrowers. The plaintiffs argue that the policy should be evaluated under the Court’s “majorquestions doctrine,” which counsels against reading ambiguous statutory text to delegate administrative authority to make radical or fundamental changes to a statutory scheme in the absence of clear congressional authorization. Beyond these statutory authority questions, the Court may also consider whether the Secretary reasonably explained his decision to adopt the policy and comported with procedures for exercising such authority. The Court’s decisions in these cases could have a variety of implications for the federal student loan programs that ED administers. The Court’s rulings will likely resolve whether up to 40 million borrowers will receive loan balance discharges under the policy. The rulings may also clarify ED’s authority to invoke the HEROES Act in the future to waive or modify provisions of law applicable to federal student financial assistance programs. Finally, the rulings may further develop important aspects of Supreme Court doctrine with applications beyond federal student loan programs, including the Article III standing of states as plaintiffs and the Court’s major-questions doctrine. Congressional Research Service Student Loan Cancellation Under the HEROES Act Contents Background ..................................................................................................................................... 2 Federal Student Loan Programs ................................................................................................ 2 The Federal Family Education Loan Program .................................................................... 3 The Federal Direct Loan Program ...................................................................................... 5 Legislative History and Prior Exercises of the HEROES Act ................................................... 6 Recent Public Debate over Student Loan Cancellation............................................................. 8 Cancellation Policy Design ..................................................................................................... 10 August 2022 Cancellation Eligibility................................................................................ 10 September 2022 Consolidation Limit ................................................................................ 11 ED’s “Supporting Analysis” ................................................................................................... 12 Budgetary Impacts of HEROES Act Uses .............................................................................. 14 Supreme Court Review of Cancellation Policy: Procedural History............................................. 16 Nebraska v. Biden.................................................................................................................... 17 Brown v. U.S. Department of Education ................................................................................. 18 Supreme Court Grants Certiorari Before Judgment ................................................................ 19 Do Plaintiffs Have Standing to Challenge the Cancellation Policy? ............................................. 20 Financial Harm ........................................................................................................................ 21 Servicer Injury .................................................................................................................. 22 Direct Harm Theory .......................................................................................................... 23 Indirect Harm Theory ....................................................................................................... 27 Consolidation Injury ......................................................................................................... 29 Procedural Injury..................................................................................................................... 33 Tax Revenue Injury ................................................................................................................. 36 Is the Cancellation Policy Substantively Valid? ............................................................................ 38 Scope of HEROES Act Authorization..................................................................................... 38 Waiver, Modification, and the Major-Questions Doctrine ................................................ 38 Ensuring Affected Individuals Not Placed in a Worse Position ........................................ 42 Is the Cancellation Policy Procedurally Valid? ............................................................................. 44 Arbitrary-and-Capricious Claim ............................................................................................. 44 Whether the Secretary Considered Alternatives to the Cancellation Policy ..................... 44 Reliance Interests .............................................................................................................. 45 Considering Important Aspects of a Problem and the Consolidation Limit ..................... 46 Pretext ............................................................................................................................... 46 Public-Participation Claim ...................................................................................................... 48 Potential Implications of Nebraska and Brown ............................................................................. 50 Potential Effects on the Cancellation Policy ........................................................................... 50 Potential Effects on HEREOS Act Authority .......................................................................... 51 Potential Effects on Broader Legal Doctrine .......................................................................... 52 Contacts Author Information........................................................................................................................ 52 Congressional Research Service Student Loan Cancellation Under the HEROES Act n August 24, 2022, Secretary of Education (Secretary) Miguel Cardona announced that the pandemic-related pause on federal student loan repayment, interest accrual, and involuntary collections (payment pause) would end on December 31.1 The Secretary found that for some borrowers, the transition to repayment after more than two years of forbearance posed a heightened risk of delinquency or default.2 If a borrower fell into these nonpayment statuses, the Secretary reasoned, they would be worse off in relation to their federal student loans than they were before the pandemic, even accounting for the benefits of the payment pause.3 O To forestall these perceived risks, the Secretary invoked asserted authority under the Higher Education Relief Opportunities for Students Act of 2003 (HEROES Act) to cancel the student loan debts of certain borrowers.4 The statute authorizes the Secretary to “waive or modify any statutory or regulatory provision applicable to the student financial assistance programs” of Title IV of the Higher Education Act (HEA) of 1965 “as the Secretary deems necessary” in connection with a war or national emergency to provide certain relief.5 In particular, the Act authorizes the Secretary to waive or modify such provisions “as may be necessary to ensure that” recipients of Title IV assistance “are not placed in a worse position financially” in relation to that assistance because of a national emergency.6 Under the Secretary’s cancellation policy, the Department of Education (ED) would provide up to $10,000 in cancellation benefits to borrowers with adjusted gross incomes in 2020 or 2021 falling below stated thresholds.7 ED would apply cancellation to, among others, Federal Direct Loan Program loans and Federal Family Education Loan Program loans held by ED or one of its guaranty agencies that disbursed before June 30, 2022.8 If a borrower had received a Pell Grant at any time, ED would provide up to an additional $10,000 in benefits, for a total of $20,000.9 The Secretary’s decision could have far-reaching effects if implemented. According to ED, over 40 million borrowers (about 88%) are eligible for some amount of cancellation under the policy. Full participation in the policy by eligible borrowers would leave 20 million borrowers (about 44%) with no remaining federal student loan debt.10 ED expects, though, that not all eligible borrowers would claim the benefit. If 81% did, ED expects that the policy would increase the federal government’s cost of having made affected loans or loan guarantees by $379 billion.11 1 Memorandum from Miguel Cardona, Jr., Secretary of Education, to Richard Cordray, Chief Operating Officer of Federal Student Aid 1 (Aug. 24, 2022) [hereinafter Cardona Memo] (filed as Exhibit B to Decl. of James Richard Kvaal, Nebraska v. Biden, No. 4:22-cv-01040 (E.D. Mo. filed Oct. 7, 2022)). 2 See id. 3 See id. 4 See id. 5 20 U.S.C. § 1098bb(a)(1). 6 Id. § 1098bb(a)(2). 7 Federal Student Aid Programs (Federal Perkins Loan Program, Federal Family Education Loan Program, and William D. Ford Federal Direct Loan Program), 87 Fed. Reg. 61512, 61514 (Oct. 12, 2022). 8 Id. 9 Id. 10 See Attachment 1 to Memorandum from James Richard Kvaal, Under Secretary of Education, to Miguel A. Cardona, Secretary of Education, on the Rationale for Pandemic-Connected Loan Cancellation Program 12 (Aug. 24, 2022) [hereinafter Supporting Analysis] (filed as Exhibit A to Decl. of James Richard Kvaal, Nebraska v. Biden, No. 4:22-cv01040 (E.D. Mo. filed Oct. 7, 2022)). 11 U.S. Department of Education Estimate: Biden-Harris Student Debt Relief to Cost an Average of $30 Billion Annually Over Next Decade, U.S. DEP’T OF EDUC., https://www.ed.gov/news/press-releases/us-department-education- Congressional Research Service 1 Student Loan Cancellation Under the HEROES Act The Secretary’s decision drew debate over whether Congress had delegated authority to the Secretary to discharge student loan balances on this scale, which ED has not previously attempted to do under the HEROES Act or any other authority. Within weeks of the Secretary’s decision, individuals, groups, and states filed lawsuits challenging the policy. By November 2022, plaintiffs in two such cases obtained court orders blocking the policy’s implementation, so that to date ED has yet to cancel any student loan debt under the policy.12 Those two cases are now before the Supreme Court for review. The cases, argued before the Court on February 28, 2023, raise important, unsettled questions of standing and statutory authority. In the first case, Biden v. Nebraska, six states allege impending financial harm or taxrevenue injury on account of the policy.13 The second case, Department of Education v. Brown, features two borrowers who claim procedural injury from not having been able to participate in the policy’s development.14 Both suits include arguments that the cancellation policy exceeds the Secretary’s HEROES Act authority. The Court’s decision on these and other important questions of standing and statutory authority will likely determine whether the Secretary can implement the cancellation policy. This report begins by placing those important questions in their context, surveying affected federal student loan programs,15 past uses of HEROES Act authority,16 and congressional debates concerning student loan cancellation.17 The report then describes the cancellation policy itself18 and traces the history of Nebraska and Brown in the lower courts.19 This report next assesses the parties’ key legal arguments about standing,20 statutory authority for the policy,21 and whether the Secretary adopted the policy in a procedurally valid manner.22 Finally, this report concludes with a discussion of potential implications of decisions in Nebraska and Brown for the cancellation policy, for the Secretary’s HEROES Act authority, and for legal doctrines that are not confined to the federal student loan context. Background Federal Student Loan Programs For decades, the federal government has helped students and their parents finance higher education under several federal student loan programs, authorized under the HEA23 and other estimate-biden-harris-student-debt-relief-cost-average-30-billion-annually-over-next-decade (last visited Apr. 14, 2023) [hereinafter ED Cost Estimate]. 12 See infra “Supreme Court Review of Cancellation Policy: Procedural History.” 13 See infra “Nebraska v. Biden.” 14 See infra “Brown v. U.S. Department of Education.” 15 See infra “Federal Student Loan Programs.” 16 See infra “Legislative History and Prior Exercises of the HEROES Act.” 17 See infra “Recent Public Debate over Student Loan Cancellation” 18 See infra “Cancellation Policy Design.” 19 See infra “Supreme Court Review of Cancellation Policy: Procedural History.” 20 See infra “Do Plaintiffs Have Standing to Challenge the Cancellation Policy?” 21 See infra “Is the Cancellation Policy Substantively Valid?” 22 See infra “Is the Cancellation Policy Procedurally Valid?” 