A lawsuit filed by a conservative-leaning nonprofit may be poised to block President Joe Biden’s student debt cancellation plan thanks to a move by a federal court in Fort Worth, Texas that one legal expert called “unusual” and another legal expert and supporter of the debt relief program called “concerning.”
The judge, Mark Pittman, who was appointed by President Donald Trump in 2019, issued an order earlier this month indicating that he’s interested in moving quickly to decide the case, suggesting that the court won’t take more time to determine whether the plaintiffs have standing — or the right to sue because they’ve been injured by the policy — to bring it.
The order, which asked the parties in the lawsuit to file written objections to the court moving to rule on the merits of the case, comes as the Biden administration is facing multiple legal challenges over its plan to cancel $10,000 in student debt for borrowers earning less than $125,000 and $20,000 for those who received Pell grants, the money the federal government provides for low-income students to attend college. The question of whether those bringing the suits have standing has featured prominently in these cases. Supreme Court Justice Amy Coney Barrett rejected requests by plaintiffs in two separate lawsuits challenging the debt relief program to temporarily block it after lower courts dismissed the suits because the plaintiffs lacked standing.
A federal judge in St. Louis, appointed by George W. Bush, dismissed a lawsuit last month filed by six Republican-led states, saying they lacked standing to sue. The states appealed the decision and an appellate court has temporarily stalled the debt cancellation program as the judges decide whether to pause the program while they hear the appeal.
But even with all the legal activity, it’s the case in the federal court in Dallas that is drawing the attention of both advocates and critics of Biden’s student debt cancellation plan. The plaintiffs in the suit are two student loan borrowers, one who is left out of the cancellation program entirely and one who won’t get the maximum benefit because they never received a Pell grant. The case is backed by the Job Creators Network, an organization founded by Bernard Marcus, the co-founder of Home Depot and a supporter and financial backer of Trump.
“On the substance, as a purely legal matter it shouldn’t have any impact,” on the debt relief plan, Abby Shafroth, the director of the Student Loan Borrower Assistance Project at the National Consumer Law Center said of the suit. “I will acknowledge that I’m growing more concerned about what might actually happen,” added Shafroth, who supports the debt cancellation policy. “It troubles me that this court seems to be sort of chomping at the bit to resolve this case.”
Inside the Dallas case
The two plaintiffs in the Fort Worth suit say they were injured by the government’s student debt relief program because the Department of Education did not seek public comment on the policy, which deprived them and other stakeholders of the chance to weigh in and resulted in a program that arbitrarily benefited some and not others, like themselves.
One of the plaintiffs, Myra Brown, has more than $17,000 in federal student debt that’s held by a private lender, a category of student loans that at least for now is ineligible for relief. The other borrower, Alexander Taylor, has more than $35,000 in federal student debt that qualifies for cancellation, but Taylor didn’t receive a Pell grant and so is only eligible for $10,000 in relief.
The suit claims that by not going through a typical rulemaking process, including seeking notice and comment, the Biden administration violated the Administrative Procedures Act. Lawyers for the government have said that’s irrelevant because the HEROES Act, the law which they say gives them the legal authority for the debt relief plan, doesn’t require notice and comment.
The plaintiffs’ claim that they have standing to bring the suit based on the fact that they didn’t get a chance to comment on the debt relief plan is “a tough sell,” said David Rubenstein, a professor at Washburn University School of Law and an expert on administrative law. Typically in order for a plaintiff to establish standing in a case like this a plaintiff would need to show a direct injury caused by an executive branch policy — say, a requirement for companies to cut down on polluting — and that the injury could be redressed by the court.
“There has to be something that’s concrete,” he said. “It’s not clear at all that even if the government went through a rulemaking it would structure the debt relief program differently, much less in a way that would or could directly benefit the plaintiffs.”
But the order by Pittman, a member of the Federalist Society, a conservative legal advocacy group, indicates that the court may not take the time to flesh out these questions. Instead, Pittman could rule simultaneously on the merits of the case and whether the plaintiffs have standing to bring it.
The government’s lawyers have argued that would be inappropriate because it wouldn’t give them the opportunity to examine the plaintiffs about their intent to participate in comments surrounding the debt relief plan. They would also be unable to properly examine “the tension between Plaintiffs’ position that the forgiveness program should be expanded to include them and their position that the program is unlawfully overbroad, which would presumably be part of their comment,” government lawyers said.
Rubenstein said he agrees with the government’s argument here that it would be improper to move forward procedurally without first resolving the contested facts about the plaintiffs’ standing. He called the court’s proposal to move past these questions and decide the case on the merits “unusual.” “I just don’t see there being enough to make a determination on standing based on the limited record before the court,” he said.
