February 3rd, 2023 2 Minute Read Press Release

Manhattan Institute's Ilya Shapiro Files Supreme Court Brief in Biden v. Nebraska

The Manhattan Institute yesterday asked the Supreme Court to affirm a lower-court decision that blocked the Biden administration’s student-loan forgiveness plan. 

In 2003, Congress gave the secretary of education limited authority to waive or modify federal student-loan provisions “as may be necessary to ensure” that certain defined goals are achieved. One of those defined goals is that “recipients of student financial assistance” who are affected by a military operation or national emergency “are not placed in a worse position financially in relation to that financial assistance because of their status as affected individuals.”

The government now argues that under this law, it has the authority to forgive billions of dollars in loans across millions of borrowers. Specifically, it argues that: 1. The Covid-19 pandemic is a national emergency; 2. Every federal student loan borrower either lives in a covid disaster area or has otherwise been financially affected by that emergency; 3. As a result of that emergency, some borrowers will default on their loans once payments finally resume after a multi-year pause; and 4. Forgiving some (or all) of the borrowers’ principal balances will ensure their overall risk of default is no worse than it was before the pandemic.

This argument runs headlong into a key limiting word in the statutory text: “necessary.” Most of the steps in a Rube Goldberg machine are far from “necessary” to achieve their final aim, because a simpler and more direct method is available. The same is true here. If the government’s purpose were truly to reduce the harm of more frequent defaults, there are far more direct means available, including putting borrowers on income-based repayment plans and, even more simply, waiving some of the legal consequences of missed payments. Forgiving $400 billion of debt so that fewer people will suffer penalties for missed payments is like cutting $400 billion in income taxes so fewer people will suffer IRS underpayment penalties.

Finally, the “major questions doctrine” clear-statement rule makes this an easy case: Since the action here was not “necessary” to achieve the government’s purported aim, the statutory text lacks a clear statement granting the secretary such power. Whether to grant nationwide debt forgiveness is undoubtedly a major question, one that Congress debated as it considered bills that would explicitly make that choice. A $400 billion debt-forgiveness plan is a major policy decision that must be made by Congress—and Congress has declined to make it.

Read the full brief here.

Ilya Shapiro is a senior fellow and director of constitutional studies at the Manhattan Institute. To book interviews with Mr. Shapiro, contact nkenney@manhattan-institute.org

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