23 See, e.g., infra “The Federal Family Education Loan Program” and “The Federal Direct Loan Program.” Congressional Research Service 2 Student Loan Cancellation Under the HEROES Act statutes.24 The vast majority of outstanding federal student loans were made under HEA authorities.25 The Biden Administration has identified only certain HEA loan balances as eligible for cancellation.26 Plaintiffs in Nebraska and Brown press claims that implicate two HEA loan programs: the Federal Family Education Loan Program and the William D. Ford Direct Loan Program. The Federal Family Education Loan Program Until its authority terminated in June 2010,27 the Federal Family Education Loan Program (FFELP) facilitated making loans to students and their parents to help finance a higher education. The FFELP is a federal loan guarantee program. Nonfederal lenders—state entities and certain private entities28—originated FFELP loans using their own funds. While federal statute required listed provisions that had to be included in a loan’s note for it to be insurable under the program,29 the original parties to that note were the borrower and the nonfederal lender. The lender was the loan’s initial holder.30 FFELP loans that remain with lenders are potential revenue sources.31 The lender receives payments of principal, interest, and other fees. The FFELP encouraged lending through, among other things, loan guarantees comprised of a system of insurance offered by guaranty agencies (GAs) and reinsurance of GA insurance by ED. The Secretary entered agreements with GAs to help administer the FFELP.32 GAs are state or private nonprofit organizations.33 They serve as an “intermediary” between the lender and ED.34 A lender may invoke an FFELP loan guarantee if a borrower defaults.35 A lender must make diligent efforts to collect on a defaulted loan.36 If those efforts fail, the lender may file a default 24 For example, Title VII of the Public Health Service Act authorized a federal student loan guarantee program known as the Health Education Assistance Loan (HEAL) program, which facilitated private lending to students pursuing a degree in certain healthcare fields. See 42 U.S.C. § 292a. Authority to issue new loan guarantees lapsed in September 1998, id., yet HEAL program loans remain outstanding, see FED. STUDENT AID, U.S. DEP’T OF EDUC., FISCAL YEAR 2021 ANNUAL REPORT 38 fig. 19 (2021), https://www2.ed.gov/about/reports/annual/2021report/fsa-report.pdf; see also CRS Report R46720, Student Loan Programs Authorized by the Public Health Service Act: An Overview, by Elayne J. Heisler and Alexandra Hegji. 25 CRS Report R47196, Federal Student Loan Debt Cancellation: Policy Considerations, coordinated by Alexandra Hegji, at 4 tbl. 1. 26 Federal Student Aid Programs (Federal Perkins Loan Program, Federal Family Education Loan Program, and William D. Ford Federal Direct Loan Program), 87 Fed. Reg. 61512, 61513 (Oct. 12, 2022). 27 20 U.S.C. § 1071(d). 28 Id. § 1085(d)(1). 29 See, e.g., id. § 1077(a) (stating that “a loan by an eligible lender shall be insurable” under the FFELP program “only if evidenced by a note or other written agreement” which, among other things, provides for specified payment deferments); see also id. § 1077a (regulating loan interest rates). 30 See Holder, BLACK’S LAW DICTIONARY (11th ed. 2019) (“Someone who has legal possession of a negotiable instrument and is entitled to receive payment on it.”). 31 FFELP loans could be sold to third parties after origination and, as discussed below, assigned to guaranty agencies. Each of these subsequent owners would be the loan’s holder during the time it owned the loan. For ease of reference, this report refers to lender-held FFELP loans as those held by entities other than a GA or ED. 32 34 C.F.R. § 682.400(a). 33 Id. § 682.200(b) (guaranty agency). 34 Great Lakes Higher Educ. Corp. v. Cavazos, 911 F.2d 10, 15 (7th Cir. 1990). 35 FFELP lenders may file claims with a GA in other circumstances as well, such as when a borrower’s loan is discharged because of their and permanent disability. See, e.g., 34 C.F.R. § 682.402(c)(8)(i)(A)–(B). 36 Id. § 682.411(a). Congressional Research Service 3 Student Loan Cancellation Under the HEROES Act claim with the GA to be compensated for the unpaid balance of principal and accrued interest.37 Upon payment of the default claim, the lender assigns the loan to the GA,38 transferring title to the loan to the GA.39 Having received title, the GA must itself make diligent efforts to collect before it, too, may be compensated for unpaid balances under its reinsurance agreement with ED.40 The GA assigns a defaulted loan to ED upon payment of a reinsurance claim.41 Though the FFELP has not insured new loans since June 2010, more than $200 billion remained outstanding on FFELP loans at the end of 2022.42 Different entities hold outstanding FFELP loans.43 At the end of FY2022, borrowers owed lenders—that is, entities other than ED or a GA— about $103 billion.44 Lenders have used the revenue-generating potential of FFELP loans to access credit markets through asset-backed securities known as Student Loan Asset-Backed Securities (SLABS). An asset-backed security is a bond or note whose cash flow derives from an asset such as a third party’s debt.45 SLABS, in particular, are backed by a pool of pledged student loans, including FFELP loans. For example, in 2021, the Higher Education Loan Authority of the State of Missouri (MOHELA or the Missouri Authority) offered SLABS for sale to investors, explaining that the notes were payable solely from the proceeds of a pool of FFELP loans.46 SLABS generate returns based on, among other factors, the payments borrowers make on pooled loans.47 An investor’s expected yield on SLABS thus depends, in part, on predicting how long borrowers will make payments on pooled loans, with longer time periods translating to greater interest 37 Id. § 682.412(e)(2). 38 See id. § 682.410(b)(5)(vi). 39 See Assign, BLACK’S LAW DICTIONARY (11th ed. 2019) (“To convey in full; to transfer (rights or property) . . . . ). 40 See 20 U.S.C. § 1078(c) (authorizing the Secretary to “enter into a guaranty agreement with any guaranty agency, whereby the Secretary shall undertake to reimburse it . . . with respect to losses (resulting from the default of the student borrower) on the unpaid balance of the principal and accrued interest of any insured loan”). 41 34 C.F.R. § 682.409(a)(1). 42 U.S. DEP’T OF EDUC., Federal Student Aid Portfolio Summary, FED. STUDENT AID, https://studentaid.gov/sites/default/files/fsawg/datacenter/library/PortfolioSummary.xls (last visited Apr. 14, 2023). 43 U.S. DEP’T OF EDUC., Location of Federal Family Education Loan Program Loans, FED. STUDENT AID, https://studentaid.gov/sites/default/files/fsawg/datacenter/library/LocationofFFELPLoans.xls (last visited Apr. 14, 2023) (describing FFELP loan amounts held by lenders, GAs, and ED). 44 Id. 45 Morgan Tanafon, Market Crises and Dodd-Frank: Does the Act Protect Against Hazardous Student Loan Securitization?, 38 REV. BANKING & FIN. L. 869, 878 (2019). 46 See HIGHER EDUC. LOAN AUTH. OF THE STATE OF MO., TAXABLE STUDENT LOAN ASSET‑BACKED NOTES, SERIES 20213 OFFERING MEMORANDUM 5 (2021), https://www.mohela.com/DL/common/publicInfo/investorInformation.aspx?idx=2340 [hereinafter OFFERING MEMORANDUM] (“The only sources of funds for payment of the Notes issued under the Indenture are the Financed Eligible Loans and investments pledged to the Trustee and the payments the Issuer receives on those Financed Eligible Loans and investments.”) (filed as Exh. A to Decl. of Michael E. Talent, Nebraska v. Biden, No. 4:22-cv-01040 (E.D. Mo. filed Sept. 29, 2022)); see also MO. REV. STAT. § 173.390 (authorizing MOHELA to issue bonds “payable solely from and secured by a pledge of revenues derived from or by reason of the ownership of student loan notes and investment income or as may be designated in a bond resolution authorized by the authority”). 47 See U.S. DEP’T OF THE TREASURY, OPPORTUNITIES AND CHALLENGES IN ONLINE MARKETPLACE LENDING 7 fig. 3 (2016), https://home.treasury.gov/system/files/231/Opportunities_and_Challenges_in_Online_Marketplace_Lending_white_pa per.pdf (illustrating securitization by direct lenders). Congressional Research Service 4 Student Loan Cancellation Under the HEROES Act payments.48 If loan prepayments exceed expectations, then actual yields can fall below expected yields.49 The Federal Direct Loan Program Nearly all borrowers who today obtain federal student loans do so under the William D. Ford Direct Loan Program (FDLP), authorized by Congress in 1993.50 The designation of this federal credit program as a “direct loan” program means that, when making an FDLP loan, the federal government disburses funds to a nonfederal borrower under a contract with the borrower that requires repayment.51 Unlike some other HEA student loan programs, such as the FFELP, the borrower enters a contractual relationship with the federal government directly upon borrowing the loan. The federal government is the loan holder, receiving payments of principal, interest, and other fees on account of the FDLP loan. The federal government makes several type of loans under the FDLP. Eligible undergraduate borrowers may receive need-based Direct Subsidized Loans. Undergraduate and graduate students may obtain Direct Unsubsidized Loans as well. Direct PLUS Loans are available to graduate students and to the parents of dependent undergraduate students.52 Borrowers may also “consolidate education loans made under certain Federal programs,”53 including loans made under the FFELP, by borrowing a Direct Consolidation Loan.54 Unlike other FDLP loans, Direct Consolidation Loan proceeds are not used to directly pay tuition, fees, and similar costs. Instead, ED pays consolidation-loan proceeds to the holder of an existing education loan to discharge that loan.55 Thus, if a borrower consolidates an existing FFELP loan held by a lender, ED pays the consolidation proceeds to the FFELP lender to pay the existing loan’s balance in full.56 Going forward, the borrower makes payments to ED on account of the new Direct Consolidation Loan. Among other loan types, ED holds tens of millions of FDLP loans—at the end of FY2022, more than $1.42 trillion was outstanding on loans made on behalf of 37.8 million recipients.57 To administer these and other federally held student loans, ED contracts with third-party loan servicers.58 A loan servicer is a company that ED contracts with “to handle the billing and other 48 See OFFERING MEMORANDUM, supra note 46, at B-2. 49 See OFFERING MEMORANDUM, supra note 46, at 96 (“The rates of payment of principal on the Notes and the yield on the Notes may be affected by prepayments of the Financed Eligible Loans.”). 50 Student Loan Reform Act of 1993, Pub. L. No. 103-66, tit. IV, § 4011, 107 Stat. 312, 341. 51 See 2 U.S.C. § 661a(1). 52 CRS Report R45931, Federal Student Loans Made Through the William D. Ford Federal Direct Loan Program: Terms and Conditions for Borrowers, by Alexandra Hegji, at 4–5. 53 34 C.F.R. § 685.220(a). 54 See id. § 685.220(b). 55 Id. § 685.220(f)(2). 56 See id. 57 See supra note 42. 58 See, e.g., 20 U.S.C. § 1087f(b)(2) (authorizing the Secretary to enter into contracts for “the servicing and collection of loans made or purchased under” the FDLP program). Congressional Research Service 5 Student Loan Cancellation Under the HEROES Act services on” an ED-held federal student loan.59 ED engages several servicers60 and allocates borrower accounts among servicers.61 ED generally pays servicers based on the number and types of assigned accounts and the work that the servicer performs on ED’s behalf.62 Legislative History and Prior Exercises of the HEROES Act The Secretary identified the Higher Education Relief Opportunities for Students Act of 2003 (HEROES Act) as statutory authority for the cancellation policy. The Act allows the Secretary to “waive or modify any statutory or regulatory provision applicable to the” Title IV programs “in connection with a . . . national emergency” to ensure, among other things, that “affected individuals are not placed in a worse position financially” in relation to their Title IV assistance.63 The HEROES Act evolved from an earlier HEROES Act of 2001, itself enacted in response to the terrorist attacks of September 11, 2001.64 The original 2001 version of the statute provided similar waiver and modification authority for individuals affected by the national emergency declared for the attacks of September 11, 2001, or a subsequent national emergency declared for a terrorist attack.65 The 2001 law was subject to a sunset at the end of FY2003.66 Before that sunset date arrived, Congress replaced the statute with the current HEROES Act of 2003.67 The 2003 legislation used a definition of “national emergency” that did not include the “terrorist attack” qualifier used in the original 2001 law.68 The HEROES Act of 2003 otherwise resembled the 2001 law in many respects. Under both laws, for example, the Secretary was empowered to “waive” or “modify” statutory and regulatory provisions applicable to Title IV programs to bring about certain relief for “affected individuals.”69 Like its predecessor statute, the HEROES Act of 2003 was subject to a two-year sunset.70 Congress extended the HEROES Act authority in 2005 and made the statute permanent in 2007.71 59 U.S. DEP’T OF EDUC., Who’s My Student Loan Servicer?, FED. STUDENT AID, https://studentaid.gov/manage- loans/repayment/servicers (last visited Apr. 14, 2023); see also CRS Report R44845, Administration of the William D. Ford Federal Direct Loan Program, by Alexandra Hegji, at 19–20 (describing common servicing activities). 60 U.S. DEP’T OF EDUC., Servicer Loan Portfolio by Loan Status, FED. STUDENT AID, https://studentaid.gov/sites/default/files/fsawg/datacenter/library/servicer-portfolio-by-loan-status093022.xls (last visited Apr. 14, 2023). 61 See, e.g., U.S. DEP’T OF EDUC., CONTRACT NO. ED-FSA-11-D-0012 WITH MOHELA 15 (2011) (describing account allocation) (filed as Exh. B to Decl. of Michael E. Talent, Nebraska v. Biden, No. 4:22-cv-01040 (E.D. Mo. filed Sept. 29, 2022)). 62 See id. at 1 (describing unit pricing for borrowers in different repayment statuses). 63 20 U.S.C. § 1098bb(a)(1). 64 Higher Education Relief Opportunities for Students Act of 2001, Pub. L. No. 107-122, 115 Stat. 2386 (2002). 65 Id. § 5(4), 115 Stat. at 2388. 66 Id. § 6, 115 Stat. at 2389. 67 Higher Education Relief Opportunities for Students Act of 2003, Pub L. No. 108-76, 117 Stat. 904. 68 Id. § 5(4), 117 Stat. at 907. 69 Compare Higher Education Relief Opportunities for Students Act of 2001, Pub. L. No. 107-122, § 2(a)(2), 115 Stat. 2386, 2386 (2002) (authorizing waivers or modifications deemed necessary “to ensure that borrowers of Federal student loans who are affected individuals are not placed in a worse position financially in relation to those loans because of their status as affected individuals”), with Higher Education Relief Opportunities for Students Act of 2003, Pub L. No. 108-76, § 2(a)(2), 117 Stat. at 904 (similar waiver for “recipients of student financial assistance under Title IV” of the HEA “who are affected individuals”). 70 Id. § 6, 117 Stat. at 908. 