The HEROES Act and PPP
If the court does move to decide the case on the merits, it will be weighing some of the same issues brought up in other legal challenges to the debt relief program. These have centered on whether the Biden administration is using too-broad a reading of the HEROES Act to justify its legal authority to cancel student debt for a wide swath of borrowers.
Passed by Congress in 2003, the HEROES Act allows the Department of Education to provide student debt relief to borrowers in a national emergency to ensure they won’t be made financially worse off. Those challenging the debt relief program in court have said that Congress did not contemplate widespread student debt cancellation when it passed the HEROES Act, instead focusing the relief on those serving in the military.
The government’s attorneys have argued that the COVID-19 pandemic is a national emergency that fits within the scope of the HEROES Act. In addition, they’ve said that the parameters around the debt relief plan are based on an economic analysis of who is most at risk of harm when student loan payments resume in January and to ensure that this group of borrowers won’t be left worse off by the national emergency.
“By relying on the HEROES Act the government dodges this a slew of potential procedural objections and procedural delay,” Rubenstein said because the HEROES Act doesn’t require notice and comment. He added, however, that the government’s reliance on that Act requires the government to justify the merits of the debt relief program as a legitimate response to a “national emergency.” Because that may be difficult for the government to demonstrate, Rubenstein wrote in an email, “the threshold issue of whether the plaintiffs have standing is potentially quite consequential. “
Some courts, including the Supreme Court have indicated that they are skeptical of executive branch agencies using authority not explicitly delegated by Congress, which is likely in part why the government has fought so hard on the standing question in these cases, Rubenstein said.
Almost immediately after the policy was announced, opponents began searching for people and organizations who might have standing to challenge it. It’s unclear how the Job Creators Network connected with Brown and Taylor, the organization didn’t provide an answer when asked.
But Brown appears to be a small business owner, a constituency the Job Creators Network says it represents. A LinkedIn profile with Brown’s name and the same educational credentials as those listed in the suit, lists the LinkedIn user’s occupation as the president of a company called High Value Signs. A Texas firm that is registered to Myra Brown and does business as High Value Signs & Studios seemingly had $48,000 in Paycheck Protection Program loans forgiven.
Brown didn’t respond to a LinkedIn message seeking comment, but Elaine Parker, the president of the Job Creators Network Foundation, said the government loan forgiveness provided through PPP and the government loan forgiveness provided through student debt cancellation aren’t comparable in part because PPP was passed by Congress.
“PPP was always designed to be forgiven if certain parameters were met,” Parker wrote in a statement. “Equating PPP with a loan that a person took out that was always intended to be paid back is misguided.”
Who is behind the effort?
Though the Job Creators Network describes itself as a “nonpartisan” group advocating around business issues, some of their efforts, including challenging the student debt relief plan, indicate the organization’s advocacy is broader and more partisan, said Chris Kromm, the executive director of the Institute for Southern Studies, a media, research and education organization.
“Really the group is more ideological and political rather than focused on economics and bread and butter business interests,”Kromm said of the Job Creators Network. For example, he said, in addition to more business oriented organizations like various chambers of commerce, JCN lists Turning Point USA, the pro-Trump student organization, as one of its partners on its website. In addition, Republican mega donors, the Mercer family, historically backed the organization.
“It does feel like more of just an anti-Biden take down,” Kromm said of the debt relief lawsuit, “and points to the ideological and partisan focus of what they’re doing.” An even more “cynical” take on the organization’s motivation to challenge the debt relief plan, Kromm said, is that student debt cancellation could give employees more power.
“Maybe once a borrower isn’t so burdened by debt they’ll be choosier about where they work,” he said.
In the statement, Parker, JCN Foundation’s president, said that challenging the debt relief plan is “consistent with our mission” because of the program’s “negative impact on our economy and the importance of pushing back against government abuses of power.”
“Moreover, the student loan bailout does nothing to address the root cause of unaffordable tuition and colleges that raise tuition far more than inflation year after year while sitting on $700 billion in endowments. College endowments, not taxpayers, should be responsible for helping students drowning in debt,” Parker said.
Right now, the debt relief plan still remains on hold as the 8th circuit appellate court decides whether to pause the program while they hear the case filed by the six Republican-led states. The White House has said that 26 million borrowers have provided the Department of Education with the necessary information to have their debt canceled and as of the end of last week, 16 million applications had been approved.
“We’re eagerly awaiting the next orders in both this case and the Nebraska case that’s been pending for a while now in the 8th circuit,” Shafroth said. “We’ll either see millions of people have their debt canceled very soon or we’ll see a longer term hold from either the 8th circuit or from this Texas court, which gums things up longer in which case we’re going to have an issue,” with the plan to resume student loan payments on January 1.