71 Student Financial Assistance—Extension, Pub. L. No. 109-78, 119 Stat. 2043 (2005) (extension to September 30, Congressional Research Service 6 Student Loan Cancellation Under the HEROES Act Neither of these legislative actions made substantive changes to the waiver or modification authority provided by the HEROES Act.72 It does not appear that ED has ever invoked the HEROES Act to afford relief as broad as the cancellation policy announced by Secretary Cardona in 2022. For instance, past Secretaries invoked the HEROES Act to expand available forbearance relief for certain Federal Perkins Loan borrowers “who reside or are employed in a disaster area.”73 In doing so, however, the Secretaries did not forgive or cancel any outstanding loan balances and also did not modify the rule that interest ordinarily accrues during forbearance.74 Past Secretaries likewise invoked the HEROES Act to suspend the collection of defaulted loans from borrowers “who reside or are employed in a disaster area,”75 but these did not expressly contemplate forgiveness or cancellation of such defaulted loan balances. Other early examples of HEROES Act use include waivers and modifications that addressed loan deferrals, extensions of the maximum period of loan forbearance, and waivers of the requirement that students return overpayments of certain grant funds.76 The scope of HEROES Act waivers grew during the COVID-19 pandemic. On March 20, 2020, then-Secretary of Education Betsy DeVos announced that “[a]ll borrowers with federally held student loans” would “automatically have their interest rates set to 0% for a period of at least 60 days.”77 The Secretary also offered such borrowers “the option to suspend their payments for at least two months.”78 A week later, Secretary DeVos announced that ED would also “halt collection actions and wage garnishments to provide additional assistance to borrowers.”79 While neither of the Secretary’s March 2020 announcements specified the statutory authority she 2007); Higher Education—Permanent Extension of Waiver Authority, Pub. L. No. 110-93, § 2, 121 Stat. 999 (2007) (permanent authorization). 72 See id. 73 See, e.g., 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 Fed. Reg. 69312, 69314–15, 69316 (Dec. 12, 2003) [hereinafter 2003 Federal Register Notice] (“Under [the HEA and its implementing regulations], there is a 3-year cumulative limit on the length of forbearances that a Federal Perkins Loan borrower can receive. To assist Perkins borrowers who are affected individuals in this category, the Secretary is waiving these statutory and regulatory requirements so that any forbearance based on a borrower’s status as an affected individual is excluded from the 3-year cumulative limit.”). 74 Compare 34 C.F.R. § 674.33(d)(7) (specifying that “[i]nterest accrues during any period of forbearance” on a Federal Perkins Loan), with, e.g., 2003 Federal Register Notice, supra note 73, at 69316. 75 See 2003 Federal Register Notice, supra note 73, at 69314–16 (“In accordance with [ED regulations], schools and guaranty agencies must attempt to recover amounts owed from defaulted Perkins and FFEL[P] borrowers. The Secretary is waiving the regulatory provisions that require schools and guaranty agencies to attempt collection on defaulted loans for the time period during which the borrower is an affected individual. The school or guaranty agency may stop collection activities upon notification by the borrower, a member of the borrower’s family, or another reliable source that the borrower is an affected individual in this category.”) (emphasis added). 76 See Use of the HEROES Act of 2003 to Cancel the Principal Amounts of Student Loans, 46 O.L.C. ___, slip op, at *4 (Op. O.L.C. Aug. 23, 2022), https://www.justice.gov/d9/2022-11/2022-08-23-heroes-act.pdf [hereinafter OLC Opinion]. 77 Delivering on President Trump’s Promise, Secretary DeVos Suspends Federal Student Loan Payments, Waives Interest During National Emergency, U.S. DEP’T OF EDUC. (Mar. 20, 2020), https://content.govdelivery.com/accounts/USED/bulletins/2823e37 [hereinafter March 20, 2020 Announcement]. 78 Id. 79 Secretary DeVos Directs FSA to Stop Wage Garnishment, Collections Actions for Student Loan Borrowers, Will Refund More than $1.8 Billion to Students, Families, U.S. DEP’T OF EDUC. (Mar. 25, 2020), https://content.govdelivery.com/accounts/USED/bulletins/28317e2 [hereinafter March 25, 2020 Announcement]. Congressional Research Service 7 Student Loan Cancellation Under the HEROES Act invoked to grant this relief,80 ED later clarified that the Secretary based the relief on the HEROES Act.81 Congress subsequently enacted the Coronavirus Aid, Relief, and Economic Security (CARES) Act.82 Section 3513(a) of the CARES Act required the Secretary to “suspend all payments due” for ED-held FDLP and FFELP loans through September 30, 2020.83 Section 3513(e) in turn required the Secretary to “suspend all involuntary collection related to” such loans during Section 3513(a)’s payment suspension period.84 Section 3513(b) provided that interest would not accrue on those loans during the suspension period.85 Section 3513 was subject to a sunset date of September 30, 2020.86 In August 2020, as Section 3513’s sunset date approached, Secretary DeVos “extend[ed] the student loan relief to borrowers initiated by the President and Secretary in March 2020 through December 31, 2020.”87 Like the March 2020 relief, ED based the August 2020 extension on the HEROES Act.88 The Trump and Biden Administrations have since extended Section 3513 repeatedly.89 The payment pause continues in effect as of this publication. Under the most recent extension, it will last, at the latest, until August 29, 2023 (i.e., 60 days after June 30, 2023). If the Supreme Court resolves the student loan litigation before June 30, then the payment pause will end 60 days after the date of the Court’s decision.90 Recent Public Debate over Student Loan Cancellation The Biden Administration expressly describes its announced cancellation policy as a response to the COVID-19 pandemic. However, Congress has considered legislation to provide broad-based student loan cancellation since at least as early as 2019. During the first session of the 116th 80 See March 20, 2020 Announcement, supra note 77; March 25, 2020 Announcement, supra note 79. 81 FED. STUDENT AID, ANNUAL REPORT FY 2020, at 38 (2020), https://www2.ed.gov/about/reports/annual/ 2020report/fsa-report.pdf [hereinafter FSA Annual Report] (“The relief provided to borrowers from March 13, 2020 through March 26, 2020 . . . was provided under the Secretary’s authority in the [HEROES Act].”); Secretary DeVos Extends Student Loan Forbearance Period Through January 31, 2021, in Response to COVID-19 National Emergency, U.S. DEP’T OF EDUC. (Dec. 4, 2020), https://www.ed.gov/news/press-releases/secretary-devos-extends-student-loanforbearance-period-through-january-31-2021-response-covid-19-national-emergency [hereinafter December 2020 Announcement] (stating that the Secretary “used her authority under the HEROES Act” to implement the March 2020 relief). 82 Pub. L. No. 116-136, 134 Stat. 281 (2020). 83 Id. § 3513(a) (codified at 20 U.S.C. § 1001 note). 84 Id. § 3513(e). 85 Id. § 3513(b). 86 Id. § 3513(a). 87 U.S. DEP’T OF EDUC., Secretary DeVos Fully Implements President Trump’s Presidential Memorandum Extending Student Loan Relief to Borrowers Through End of Year (2020), https://content.govdelivery.com/accounts/USED/bulletins/29b4634 [hereinafter August 2020 Announcement]. 88 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 Fed. Reg. 79856–57, 79862 (Dec. 11, 2020) [hereinafter 2020 Federal Register Notice]; FSA Annual Report, supra note 81, at 38. 89 See, e.g., Federal Student Aid Programs (Federal Perkins Loan Program, Federal Family Education Loan Program, and William D. Ford Federal Direct Loan Program), 87 Fed. Reg. 61512, 61513–14 (Oct. 12, 2022) (listing extensions). See also CRS Legal Sidebar LSB10568, The Biden Administration Extends the Pause on Federal Student Loan Payments: Legal Considerations for Congress, by Kevin M. Lewis and Edward C. Liu. 90 See COVID-19 Emergency Relief and Federal Student Aid, FED. STUDENT AID, https://studentaid.gov/announcements-events/covid-19 (last visited Apr. 14, 2023). Congressional Research Service 8 Student Loan Cancellation Under the HEROES Act Congress, some Members introduced bills to cancel, to varying degrees, portions of outstanding federal student loan debt.91 Proponents of these proposals generally argued that cancellation would address a student debt crisis that arose because of increasing tuition costs.92 However, as the COVID-19 pandemic progressed, some Members suggested bills providing for student loan cancellation as a means of addressing the economic impact of the pandemic on borrowers.93 In 2020, Congress considered omnibus legislation called the Heroes Act (not to be confused with the HEROES Act of 2003), which would have addressed a wide variety of pandemic-related issues.94 Although the House of Representatives passed a version of the bill that would have directed the Secretary to cancel or repay up to $10,000 of student loan debt for “economically distressed borrowers,” Congress ultimately did not enact that measure.95 The following year, Congress enacted the American Rescue Plan Act of 2021 (ARPA), which included a provision amending the treatment of discharged student loans for federal income tax purposes.96 In addition to these legislative proposals, academics and some Members of Congress suggested the possibility of executive action to discharge student loan balances based on existing statutory authorities.97 In January 2021, ED under the outgoing Trump Administration concluded that the HEROES Act did not authorize cancellation of student loan balances, a decision that the Office of Legal Counsel (OLC) of the Department of Justice (DOJ) rejected in 2022 in concert with the Biden Administration’s announcement of the cancellation policy.98 91 Student Debt Cancellation Act of 2019, H.R. 3448, 116th Cong. (2019) (authorizing cancellation of federal student loan balances as well as authorizing ED to purchase, and subsequently cancel, outstanding private education loans); College for All Act of 2019, S. 1947, 116th Cong. (2019) (same); Student Loan Debt Relief Act of 2019, H.R. 3887, 116th Cong. (2019) (authorizing cancellation of up to $50,000 of federal student loan balances for borrowers, subject to an income phase-out between $100,000 and $250,000), S. 2235, 116th Cong. (2019) (same). 92 See Senator Warren, House Majority Whip Clyburn Introduce Legislation to Cancel Student Loan Debt for Millions of Americans, SEN. ELIZABETH WARREN (July 23, 2019), https://www.warren.senate.gov/newsroom/pressreleases/senator-warren-house-majority-whip-clyburn-introduce-legislation-to-cancel-student-loan-debt-for-millionsof-americans; AFT President Randi Weingarten on Sen. Warren’s Student Debt and College Affordability Proposals, AM. FED’N OF TEACHERS (Apr. 22, 2019), https://www.aft.org/press-release/aft-president-randi-weingarten-senwarrens-student-debt-and-college. 93 See, e.g., Student Loan Forgiveness for Frontline Health Care Workers Act, H.R. 6720, 116th Cong. (2020) (providing for partial cancellation of student loan balances for certain health care professions engaged in COVIDrelated health services); Frontline Health Care Worker Student Loan Assistance Act of 2020, H.R. 8393, 116th Cong. (2020) (providing a smaller degree of cancellation for similar borrowers). But see, Student Loan Relief Act, H.R. 8514, 116th Cong. (2020) (providing up to $25,000 of cancellation of student loan balances for all borrowers). 94 See The Heroes Act, H.R. 6800, 116th Cong. (2020). 95 Id. at Div. O, Title I, § 150117. 96 American Rescue Plan Act of 2021, Pub. L. No. 117-2, tit. IX, § 9675, 135 Stat. 4, 185–86. This provision is discussed in more detail below under “Tax Revenue Injury.” 97 See Luke Herrine, The Law and Political Economy of A Student Debt Jubilee, 68 BUFF. L. REV. 281 (2020); Chuck Schumer Says Biden Could Forgive $50,000 in Student Debt with Executive Order, CNBC (Nov. 17, 2020), https://www.cnbc.com/2020/11/16/schumer-suggests-student-debt-forgiveness-through-executive-order.html; H.R. Res. 100, 117th Cong. (2021) (calling on the President of the United States to take executive action to broadly cancel Federal student loan debt); S. Res. 46, 117th Cong. (2021) (same). 98 Memorandum from Reed D. Rubinstein, Principal Deputy General Counsel of the U.S. Department of Education, to Betsy DeVos, Secretary of Education (Jan. 12, 2021), https://static.politico.com/d6/ce/3edf6a3946afa98eb13c210afd7d/ogcmemohealoans.pdf [hereinafter Rubinstein Memo]; OLC Opinion, supra note 76. These competing interpretations are discussed in more detail below at “Waiver, Modification, and the Major-Questions Doctrine.” Congressional Research Service 9 Student Loan Cancellation Under the HEROES Act Cancellation Policy Design On August 24, 2022, Secretary of Education Miguel Cardona determined that he would exercise asserted authority under the HEROES Act to provide relief to student loan borrowers in connection with the pandemic.99 Secretary Cardona decided he would extend the payment pause until December 31, 2022, and that this would be the “final extension” of the pause.100 However, the Secretary found that “many borrowers” would be at “heightened risk of loan delinquency and default” once payment resumed in 2023.101 If borrowers fell into delinquency or default, they would be “worse off than they were before the pandemic,” even accounting for the benefits afforded them by the payment pause.102 To avoid this result, Secretary Cardona decided that he would waive and modify statutory and regulatory provisions to discharge federal student loan balances.103 The Secretary’s August 24 announcement was followed roughly five weeks later by a modification to ED’s website affecting cancellation eligibility for Direct Consolidation Loans. On September 29, within hours of the Nebraska plaintiffs filing suit,104 ED announced that a borrower’s Direct Consolidation Loan would be eligible for cancellation only if it derived from a consolidation application filed with ED on or before September 29 (the consolidation limit).105 The Nebraska plaintiffs characterize this development as a “change” to the policy.106 These aspects of the cancellation policy are discussed below. August 2022 Cancellation Eligibility In his initial directives about the cancellation policy, the Secretary settled on three related criteria to identify borrowers eligible to receive cancellation and the amount of cancellation benefits they would receive. The Secretary’s first two eligibility criteria would work in tandem to identify borrowers and loans eligible to receive cancellation. First, ED would use income thresholds to identify borrowers with eligible loan types who could receive cancellation. Thresholds differ based on a borrower’s taxpayer status and would use adjusted gross income (AGI) in tax years 2020 or 2021.107 Those who file individually (whether single or married) would be eligible if their AGI was less than $125,000 in either tax year. Those who file jointly, as head of household, or as a qualifying 99 Cardona Memo, supra note 1, at 1. 100 Id. at 2. 101 Id. at 1. 102 Id. 103 Id. 104 The federal petitioners do not appear to dispute that the Nebraska plaintiffs filed their complaint before ED’s website vendor published the consolidation limit on the Federal Student Aid website. Compare Br. of Pet’rs’ at 25, Biden v. Nebraska, No. 22-506, and Dep’t of Educ. v. Brown, No. 22-535 (U.S. Jan. 4, 2023) (describing the consolidation limit as “a decision the Department made before the States sued and announced and made effective the day they sued”) [hereinafter Federal Pet’rs’ Br.], with Br. of Resp’ts’ at 10, Biden v. Nebraska, No. 22-506 (U.S. Jan. 27, 2023) [hereinafter State Pls.’ Br.]. 105 See infra “Consolidation Injury.” 106 See State Pls.’ Br., supra note 104, at 10–11. 107 The Secretary’s initial memorandum referred only to “income” generally. See Cardona Memo, supra note 1, at 1. In later publications concerning the policy, ED has used Adjusted Gross Income to describe the income thresholds. See Federal Student Aid Programs (Federal Perkins Loan Program, Federal Family Education Loan Program, and William D. Ford Federal Direct Loan Program), 87 Fed. Reg. 61512, 61514 (Oct. 12, 2022). Congressional Research Service 10 Student Loan Cancellation Under the HEROES Act widow or widower would be eligible if their AGI was less than $250,000 in either tax year.108 Second, ED would apply cancellation benefits to only certain federal student loans. Cancellation would be available for FDLP loans and FFELP loans held by a GA or by ED that had been disbursed as of June 30, 2022.109 Direct Consolidation Loans would also be eligible for cancellation, provided the loan’s proceeds were used to consolidate education loans outstanding as of the June 30, 2022, cutoff.110 But FFELP loans held by a lender would not be eligible for cancellation. The Secretary’s income threshold and loan type criteria identify the borrowers eligible to receive cancellation benefits. A third criterion identifies the amount of benefits eligible borrowers would receive. The Secretary decided that all eligible borrowers would receive up to $10,000 in cancellation benefits.111 Eligible borrowers would receive up to an additional $10,000 in cancellation benefits, for up to $20,000, if they had received a Pell Grant at any point.112 ED awards Pell Grants to “help financially needy students meet the cost of their postsecondary education.”113 September 2022 Consolidation Limit FFELP loans held by a lender are not, themselves, eligible for cancellation under the policy. Even so, borrowers with such loans initially had a route to gain cancellation eligibility: consolidation into the FDLP. Take a borrower with only lender-held FFELP loans who met the cancellation policy’s applicable income threshold and was otherwise able to obtain a Direct Consolidation Loan.114 The lender-held FFELP loans would not themselves be eligible for cancellation. After consolidation of these loans into the FDLP, though, the new Direct Consolidation Loan would be eligible for cancellation because the Direct Consolidation Loan would consolidate only loans that disbursed before June 30, 2020.115 ED’s initial public statements about the cancellation eligibility of Direct Consolidation Loans did not state a deadline by which a borrower would need to apply for consolidation into the FDLP. In September 2022, ED decided to revise its website to explain that “consolidation loans comprised 108 87 Fed. Reg. at 61514. ED decided to use parental income for enrolled dependent student borrowers. See, e.g., Supporting Analysis, supra note 10, at 12. 109 See Cardona Memo, supra note 1, at 1. Secretary Cardona also listed Perkins Loans held by ED as among the loan types eligible for cancellation. Id. Neither Nebraska nor Brown implicate Perkins Loans. 110 See, e.g., One-Time Student Loan Debt Relief, FED. STUDENT AID (pdf version of Department of Education website as it existed on September 28, 2022) (stating that Direct Consolidation Loans would be eligible for cancellation if “[u]nderlying loans disbursed on or before June 30, 2022”) (filed as Exh. E to Decl. of James A. Campbell, Nebraska v. Biden, No. 4:22-cv-01040 (E.D. Mo. filed Oct. 11, 2022)). 111 See Cardona Memo, supra note 1, at 1. 112 See id. 113 34 C.F.R. § 690.1; see also generally CRS Report R45418, Federal Pell Grant Program of the Higher Education Act: Primer, by Cassandria Dortch. 114 See 34 C.F.R. § 685.220(d) (describing eligibility rules for obtaining a Direct Consolidation Loan, such as a requirement that at the time the borrower applies for the loan the borrower is not “subject to a judgment secured through litigation, unless the judgment has been vacated[,]” on the “loans being consolidated”); see also 20 U.S.C. §§ 1078-3(a)(3), 1087e(g). 115 See supra note 27 and accompanying text (noting that authority to make FFELP loans terminated in 2010 so that all FFELP loans were necessarily disbursed before the cancellation policy’s June 30, 2022 cut-off). Congressional Research Service 11 Student Loan Cancellation Under the HEROES Act of any FFELP or Perkins loans not held by ED are also eligible, as long as the borrower applied for consolidation before Sept. 29, 2022.”116 ED communicated these changes to the private firm that serves as website vendor for the Federal Student Aid website on September 28, 2022—the day before the complaint in Nebraska was filed—and the changes were visible to the public the next day, September 29.117 Borrowers of lender-held FFELP loans could still apply for consolidation on or after September 29, but the resulting loan would not be eligible for cancellation.118 In another revision to its website made public on September 29, ED stated that it was “assessing whether there are alternative pathways to provide relief to borrowers with federal student loans not held by ED,” including FFELP loans.119 To date, ED has not identified an alternative cancellation pathway for federal student loans that are not held by ED. On October 12, 2022, ED published the waivers and modifications that comprise the policy in the Federal Register.120 These published waivers include the consolidation limit.121 ED’s “Supporting Analysis” As ED deliberated on the cancellation policy, it prepared a paper that “summarizes the basis for and key design elements of” the initiative.122 The federal petitioners refer to this document as ED’s “Supporting Analysis.”123 They have relied on the Supporting Analysis in the student loan litigation as the main evidence of why the cancellation policy is necessary to ensure that borrowers are not placed in a worse position financially in relation to their federal student loans because of the pandemic.124 The Supporting Analysis expresses three general conclusions relevant to the litigation: (1) that borrowers face a heightened delinquency or default risk with the end of the payment pause; (2) that, in general, the cancellation of student loan balances would avert such risks; and (3) that the policy’s income and Pell Grant eligibility criteria reasonably cabined benefit eligibility to borrowers who need it. First, the Supporting Analysis determined that ending the payment pause would expose borrowers to a heightened delinquency or default risk on their federal student loans.125 For purposes of federal student loans, a borrower is current on a loan if the borrower makes a monthly payment 116 One-Time Student Loan Debt Relief, FED. STUDENT AID (Sept. 28, 2022 copy edit document showing changes to ED’s website in redline form) (filed as Exhibit D to Decl. of James Richard Kvaal, Nebraska v. Biden, No. 4:22-cv01040 (E.D. Mo. filed Oct. 7, 2022)). 117 See Decl. of James Richard Kvaal at ¶ 4, Nebraska v. Biden, No. 4:22-cv-01040 (E.D. Mo. Oct. 7, 2022). 118 See supra note 116. 119 One-Time Student Loan Debt Relief, FED. STUDENT AID (Sept. 28, 2022 copy edit document showing changes to website content in redline form) (filed as Exhibit D to Decl. of James Richard Kvaal, Nebraska v. Biden, No. 4:22-cv01040 (E.D. Mo. filed Oct. 7, 2022)). 120 Federal Student Aid Programs (Federal Perkins Loan Program, Federal Family Education Loan Program, and William D. Ford Federal Direct Loan Program), 87 Fed. Reg. 61512 (Oct. 12, 2022). 121 Id. at 61514 (“Direct Consolidation loans disbursed after June 30, 2022, and for which the repaid loans include a FFEL loan not held by ED, are only eligible for relief if the borrower submitted an application to consolidate such loans prior to September 29, 2022.”). 122 Supporting Analysis, supra note 10, at 1. 123 Federal Pet’rs’ Br., supra note 104, at 9. 124 See, e.g., Federal Pet’rs’ Br., supra note 104, at 44 (relying on the Supporting Analysis to argue that the cancellation policy’s income eligibility criterion is appropriately tailored to benefit borrowers at risk of delinquency or default after the payment pause ends). 125 Supporting Analysis, supra note 10, at 1. Congressional Research Service 12 Student Loan Cancellation Under the HEROES Act within 30 days of its due date.126 If the borrower does not make a monthly payment within 30 days of its due date, the borrower is then delinquent until the point when the borrower either returns to current status or defaults.127 A borrower defaults by failing to make a monthly payment within 270 days of its due date.128 To gauge default and delinquency risks, ED looked first to the payment behavior of borrowers affected by certain 2017 natural disasters who were in mandatory administrative forbearance.129 Default rates among these borrowers spiked once forbearance ended.130 In the year before the disaster declaration that led to the forbearance, 0.3% of borrowers entered default, whereas 6.5% entered default in the calendar year after exiting forbearance.131 Increases in default rates were even higher among Pell Grant recipients.132 ED also found evidence of delinquency and default risk in data from a survey of borrowers, who expected that despite the payment pause they would have more difficulty making full loan payments post-pandemic than they had pre-pandemic.133 ED explained that other studies of delinquency rates for debts not affected by the payment pause (e.g., non-student loan debt) confirmed the views expressed in the borrower survey.134 Second, the Supporting Analysis found that loan cancellation could reduce delinquency and default risks by reducing or eliminating the amount that borrowers would have to repay each month.135 If ED provided up to $20,000 in cancellation and all eligible borrowers claimed that benefit, 20 million borrowers would have no remaining student loan balance and thus no risk of falling into delinquency or default on such debt.136 With full participation by eligible borrowers, another 23 million would still have amounts owing after application of cancellation benefits.137 ED would reamortize the loans of borrowers with remaining balances, and their monthly payments would decline by an estimated $200 to $300.138 ED estimated that the payment pause, by comparison, saved the average borrower in repayment $233 per month.139 Third, the Supporting Analysis explained use of borrower income as a cancellation-policy eligibility criterion.140 ED determined that the higher a borrower’s income, the more likely the 126 FED.STUDENT AID, DEP’T OF EDUC., FISCAL YEAR 2022 ANNUAL REPORT 33 (2023), https://www2.ed.gov/about/reports/annual/2022report/fsa-report.pdf. 127 Id. 128 20 U.S.C. § 1085(l). 129 Supporting Analysis, supra note 10, at 2 (examining borrowers affected by hurricanes as well as wildfires in northern California). 130 Supporting Analysis, supra note 10, at 2. 131 Supporting Analysis, supra note 10, at 2. 132 Supporting Analysis, supra note 10, at 2 (noting that 7% of Pell borrowers “enter[ed] default in the calendar year after exiting mandatory administrative forbearance compared to 5 percent” of borrowers who were not Pell Grant recipients). 133 Supporting Analysis, supra note 10, at 2–3. 134 See, e.g., Supporting Analysis, supra note 10, at 3 (stating that data from the Federal Reserve Bank of New York showed that delinquency rates on student loans not affected by the payment pause had returned to pre-pandemic levels). 135 Supporting Analysis, supra note 10, at 4. 136 Supporting Analysis, supra note 10, at 5. 137 Supporting Analysis, supra note 10, at 5. 138 Supporting Analysis, supra note 10, at 5. 139 Supporting Analysis, supra note 10, at 5. 140 Supporting Analysis, supra note 10, at 6. Congressional Research Service 13 Student Loan Cancellation Under the HEROES Act borrower could make timely payments on their federal student loans.141 In particular, as compared to their lower-income counterparts, borrowers in higher income categories made loan payments more consistently; expressed a greater ability to repay future loans; were less likely to report financial insecurity; and were less likely to have lost employment at the beginning of the pandemic.142 In some cases, ED found that there were particularly large differences in repayment capacity between borrowers who made less than $125,000 and those who made more than $125,000.143 As a result, ED determined that the “$125,000 income mark” would be “a reasonable ceiling for discharge eligibility.”144 The Supporting Analysis also contended that a borrower’s past receipt of a Pell Grant, another policy eligibility criterion, helped predict a borrower’s delinquency or default risk in ways that a borrower’s current income alone could not.145 As ED explained, a borrower’s Pell Grant eligibility was based on family financial resources at the time of Pell Grant application, when recipients tended to have “lower wealth and familial monetary resources” than nonrecipients.146 While this determination relates to the status of a Pell Grant recipient at the time of application for the grant, ED also found significant differences in borrower repayment between Pell Grant recipients and nonrecipients.147 In every imputed income band, a Pell Grant recipient was about twice as likely to have defaulted on their loans as a non-Pell Grant recipient borrower in the same band six to ten years after entering repayment.148 Budgetary Impacts of HEROES Act Uses One facet of the lawsuits challenging the cancellation policy is the magnitude of the economic impact of this exercise of the HEROES Act. According to the plaintiffs, the dimensions of the policy show that ED proposes to use the HEROES Act to address a question of major economic as well as political significance. Thus, plaintiffs urge the Supreme Court to apply the “majorquestions doctrine” to assess whether the statute authorizes the policy.149 The federal petitioners respond, in part, by focusing on the financial effects of the payment pause,150 portions of which ED implemented using HEROES Act authority. Given the “permanent and substantial effects” of this prior use of the HEROES Act, the federal petitioners contend that the cancellation policy is 141 Supporting Analysis, supra note 10, at 6. 142 Supporting Analysis, supra note 10, at 7–10. 143 See, e.g., Supporting Analysis, supra note 10, at 8 (“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, comparted to 14 percent of those earning above $125,000.”); id. at 7, 9 (stating that inconsistent payment rates and expressions of financial insecurity for borrowers in the $100,000 to $124,000 income band are about double the rates of borrowers with incomes between $125,000 and $149,000). 144 Supporting Analysis, supra note 10, at 7. The Supporting Analysis does not expressly relate indicators of a borrower’s ability to repay student loans to household income as opposed to individual income. Id. at 6. 145 Supporting Analysis, supra note 10, at 11 (describing Pell Grant recipient status as an “independent and valuable” indicator of delinquency or default risk). 146 Supporting Analysis, supra note 10, at 11. 147 Supporting Analysis, supra note 10, at 12. 148 Supporting Analysis, supra note 10, at 12. 149 See State Pls.’ Br., supra note 104, at 31. 150 Federal Pet’rs’ Br., supra note 104, at 51. Congressional Research Service 14 Student Loan Cancellation Under the HEROES Act not an “unheralded” exercise of claimed statutory authority and thus is not on par with those administrative actions the Court has invalidated in its major-questions cases.151 While the economic impact of the payment pause and the cancellation policy could perhaps be framed in more than one way, the parties have quantified the economic impacts of ED’s actions by citing their estimated budgetary costs. The Federal Credit Reform Act of 1990 prescribes how agencies measure and account for these costs.152 When an agency makes a direct loan or loan guarantee, it estimates the “cost” to the federal government of that commitment.153 In simplified terms, this “cost” figure estimates the value to the government, when the commitment is made, of the future cash flows of a loan or loan guarantee.154 Cash flows are amounts the agency expects to pay to and receive from a third party over the lifetime of the commitment, stated in today’s dollars.155 The agency obligates existing budget authority to cover this cost when it originates a direct loan or makes a loan guarantee.156 If an agency then modifies a commitment—for example, by exercising “administrative discretion under existing law” to change a commitment’s terms157—in a way that increases the estimated cost of the outstanding direct loan or loan guarantee, the agency obligates more budget authority to cover the increased cost.158 ED used HEROES Act authority to extend the payment pause originally instituted by the CARES Act.159 By suspending loan repayment and interest accrual on covered federal student loans, the payment pause increased the cost to the federal government of having made the loans. The exact extent of the cost increase is unclear because there does not appear to be a public estimate of the cost of the entire HEROES Act payment pause from October 2020 to the present. ED states that the payment pause extensions made during FY2021 resulted in increased costs of $49.5 billion, while the extensions made during FY2022 increased costs by an additional $48.6 billion.160 151 Federal Pet’rs’ Br., supra note 104, at 51. 152 2 U.S.C. § 661a, et seq. 153 2 U.S.C. § 661c(d). ED estimates initial and updated costs on a cohort basis, grouping together in a single cohort all of the direct loans (or loan guarantees) made in a given fiscal year. See FED.STUDENT AID, U.S. DEP’T OF EDUC., FISCAL YEAR 2022 ANNUAL REPORT 170 (2023), https://www2.ed.gov/about/reports/annual/2022report/fsa-report.pdf. 154 2 U.S.C. § 661a(5). 155 See id. § 661a(5)(B)–(C). According to the Government Accountability Office (GAO), there is no FDLP cohort whose borrowers have all finished repaying their loans. Thus, as of 2022, ED continued to monitor the “costs” of the FDLP’s inaugural, Fiscal Year 1994 loan cohort, as well as all subsequent cohorts. See GOV’T ACCOUNTABILITY OFF., STUDENT LOANS: EDUCATION HAS INCREASED FEDERAL COST ESTIMATES OF DIRECT LOANS BY BILLIONS DUE TO PROGRAMMATIC AND OTHER CHANGES, GAO-22-105365, at 7–8 (2022) [hereinafter DIRECT LOAN COST REPORT]. 156 See 2 U.S.C. § 661c(d). 157 Id. § 661a(9). 158 See OFF. OF MGMT. & BUDGET, EXEC. OFF. OF THE PRESIDENT, CIRCULAR NO. A-11: PREPARATION, SUBMISSION, AND EXECUTION OF THE BUDGET § 185.7 (rev. Aug. 2022). 159 See Pub. L. No. 116-36, § 3513(a)–(b), 134 Stat. 281, 404 (2020). ED has stated that for a thirteen-day period preceding enactment of the CARES Act it also used the HEROES Act to provide similar payment relief to borrowers. See FED. STUDENT AID, U.S. DEP’T OF EDUC., FISCAL YEAR 2020 ANNUAL REPORT 38 (2020), https://www2.ed.gov/about/reports/annual/2020report/fsa-report.pdf. No public estimate of the costs of this relief appears to exist. 160 See U.S. DEP’T OF EDUC., FY 2022 AGENCY FINANCIAL REPORT 21, 69 (2023), https://www2.ed.gov/about/reports/annual/2022report/agency-financial-report.pdf (explaining that the FY2022 cost increase included the cost of extending the payment pause through December 31, 2022). Congressional Research Service 15 Student Loan Cancellation Under the HEROES Act According to the Government Accountability Office (GAO), the payment pause in effect between October 2020 and May 2022 increased the cost of FDLP loans by $77.8 billion.161 The cancellation policy would also affect the cost to the government of federal student loans by discharging all or part of an eligible loan’s outstanding balance. As a result of this discharge, the federal government would forgo payments of principal and accrued interest that it once estimated it would receive. By canceling principal, the federal government would also forgo interest that would have accrued on this principal. Cost estimates for the policy vary. ED estimates that for all eligible loan cohorts, cancellation would result in a roughly $379 billion cost increase.162 The Congressional Budget Office (CBO) places the cost of cancellation at about $400 billion.163 The two cost estimates diverge because, among other things, they rest on different assumptions about the number of eligible borrowers who would apply for cancellation.164 Supreme Court Review of Cancellation Policy: Procedural History The Supreme Court has accepted jurisdiction over two cases challenging the cancellation policy, Nebraska v. Biden and Brown v. U.S. Department of Education. Different plaintiffs brought the two cases, and the cases were heard in different lower courts. The two groups of plaintiffs describe different types of harm that the cancellation policy would allegedly cause, and the plaintiffs raise different claims to avert this alleged harm. The paths that each of these cases traveled to the Supreme Court are summarized below. 161 GOV’T ACCOUNTABILITY OFF., DIRECT LOAN COST REPORT, supra note 155, at 14. Relying on GAO’s analysis, the federal petitioners argue that “previous invocations of the [HEROES] Act had permanent and substantial economic effects. Most significantly, the previous COVID-19 relief measures, including the suspension of loan payments and interest accrual, are estimated to have cost the federal government $102 billion.” Federal Pet’rs’ Br., supra note 104, at 51 (emphasis added). This $102 billion figure adds the $77.8 billion cost of the payment pause that is attributable to the HEROES Act to the $24.6 billion cost that is attributable to the CARES Act. However, costs incurred because of the CARES Act seem not relevant to the federal government’s argument concerning payment-pause-cost figures, which is that the cancellation policy is not an “unheralded” use of HEROES Act authority. See also Transcript of Oral Argument at 31:24, Dep’t of Educ. v. Brown, No. 22-535 (Feb. 28, 2023) (statements at oral argument by the federal petitioners that the payment pause had cost “150 billion dollars”), https://www.supremecourt.gov/oral_arguments/argument_transcripts/2022/22-535_ba7d.pdf. 162 See ED Cost Estimate, supra note 11. 163 Letter from Phillip L. Swagel, Director, Congressional Budget Office, to Richard Burr, Ranking Member, Committee on Health, Education, Labor, and Pensions, U.S. Senate, and Virginia Foxx, Ranking Member, Committee on Education and Labor, U.S. House of Representatives at 3 (Sept. 26, 2022), https://www.cbo.gov/system/files/202209/58494-Student-Loans.pdf (last visited Apr. 14, 2023) [hereinafter CBO Cost Estimate]. CBO estimated that $430 billion in loan balances will be canceled under the policy. See id. CBO set its “cost” estimate lower, though, because it concluded a portion of canceled balances would, under current law, already have been discharged under programs such as income-driven repayment plans. See id. 164 Compare ED Cost Estimate, supra note 11 (assuming an 81% participation rate), with CBO Cost Estimate, supra note 163 (assuming “90 percent of income-eligible borrowers will apply for debt cancellation”). Congressional Research Service 16 Student Loan Cancellation Under the HEROES Act Nebraska v. Biden The first filed of these cases is captioned Nebraska v. Biden, initiated by a complaint filed in the U.S. District Court for the Eastern District of Missouri on September 29, 2022.165 The plaintiffs in Nebraska are six states: Nebraska, Missouri, Arkansas, Iowa, Kansas, and South Carolina.166 The Nebraska complaint includes three counts. Count 1 is titled “Separation of Powers” and alleges that the cancellation policy is “ultra vires” and “violates the separation of powers” because the HEROES Act does not authorize the policy.167 Count 2 claims that the policy violates the Administrative Procedure Act (APA) because ED adopted the policy in excess of its statutory authority.168 Count 3 asserts that the policy violates the APA because it is “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.”169 Whereas Counts 1 and 2 mainly focus on the asserted lack of statutory authority for the policy,170 Count 3 claims that the Secretary’s decision to adopt the policy did not result from reasoned decisionmaking. 171 Along with their complaint, the Nebraska plaintiffs filed a motion for a preliminary injunction.172 The Nebraska plaintiffs asked the district court to enjoin the federal petitioners from implementing or enforcing the policy because, at that time, ED had said that it would “start cancelling loan balances” for certain borrowers as early as October 2022,173 a move that assertedly would have inflicted harm on the plaintiffs. On October 20, the district court denied the Nebraska plaintiffs’ motion and dismissed the suit.174 The district court did not reach the merits of the plaintiffs’ claims by asking (for example) whether the states were likely to prevail on their argument that the HEROES Act did not authorize the cancellation policy.175 Instead, the district court held that none of the plaintiffs had shown Article III standing under any of their injury theories.176 The Nebraska plaintiffs appealed the district court’s judgment to the U.S. Court of Appeals for the Eighth Circuit (Eighth Circuit).177 They simultaneously asked the Eighth Circuit for two related forms of relief. The Nebraska plaintiffs first asked for an administrative stay of the cancellation policy to give the Eighth Circuit time to consider their second form of relief before 165 See Compl., Nebraska v. Biden, No. 4:22-cv-01040 (E.D. Mo. Sept. 29, 2022). 166 Id. ¶¶ 12–20. 167 Id. ¶¶ 142–48. 168 Id. ¶¶ 149–58. 169 Id. ¶¶ 159–71. 170 Id. ¶¶ 146–48, 155–56. 171 Id. ¶ 166. 172 Mot. for Prelim. Inj., Nebraska v. Biden, No. 4:22-cv-01040 (E.D. Mo. Sept. 29, 2022). A preliminary injunction is a temporary court order, issued before final judgment, compelling or preventing an action to prevent an irreparable injury to the party requesting the injunction. Injunction, BLACK’S LAW DICTIONARY (11th ed. 2019). 173 Pl. States Memo. in Supp. of Mots. for TRO and Prelim. Inj. at 3, Nebraska v. Biden, No. 4:22-cv-01040 (E.D. Mo. Sept. 29, 2022). ED subsequently stated that it would not discharge student loan debt under the policy until late October 2022. See Decl. of James Richard Kvaal at ¶ 5, Nebraska v. Biden, No. 4:22-cv-01040 (E.D. Mo. Oct. 7, 2022). Before then, though, the U.S. Court of Appeals for the Eighth Circuit entered injunctive relief to stay the policy’s implementation, relief that remains in effect as of the date of this publication. See infra notes 180–181 and accompanying text. 174 Nebraska v. Biden, No. 4:22-cv-1040, 2022 WL 11728905, at *7 (E.D. Mo. Oct. 20, 2022). 175 See id. (dismissing complaint for lack of jurisdiction). 176 Id. at *4–7. 177 Not. of Appeal, Nebraska v. Biden, No. 4:22-cv-01040 (E.D. Mo. Oct. 20, 2022). Congressional Research Service 17 Student Loan Cancellation Under the HEROES Act ED began implementing the policy.178 The Nebraska plaintiffs also asked for an injunction of the policy pending appeal.179 On October 21, 2022, the Eighth Circuit summarily granted the administrative stay.180 On November 14, the court entered an injunction pending appeal.181 The Eighth Circuit explained that at least one of the states, Missouri, had likely shown standing based on the policy’s effects on MOHELA.182 The Eighth Circuit also found that the appeal involved “substantial,” unresolved questions of law about ED’s statutory authority.183 The equities, the court reasoned, supported an injunction, because allowing the policy to go into effect would have an “irreversible impact” on the plaintiffs, while staying implementation would not harm eligible borrowers already covered by the payment pause.184 Brown v. U.S. Department of Education As Nebraska progressed, two student loan borrowers pressed a separate challenge to the cancellation policy in a case captioned Myra Brown v. U.S. Department of Education, filed on October 10, 2022, in the U.S. District Court for the Northern District of Texas.185 One of the Brown plaintiffs is current on lender-held FFELP loans and thus is not eligible for cancellation.186 The only FFELP loans eligible for cancellation under the policy are those held by ED or in default at a GA.187 The second plaintiff owes FDLP loans and thus is eligible for up to $10,000 in cancellation.188 The second plaintiff would not receive an additional $10,000 in cancellation, though, because he did not receive a Pell Grant.189 The Brown complaint includes a single APA count, which focuses on ED’s failure to follow allegedly applicable procedures for developing the policy. In particular, the Brown plaintiffs say that the cancellation policy qualifies as a “regulation” or “rule” as those terms are used in the HEA and the APA, respectively.190 Because the policy allegedly fits these categories, the plaintiffs contend they had a right to participate in the policy’s development, which ED did not allow them.191 Like the Nebraska plaintiffs, the Brown plaintiffs filed a motion for preliminary injunction alongside their complaint.192 178 See Dkt. Entry Granting Mot. for Administrative Stay, Nebraska v. Biden, No. 22-3179 (8th Cir. Oct. 21, 2022). 179 Emergency Mot. for Inj. Pending Appeal, Nebraska v. Biden, No. 22-3179 (8th Cir. Oct. 21, 2022). 180 Dkt. Entry Granting Mot. for Administrative Stay, Nebraska v. Biden, No. 22-3179 (8th Cir. Oct. 21, 2022). 181 See Nebraska v. Biden, 52 F.4th 1044 (8th Cir. 2022). 182 Id. at 1046–47. 183 Id. at 1047–48. 184 Id. at 1048. Four days before, on November 10, 2022, the Brown district court entered a judgment of vacatur setting aside the cancellation policy. See infra note 198 and accompanying text. 185 Compl., Brown v. U.S. Dep’t of Educ., No. 4:22-cv-00908-O (N.D. Tex. Oct. 10, 2022). 186 Id. ¶¶ 13–14. 187 See supra note 109 and accompanying text. 188 Compl. at ¶¶ 15–16, Brown v. U.S. Dep’t of Educ., No. 4:22-cv-00908-O (N.D. Tex. Oct. 10, 2022). 189 Id. ¶ 16. 190 Id. ¶¶ 65–73. 191 Id. ¶ 72. 192 Pls.’ Mot. for Prelim. Inj., Brown v. U.S. Dep’t of Educ., No. 4:22-cv-00908-O (N.D. Tex. Oct. 10, 2022). Congressional Research Service 18 Student Loan Cancellation Under the HEROES Act On November 10, the district court entered judgment for the Brown plaintiffs.193 The district court held that the plaintiffs had standing based on a procedural injury theory.194 Turning to the merits, the district court then considered the Brown plaintiffs’ single APA claim as relating to the APA’s “procedural” and “substantive” requirements.195 As to procedure, the district court reasoned that because ED issued the policy “under the HEROES Act, which exempts” the policy from public comment requirements, the policy “did not violate the APA’s procedural requirements.”196 Then, under the rubric of the APA’s “substantive requirements,” the district court held that the HEROES Act did not in fact authorize the policy.197 As a remedy, the district court declared the policy unlawful and ordered that it be vacated.198 The federal petitioners took an immediate appeal to the U.S. Court of Appeals for the Fifth Circuit (Fifth Circuit)199 and asked the Fifth Circuit to stay the district court’s judgment pending appeal.200 On November 30, the Fifth Circuit summarily denied that motion.201 Supreme Court Grants Certiorari Before Judgment By mid-November 2022, orders issued by two courts—the Texas district court’s November 10 judgment of vacatur202 and the Eighth Circuit’s November 14 injunction203—barred ED from implementing the cancellation policy. In November and December 2022, the federal petitioners thus asked the Supreme Court for orders that would allow ED to move forward with the cancellation policy while the appellate courts heard the appeals.204 In the alternative, the federal petitioners asked the Supreme Court to grant certiorari before judgment.205 Federal statute empowers the Court to accept jurisdiction over a case “before judgment has been rendered in the court of appeals.”206 This is not the typical route used to arrive at the Court. The Court’s rules of practice say that certiorari before judgment is reserved for cases of “such imperative public importance as to justify deviation from normal appellate practice.”207 193 See Brown v. U.S. Dep’t of Educ., No. 4:22-CV-0908-P, 2022 WL 16858525, at *15 (N.D. Tex. Nov. 10, 2022). 194 Id. at *7–9. The procedural injury theory is discussed in more detail. See infra “Procedural Injury.” 195 See Brown, 2022 WL 16858525 at *10–11. 196 Id. at *11. 197 Id. at *13–14. 198 Id. at *14–15. 199 Not. of Appeal, Brown v. U.S. Dep’t of Educ., No. 4:22-cv-00908-P (N.D. Tex. Nov. 10, 2022). 200 Defs.-Appellants’ Emergency Mot. for Stay Pending Appeal, Brown v. U.S. Dep’t of Educ., No. 22-11115 (5th Cir. Nov. 17, 2022). 201 Order, Brown v. U.S. Dep’t of Educ., No. 22-11115 (5th Cir. Nov. 30, 2022). 202 See supra note 198. 203 See supra note 181. 204 Appl. to Vacate the Inj. Entered by the U.S. Ct. of Appeals for the Eighth Cir., Biden v. Nebraska, No. 22A444 (U.S. Nov. 18, 2022); Appl. to Stay the J. Entered by the U.S. District Ct. for the N. District of Tex., U.S. Dep’t of Educ. v. Brown, No. 22A489 (U.S. Dec. 2, 2022). 205 See, e.g., Appl. to Vacate the Inj. Entered by the U.S. Ct. of Appeals for the Eighth Cir. at 4, Biden v. Nebraska, No. 22A444 (U.S. Nov. 18, 2022). 206 28 U.S.C. § 2101(e). 207 SUP. CT. R. 11. Congressional Research Service 19 Student Loan Cancellation Under the HEROES Act In December 2022, the Supreme Court deferred rulings on the federal petitioners’ applications for relief from the restraining effects of the lower court orders.208 As a result, both orders continue to bar ED from carrying out the cancellation policy. The Supreme Court also granted certiorari in both cases and identified the questions it will consider.209 In Nebraska, the Court will examine whether the state plaintiffs have Article III standing, whether statute authorizes the cancellation policy, and whether the Secretary’s exercise of any such authority was arbitrary or capricious.210 In Brown, the Court will consider the borrower plaintiffs’ Article III standing and whether the policy is statutorily authorized and adopted in a procedurally proper way.211 Do Plaintiffs Have Standing to Challenge the Cancellation Policy? Under Article III of the Constitution, the judicial power of the United States extends only to “Cases” and “Controversies.”212 In particular, plaintiffs, whether individuals, businesses, or governmental entities, must show that they have standing to sue before they may invoke the jurisdiction of the federal courts.213 The Supreme Court has repeatedly held that to have standing, a plaintiff must demonstrate that (1) they have suffered some injury-in-fact, (2) that the injury is fairly traceable to the defendant’s allegedly unlawful conduct, and (3) that the injury is likely to be redressed by the remedy sought from the court.214 As described by the Court in 2021, this requirement ensures that federal courts only decide cases involving the “rights of individuals” within the courts’ “proper function in a limited and separated government.”215 For an alleged harm to constitute an injury-in-fact, it must be both concrete (i.e., not abstract or conjectural)216 and particularized (i.e., affecting the plaintiff individually).217 Common examples of concrete harms include physical injuries or monetary losses,218 but concrete harms may also include intangible injuries such as reputational harms or interference with a person’s 208 Dkt. Entry, Biden v. Nebraska, No. 22-506 (U.S. Dec. 1, 2022); Dkt. Entry, Dep’t of Educ. v. Brown, No. 22-535 (U.S. Dec. 12, 2022). 209 Dkt. Entry, Biden v. Nebraska, No. 22-506 (U.S. Dec. 1, 2022); Dkt. Entry, Dep’t of Educ. v. Brown, No. 22-535 (U.S. Dec. 12, 2022). 210 Dkt. Entry, Biden v. Nebraska, No. 22-506 (U.S. Dec. 1, 2022) (referencing the federal petitioners’ application to identify questions presented in Nebraska); Appl. to Vacate the Inj. Entered by the U.S. Ct. of Appeals for the Eighth Cir. at 38, Biden v. Nebraska, No. 22A444 (U.S. Nov. 18, 2022). 211 Dkt. Entry, Dep’t of Educ. v. Brown, No. 22-535 (U.S. Dec. 12, 2022) (stating questions presented). 212 U.S. CONST. art. III, § 2. 213 Spokeo, Inc. v. Robins, 578 U.S. 330, 338 (2016) (explaining that Article III standing “doctrine limits the category of litigants empowered to maintain a lawsuit in federal court to seek redress for a legal wrong”). 214 Hollingsworth v. Perry, 570 U.S. 693, 704 (2013). 215 TransUnion LLC v. Ramirez, 141 S. Ct. 2190, 2203 (2021) (internal quotation marks omitted) (distinguishing between those cases that are properly within the judicial power and “hypothetical or abstract disputes” which are not). 216 See Carney v. Adams, 141 S. Ct. 493, 498 (2020) (“[A] grievance that amounts to nothing more than an abstract and generalized harm to a citizen’s interest in the proper application of the law does not count as an injury in fact.” (internal quotation marks omitted)). 217 Lujan v. Defs. of Wildlife, 504 U.S. 555, 560 n.1 (1992). 218 Collins v. Yellen, 141 S. Ct. 1761, 1779 (2021) (stating that “pocketbook injury is a prototypical form of injury in fact”). Congressional Research Service 20 Student Loan Cancellation Under the HEROES Act constitutional right of free speech.219 The harm must be “real and immediate” and not hypothetical or imagined.220 With respect to particularity, the Court has explained that this inquiry generally requires asking whether the plaintiff claims an injury that is personal, rather than a grievance the plaintiff “suffers in some indefinite way in common with people generally.”221 Traceability generally requires a causal link between the defendant’s allegedly unlawful conduct and the plaintiff’s injury.222 The Court has stated that it may be “substantially more difficult” to establish causation where the asserted chain of events connecting unlawful action to harm includes the actions of third parties who are not parties to the suit.223 Redressability requires a court to examine the particular relief requested by the plaintiff and ask whether it likely would address the alleged injury.224 For example, a plaintiff lacks standing to request an injunction to prevent future harm where they have failed to allege continuing or threatened injury from an underlying violation of law.225 The Brown and Nebraska plaintiffs advance different standing theories, which fall into three general categories. First, certain Nebraska plaintiffs allege that the cancellation policy causes them financial harm based on its effects on loan servicers and lender-held FFELP loans. Second, certain Nebraska plaintiffs assert harm in the form of lost state tax revenue. Third, the Brown plaintiffs claim that the Secretary adopted the policy in disregard of alleged procedural rights to participate in the policy’s development and that this procedural-right deprivation harmed their interest in receiving cancellation benefits. Financial Harm The states of Missouri, Nebraska, and Arkansas argue that they have standing to pursue their claim based on alleged financial harm. Missouri’s financial-harm standing theories are unique for two reasons. First, only Missouri claims to be injured because of the cancellation policy’s effects on direct loan servicers. Second, Missouri’s claims of financial harm depend on an alleged injury suffered in the first instance by a nonparty, MOHELA. Missouri thus offers two theories of how harm to MOHELA harms the state. One theory alleges that financial harm to MOHELA results in direct, simultaneous harm to Missouri because of the state’s degree of control over MOHELA. The second theory contends that MOHELA’s financial losses will indirectly harm Missouri by impairing MOHELA’s ability to make statutorily required payments to the state or scholarship contributions in lieu of such payments. Missouri, Nebraska, and Arkansas each claim a second type of financial harm. The states allege that the policy gave borrowers of lender-held FFELP loans an incentive to consolidate into the FDLP, which inflicted injury on these states in a variety of ways described below. 219 See Spokeo, Inc. v. Robins, 578 U.S. 330, 340 (2016) (“Although tangible injuries are perhaps easier to recognize, we have confirmed in many of our previous cases that intangible injuries can nevertheless be concrete.”). 220 City of Los Angeles v. Lyons, 461 U.S. 95, 102 (1983) (internal quotation marks omitted). 221 DaimlerChrysler Corp. v. Cuno, 547 U.S. 332, 344 (2006). 222 Lujan, 504 U.S. at 560. 223 Warth v. Seldin, 422 U.S. 490, 505 (1975). 224 Steel Co. v. Citizens for a Better Env’t, 523 U.S. 83, 103 (1998). 225 Lyons, 461 U.S. at 102–03. Congressional Research Service 21 Student Loan Cancellation Under the HEROES Act The following sections first examine the issues uniquely affecting Missouri’s standing before turning to the second financial harm theory—the consolidation injury—asserted by the three states. Servicer Injury Missouri’s unique theory of financial harm focuses on the cancellation policy’s alleged effects on MOHELA in its capacity as one of ED’s loan servicers. ED contracts with third parties—loan servicers—to perform many of the day-to-day administrative functions of the student loan accounts that correspond to the tens of millions of student loans that ED holds.226 ED allocates accounts to its servicers and then pays servicers based on the number and type of accounts and the work that the servicer performs on ED’s behalf.227 MOHELA is one of ED’s loan servicers. In FY2022, ED paid MOHELA $88.9 million in directloan servicer fees.228 These fees were the largest source of MOHELA’s revenue in that fiscal year.229 Missouri thus argues that the cancellation policy will cause financial harm to MOHELA because ED has stated that if all eligible borrowers applied for cancellation, up to 20 million would have no remaining student loan balance after cancellation.230 The elimination of student loan balances, Missouri says, means the closure of accounts—sometimes more than one per affected borrower—that are assigned to ED’s servicers.231 These closures, in turn, would impact servicer fees.232 If half of ED’s accounts close as a result of the policy, then Missouri argues that MOHELA could lose “at least half of” the accounts allocated to it and “nearly 40 percent” of its total operating revenue.233 In its briefs, the federal government appears to dispute that the policy will cause MOHELA to lose servicer fees.234 It is unclear whether this position later changed at oral argument. On the one hand, the Solicitor General said at oral argument that “if MOHELA made allegations that the” policy “was going to have financial effects on it, it could sue in its own name and” the federal petitioners “would not contest Article III standing.”235 On the other hand, the Solicitor General reiterated arguments from the briefs that, as a factual matter, Missouri failed to demonstrate that loan discharge under the policy would cause MOHELA to suffer a net revenue loss because ED would compensate MOHELA for processing policy-related discharges. This new dischargeprocessing revenue, according to the federal petitioners, could offset lost servicer revenue caused 226 See supra notes 58–60 and accompanying text. 227 See supra notes 61–62 and accompanying text. 228 See HIGHER EDUC. LOAN AUTH. OF THE STATE OF MO., FINANCIAL STATEMENTS 4 (2022). As of June 2022, MOHELA had been allocated 5.2 million federal accounts for servicing. Id. 229 Id. at 4, 23. 230 See supra note 136 and accompanying text. As discussed above, though, ED does not anticipate that all eligible borrowers will apply for cancellation. See supra note 164 (noting ED’s use of an 81-percent participation rate in its cost estimates). 231 State Pls.’ Br., supra note 104, at 16. 232 State Pls.’ Br., supra note 104, at 16. 233 State Pls.’ Br., supra note 104, at 16. 234 Federal Pet’rs’ Br., supra note 104, at 28 (“The plan may not cause a significant drop in MOHELA’s revenue at all.”). 235 Transcript of Oral Argument at 18:8–16, Nebraska v. Biden, No. 22-506 (Feb. 28, 2023), https://www.supremecourt.gov/oral_arguments/argument_transcripts/2022/22-506_5426.pdf. Congressional Research Service 22 Student Loan Cancellation Under the HEROES Act by the policy, so that MOHELA potentially would not suffer a net revenue loss and thus no financial harm.236 In the lower courts, the parties do not appear to have specifically focused on these potentially offsetting servicer fees.237 As a result, it is unclear (for example) what rate ED would use to compensate MOHELA for policy-related discharges.238 It is possible that the Supreme Court could conclude, though, that one-time fees associated with discharging loans under the policy likely would not offset the recurring fees that those same accounts would otherwise generate over a longer term absent discharge.239 Direct Harm Theory With respect to Missouri’s first theory of how harm to MOHELA harms the state, the parties offer differing descriptions of the relationship between MOHELA and Missouri. Missouri argues that MOHELA “is a Missouri-created and -controlled public instrumentality.”240 The federal petitioners, by contrast, emphasize features of state law separating MOHELA from the state.241 Missouri argues that its description of the MOHELA-Missouri relationship fits within Supreme Court cases that permitted a sovereign to litigate claims on behalf of its separately incorporated public entity, while the federal petitioners seek to distinguish those cases. There is support in Missouri state law for the parties’ differing views of the Missouri-MOHELA relationship. On the one hand, MOHELA’s statutory charter describes the Missouri Authority as an entity created for a public purpose that operates like a public entity with related privileges. Missouri established MOHELA as a “public instrumentality” to pursue goals such as ensuring that eligible students would have access to student loans.242 Missouri granted MOHELA statutory authorities and stated that when it used these authorities, it would be performing “an essential public function.”243 Likewise, the Missouri General Assembly declared MOHELA a “separate public instrumentality of the state,” whose income and property are exempt from all state-law 236 See id. at 72:9–16 (“JUSTICE JACKSON: So we don’t know really what the ultimate loss would be to MOHELA, even if we believe that MOHELA is part of the state [of Missouri]? GENERAL PRELOGAR: That’s right. The states haven’t offered any evidence in that regard to substantiate their assertion of standing); see also id. at 71:23-72:8 (Solicitor General argument) (contending that MOHELA would receive “fees for discharging accounts” under the policy that would have to be factored into a calculation of the net loss in servicer fees, if any, that MOHELA might experience). 237 See, e.g., Defs. Memo. of Law in Oppo. to Plfs. Mot. for Prelim. Inj. at 15, Nebraska v. Biden, No. 4:22-cv-01040 (E.D. Mo. Oct. 7, 2022)) (arguing that Missouri’s servicer injury theory was impermissibly speculative because the policy could either “reduce MOHELA’s portfolio” or “create increased demand for Direct Loans” and thereby increase the “pool of debt available for MOHELA to service”). 238 A June 2020 contract states that ED pays MOHELA specified amounts for “discharge processing.” DEP’T OF EDUC., CONTRACT NO. 91003120D0002 WITH MOHELA 4 (June 23, 2020) (filed as Exh. C to Decl. of Michael E. Talent, Nebraska v. Biden, No. 4:22-cv-01040 (E.D. Mo. filed Sept. 29, 2022)). However, this task relates to “discharge categories authorized under the Higher Education Act.” Id. at 11 (emphasis added). 239 See supra note 233 and accompanying text (framing the possible extent of account closures). 240 State Pls.’ Br., supra note 104, at 16. 241 Federal Pet’rs’ Br., supra note 104, at 29 (“Missouri and MOHELA are legally separate entities. Missouri thus cannot establish its own standing by asserting that the [policy] injures MOHELA.”). 242 MO. REV. STAT. § 173.360. To this end of improving access to student loans, the charter specifically authorized MOHELA to originate FFELP loans. See id. § 173.387. 243 Id. § 173.360. Congressional Research Service 23 Student Loan Cancellation Under the HEROES Act taxation.244 MOHELA’s proceedings and actions “shall comply with all statutory requirements respecting the conduct of public business by a public agency.”245 MOHELA is also accountable to Missouri state officials. It is led by a seven-member board.246 The governor appoints five members, by and with the advice and consent of the Missouri Senate, while the two other members are Missouri state officials.247 The governor may remove any authority member for cause.248 Statute also “assign[s]” MOHELA to the state’s Department of Higher Education and Workforce Development (the Missouri Department).249 MOHELA must report financial information to the Missouri Department annually.250 MOHELA must also receive the Missouri Department’s approval before it may sell certain of its student loan notes.251 These features of MOHELA’s charter describe state control over the Missouri Authority’s activities. However, other features of its charter describe structural and financial separation between MOHELA and the state. MOHELA is a separate legal entity—that is, it is a “body politic and corporate.”252 It has many powers of a corporation, including authority to “sue and be sued and to prosecute and defend.”253 Missouri is not “liable in any event for the payment of the principal of or interest on any bonds of the authority” or the performance of any MOHELA agreement; MOHELA’s debt is not the debt of the state or any of its political subdivisions.254 Its student loan notes are not “public property.”255 MOHELA and Missouri cannot rely on each other’s assets to pay their separate expenses. That is, MOHELA cannot use its assets “for the payment of debt incurred by the state,”256 and in turn MOHELA’s assets generally are not “revenue of the state” or “subject to appropriation by” the General Assembly.257 These differing descriptions of the MOHELA-Missouri relationship are background for arguments concerning Court precedent in two areas—original jurisdiction cases brought by states and suits brought by the United States, both of which saw the sovereign government assert interests that the opposing party argued belonged to one of the sovereign’s separately incorporated public entities, capable of suing in its own name.258 244 Id. § 173.415. 245 Id. § 173.365. 246 Id. § 173.360. 247 Id. (stating that a member of the state’s coordinating board and its commissioner of higher education shall serve on MOHELA’s board). The nine-member coordinating board heads the Missouri Department of Higher Education and Workforce Development, and the commissioner of higher education (commissioner) acts as its chief administrative officer. See, e.g., MO. CONST. art. IV, § 52; MO. REV. STAT. §§ 173.005 & 173.007. The governor appoints coordinating board members, by and with the advice and consent of the Missouri Senate. MO. REV. STAT. § 173.005. The coordinating board, in turn, appoints the commissioner. Id. § 173.007. 248 MO. REV. STAT. § 173.360. 249 Id. § 173.445. 250 Id. 251 Id. § 173.385.8. 252 Id. § 173.385.1. 253 Id. § 173.385.3. 254 Id. § 173.410. 255 Id. § 173.425. 256 Id. § 173.386. 257 Id. § 173.425; but see infra notes 293–298 and accompanying text (discussing the Lewis and Clark Discovery Fund (LCD Fund)). 258 The Court has also concluded that when the government “creates a corporation by special law, for the furtherance of governmental objectives, and retains for itself permanent authority to appoint a majority of the directors of that Congressional Research Service 24 Student Loan Cancellation Under the HEROES Act Original Jurisdiction Case Law: Possible Application of Arkansas v. Texas The Constitution defines the Supreme Court’s original jurisdiction as including “cases” in “which a state is a party,”259 meaning that, with the Supreme Court’s leave, a state can file its complaint directly in the Court rather than in a district court.260 A state may invoke this original jurisdiction only to pursue a “direct interest of its own” and not to “seek recovery” on behalf of others.261 Seventy years ago in Arkansas v. Texas, though, the Court declined to dismiss a suit brought by a state for injuries suffered in the first instance by a state-created and -controlled entity that was not itself a party to the litigation. Texas sought dismissal of Arkansas’s original-jurisdiction action challenging Texas’s efforts in its own courts to enjoin a contract to finance a new hospital at the University of Arkansas (the University).262 The contract named the University as a party to the agreement but not the state of Arkansas as such.263 Texas claimed that the University’s injury was not also Arkansas’s injury.264 The Court disagreed.265 State law established the University, the Court wrote, as “an official state instrumentality” in a way that meant that “any injury under the contract to the University is an injury to Arkansas.”266 Looking beyond state law’s description of the University, the Court also held that “in substance the claim is that of the State,” which was the “real party in interest.”267 It is unclear how the framework set forth by the Court in Arkansas, used there to decide when harm suffered by a separately incorporated state entity is shared by the state that created it, might apply to MOHELA in the student loan cancellation litigation. The federal petitioners assert that because Missouri created MOHELA as “a separate legal entity,” the state cannot maintain that it and the state “are one and the same” for standing purposes.268 Yet Arkansas had also established its University as a “body politic and corporate” with all the powers of a corporation.269 These powers include, as the Arkansas Supreme Court explained in 1963, the power to sue and be corporation,” the corporation may be subject to constitutional limitations such as the First Amendment. Lebron v. Nat’l R.R. Passenger Corp., 513 U.S. 374, 399 (1995). Missouri argues that under this precedent, MOHELA is part of the state despite those aspects of its charter that indicate separation. See id. at 391 (noting that Amtrak’s statutory charter that it was not “an agency or establishment of the United States Government” (internal quotation marks omitted)). Missouri’s argument concludes that because MOHELA is part of the state, and because the Missouri attorney general has authority to protect state interests in litigation, the state can sue in MOHELA’s name. See State Pls.’ Br., supra note 104, at 17–18. The federal petitioners respond that Lebron and related cases address only whether MOHELA is a state actor for purposes of the Constitution’s individual rights protections or the separation of powers; the Lebron line of cases does not expressly address questions of standing. Reply Br. of Federal Petitioners, at 5 Biden v. Nebraska, No. 22-506 (U.S. Feb. 15, 2023) [hereinafter Reply Br.]. 259 U.S. CONST. ART. III, § 2. 260 SUP. CT. R. 11 (describing procedure in original actions). 261 See, e.g., State of Oklahoma ex rel. Johnson v. Cook, 304 U.S. 387, 396 (1938). 262 346 U.S. 368 (1953). 263 Id. 264 Id. at 369. 265 Id. at 370. 266 Id. 267 Id. at 371. 268 Federal Pet’rs’ Br., supra note 104, at 30. 269 State of Ark., 346 U.S. at 370 (internal quotation marks omitted). Congressional Research Service 25 Student Loan Cancellation Under the HEROES Act sued.270 MOHELA and the University otherwise had similar structural connections to the states that created them.271 The ability to sue and be sued thus does not distinguish MOHELA from the University at issue in Arkansas, but the two entities do differ in a potentially important respect. In Arkansas, the Court noted that the state owned “all the property used by” the University, including the medical center whose construction Texas was preventing.272 The Court also stated that Arkansas was the real party in interest to the construction contract.273 These statements appear to focus on the benefit that Arkansas derived from its suit. If Texas were compelled to allow construction, Arkansas would then own new University property.274 If Missouri prevails in its suit, by contrast, MOHELA would perhaps retain servicer fees it might otherwise lose with broad loan cancellation, but those fees would not be directly accessible to Missouri under existing state law.275 Federally Chartered Corporations Case Law: Possible Application of Cherry Cotton Mills, Inc. v. United States The Supreme Court has also considered whether the United States could litigate claims that allegedly belonged to a federally chartered corporation that was absent from the suit and able to bring the same claim on its own. Decided in 1946, Cherry Cotton Mills, Inc. v. United States concerned two debts: a federal tax refund, and the taxpayer’s separate debt to the Reconstruction Finance Corporation (RFC).276 The Department of the Treasury issued the taxpayer’s refund check to the RFC to partially offset the RFC debt.277 The taxpayer claimed the offset was improper, and sued the United States to recover the refund.278 The United States counterclaimed to recover the RFC debt, arguing that the debt to the RFC was a claim “on the part of the Government.”279 The RFC was not a party to the suit,280 and it had the power to sue on debts that were owed to it.281 The taxpayer thus argued that the RFC’s debt should not be the basis for a government 270 See Cammack v. Chalmers, 284 Ark. 161, 163 (1984) (“The legislature designates the Board of Trustees of the University as the corporate entity capable of being sued.”). The federal petitioners argue that the “university could not sue or be sued in its own name” because the Arkansas Supreme Court had described the state’s district agricultural schools as lacking those powers. Reply Br., supra note 258, at 5. However, the Arkansas statutes established state district agricultural schools separately from the University, and those separate statutory authorities vested only the University with “all the powers of a corporate body.” Ark. Code Ann. § 6-64-202. 271 For example, both were led by multimember boards appointed by state officials and described in state law as public instrumentalities serving public purposes. Compare State of Ark., 346 U.S. at 370, with MO. REV. STAT. § 173.360. 272 State of Ark., 346 U.S. at 370. 273 Id. at 371. 274 Id. at 370. 275 See supra note 257 and accompanying text. 276 327 U.S. 536, 537 (1946). 277 Id. at 537–38. 278 Id. at 538. 279 Id. (internal quotation marks omitted). 280 See id. 281 Act of Jan. 22, 1932, Pub. L. No. 72-2, § 4, 47 Stat. 1, 2 (1932) (providing that the Reconstruction Finance Corporation “shall have the power” “to sue and be sued, to complain and to defend, in any court of competent jurisdiction, State or Federal”). Congressional Research Service 26 Student Loan Cancellation Under the HEROES Act counterclaim; just like a privately owned corporation, the RFC would have to pursue recovery of its debt in separate litigation.282 The Supreme Court nonetheless allowed the counterclaim to proceed.283 The counterclaim statute, the Court reasoned, “was intended to permit the Government to have adjudicated in one suit all controversies between it and those granted permission to sue it.”284 This intended purpose encompassed the RFC’s claims. Though Congress had referred to the RFC as a corporation, in actuality it was “an agency selected by Government to accomplish purely Governmental purposes” because of the United States’ pervasive control over the RFC.285 The Court offered specific examples of this pervasive control, and the parties dispute whether these examples are sufficiently similar to Missouri’s relationship with MOHELA. The Court in Cherry Cotton Mills noted that the President appointed all of the RFC’s directors and that the RFC was tasked with accomplishing a public purpose.286 Missouri argues that the same is true of the relationship between it and MOHELA.287 The Court also noted that the United States was financially tied to the RFC: all of the RFC’s money “came from” the United States, and the United States both received all of the RFC’s profits and bore all of its losses.288 The federal petitioners stress that the same is not true of Missouri’s ties to MOHELA.289 Cherry Cotton Mills is also not a perfect fit for Missouri’s standing theory. Except for MOHELA’s obligation to make Lewis and Clark Discovery Fund (LCD Fund) distributions, no direct financial connection exists between the state and MOHELA.290 Missouri would not suffer the same type of direct pocketbook injury on account of servicer injury that the United States would suffer from having RFC debts go uncollected.291 To say that a case is not a perfect fit for a theory does not mean that the case provides no support, and Missouri’s nonfinancial connections to MOHELA resemble those present in Cherry Cotton Mills. The question confronting the Court, then, is which of these connections—financial connections, other forms of control, or both—is most legally salient for deciding whether a sovereign may assert the rights of a separately incorporated entity with its own power to vindicate those interests. Indirect Harm Theory Missouri’s direct-harm theory posits that MOHELA’s injuries are also injuries of the state. The state’s indirect-harm theory contends that the cancellation policy will financially harm MOHELA and thereby affect its ability to make two types of related payments to the state.292 282 See Cherry Cotton Mills, Inc., 327 U.S. at 538. 283 Id. at 539. 284 Id. 285 Id. 286 Id. 287 State Pls.’ Br., supra note 104, at 18. 288 Cherry Cotton Mills, Inc., 327 U.S. at 539. 289 Reply Br., supra note 258, at 6. 290 See supra notes 254–257 and accompanying text. 291 See, e.g., MO. REV. STAT. § 173.410 (“The state shall not be liable in any event for the payment of the principal of or interest on any bonds of the authority or for the performance of any pledge, mortgage, obligation, or agreement of any kind whatsoever which may be undertaken by the authority.”). 292 State Pls.’ Br., supra note 104, at 21 (“By hindering MOHELA’s contributions to the State, the Program risks financial injury to Missouri.”). Congressional Research Service 27 Student Loan Cancellation Under the HEROES Act Missouri refers to the first type of payments as “distributions.”293 MOHELA must make distributions worth $350 million to Missouri’s LCD Fund.294 When the LCD Fund has a balance, the Missouri General Assembly is able to appropriate from the Fund to support capital projects at the state’s public colleges and universities and the Missouri Technology Corporation’s work with colleges and universities.295 MOHELA states that as of June 30, 2022, it still owed the LCD Fund $105.1 million and last made a distribution in 2008.296 When further distributions will occur is unclear. State law allows MOHELA to ask the state for an extension of the due date.297 In FY2017, MOHELA received an extension to September 30, 2024, “with one year extensions for each additional $5 million” of educational-assistance contributions.298 MOHELA’s payments to state educational funds that assist Missouri students are the second type of payments that Missouri says will be indirectly impacted by the cancellation policy. MOHELA contributes to Missouri Department of Higher Education and Workforce Development programs.299 These contributions include $65 million paid to the state’s Access Missouri Financial Assistance Program.300 MOHELA made these payments to the Access Missouri program in fiscal years 2011, 2012, and 2013 in exchange for the state granting extensions of prior LCD Fund distribution due dates.301 The federal petitioners argue that Missouri’s indirect-harm theory faces two problems, one that is mainly legal and other mainly factual. On the legal front, the federal government argues that the rights Missouri attempts to assert are not its own.302 That is, the federal government argues that Missouri looks to sue for injuries suffered as a legal matter by MOHELA. The federal petitioners argue that the state’s attempt to rely on these injuries is no different from an ordinary creditor trying to base its standing on injury to its debtor, which the Court’s case law does not allow.303 293 See MO. REV. STAT. § 173.385.2. 294 Id. 295 Id. § 173.392.2; see also id. § 348.251.2 (authorizing the Missouri governor to establish “a private not-for-profit corporation named the ‘Missouri Technology Corporation,’ to carry out the provisions” of the Revised Statutes). 296 HIGHER EDUC. LOAN AUTH. OF THE STATE OF MO., FINANCIAL STATEMENTS 20–21 (2022). 297 MO. REV. STAT § 173.385.2 (“Notwithstanding the ability of the authority to delay any distribution required by this subsection” if the lack of delay would have certain adverse effects on MOHELA, “the distribution of the entire three hundred fifty million dollars of assets by the authority to the Lewis and Clark discovery fund shall be completed no later than September 30, 2013, unless otherwise approved by the authority and the commissioner of the office of administration.” (emphasis added)). 298 HIGHER EDUC. LOAN AUTH. OF THE STATE OF MO., FINANCIAL STATEMENTS 21 (2022). 299 Id. at 10 (listing MOHELA’s annual contributions to scholarship funds including those administered by Missouri such as the A+ Scholarship Program); see also MO. REV. STAT. § 160.545. 300 See, e.g., MO. REV. STAT. § 173.1104 (describing eligibility rules for the Access Missouri Financial Assistance Program (Access Missouri)). 301 HIGHER EDUC. LOAN AUTH. OF THE STATE OF MO., FINANCIAL STATEMENTS 9 (2022). MOHELA continues contributing to Department of Higher Education and Workforce Development programs, but it is unclear whether future extensions of the distribution due date are contingent on such contributions. MOHELA’s financial statements describe an agreement with the state for “one year extensions” beyond FY24 “for each additional $5 million” in payments MOHELA makes to a different recipient program, the Missouri Scholarship and Loan Foundation (the Foundation). MOHELA created the Foundation as a nonprofit to assist Missouri residents attending Missouri postsecondary institutions. Id. at 9–10, 29. 302 Federal Pet’rs’ Br., supra note 104, at 27. 303 Federal Pet’rs’ Br., supra note 104, at 27 (stating that this standing theory equates to “the proposition that, if A causes financial harm to B, and B owes money to C, C has standing to sue A”). Congressional Research Service 28 Student Loan Cancellation Under the HEROES Act To distinguish its standing theory from the ordinary debtor example, Missouri relies on the Court’s 1990 decision in Franchise Tax Board of California v. Alcan Aluminum Ltd.304 There, the Court found that two corporations had Article III standing to challenge California taxes on their respective wholly owned subsidiaries.305 The allegedly illegal taxes threatened to lower the value of their holdings in the subsidiaries.306 Missouri thus likens MOHELA to a wholly owned subsidiary, citing its control over MOHELA and the distributions that the Missouri Authority must make to the state.307 Whether the Court accepts Missouri’s analogy to Aluminum Ltd. appears to depend on how closely it views the statutory relationship between Missouri and MOHELA.308 On the factual front, the federal government argues that Missouri can only speculate that the policy’s effects on MOHELA will cause it to default on payments to the LCD Fund.309 The Court has said that to show standing, “possible future injury” is not enough.310 Injury must be “certainly impending.”311 The Court has also usually been reluctant “to endorse standing theories that rest on speculation about the decisions of independent actors.”312 Whether the Court views Missouri’s predictions of the cancellation policy’s effects as certainly impending harm or mere speculation will likely depend on its view of the extent of the harms that MOHELA may suffer, such as server injury, because of the policy.313 The larger that harm, the more likely that the policy will affect MOHELA’s ability to make required distributions or contributions to educational assistance programs for distribution extensions. Consolidation Injury Missouri, Nebraska, and Arkansas claim a second type of financial harm, the cancellation policy’s alleged effects on lender-held FFELP loans. Since unveiling the policy, ED has maintained that 304 493 U.S. 331 (1990). Missouri also relies on Hunt v. Washington State Apple Advertising Commission, in which the Court stated that the interests of the Washington State Apple Advertising Commission (the Commission) “may” have been impacted by a North Carolina statute that barred the sale of apples labeled as “Washington Apples,” even though Commission did not itself participate in the “Washington Apples” market. 432 U.S. 333, 341, 345 (1977). The Commission received annual assessments from Washington producers based on the sales volume of that market. Id. at 345. If the label requirement impacted sales of Washington Apples, “it could reduce the amount of the assessments due the Commission and used to support its activities.” Id. Despite these comments, the Court appears to have based its finding of Article III standing on a separate theory of representational standing. Under that theory, the Commission was able to sue on behalf of Washington Apple producers in the same manner as a trade association representing the interests of its members. See id. (“We . . . agree with the District Court that the Commission has standing to bring this action in a representational capacity.”). 305 Alcan Aluminum Ltd., 493 U.S. at 335–36. 306 Id. 307 State Pls.’ Br., supra note 104, at 21 (“By hindering MOHELA’s contributions to the State, the Program risks financial injury to Missouri.”). 308 See Alcan Aluminum Ltd, 493 U.S. at 335–36 (agreeing with the appellate court’s holding that standing existed because the parent corporation’s ownership interest in the subsidiaries gave the parents a “personal stake” in the litigation that ensured the parties would be adverse to one another and “sharply” present issues for determination by federal courts). 309 Federal Pet’rs’ Br., supra note 104, at 28. 310 Whitmore v. Arkansas, 495 U.S. 149, 158 (1990). 311 Id. 312 Clapper v. Amnesty Int’l USA, 568 U.S. 398, 414 (2013). 313 See supra “Servicer Injury” and infra “Consolidation Injury” (describing the types of financial harms that MOHELA alleges). Co [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/crs%3AR47505. Public record. Not legal advice.