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How is Biden able to forgive student loans?

With opponents expected to file lawsuits, the Justice Department has released a legal opinion covering the justification for Biden's debt relief program.

WASHINGTON — President Joe Biden's student debt relief program announced Wednesday delivers on a long-awaited campaign promise, offering up to $10,000 in loan cancellation for many Americans — and up to $10,000 more for those with the greatest financial need

But how is he able to do it, and most importantly what legal challenges could the program face?

The Justice Department released a legal opinion on Wednesday saying that the Higher Education Relief Opportunities for Students Act allows the Secretary of Education the “authority to reduce or eliminate the obligation to repay the principal balance of federal student loan debt.”  

Also known as the HEROES act, the legislation is a post-9/11 law that provides the authority to grant relief from student loan requirements during specific periods, such as a war or national emergency. The law was adopted with overwhelming bipartisan support at a time when U.S. forces were fighting two wars, in Afghanistan and Iraq.

RELATED: You can't apply for new student loan forgiveness yet, but you can sign up for alerts

According to the Biden administration's legal opinion, the Secretary of Education has used the authority granted by the HEROES act under every prior administration since its passage after the September 11 attacks. 

The current payment pause on student loans enacted during March 2020 is allowed under this law. But neither Trump nor Biden, until the president's announcement on Wednesday, had tried to wipe out so much student debt at one time.

Under this authority, the Biden administration said it is able to develop a program tackling categorical debt cancellation directed at "addressing the financial harms caused by the COVID-19 pandemic." 

The legal opinion also upheld that a relief program wouldn't need to be "on a case-by-case basis," but rather can be applied on a "class-wide basis."

The Justice Department's legal justification seemed to be anticipating criticism that the broad-based debt cancellation might run afoul of Supreme Court rulings, including a June decision limiting the administration’s ability to combat climate change.

In that case, the court declared that when dealing with such “major questions,” the administration must point to clear congressional authorization when it asserts new power over an important part of the economy.

The justification for the debt cancellation “seems to tee up nicely -- perhaps inadvertently — a major-questions doctrine challenge as the opinion seems to suggest the agency could forgive all student loans for everyone due to pandemic" if the agency head deemed it necessary, Chris Walker, a University of Michigan law professor wrote on Twitter.

But Abby Shafroth, an attorney at the National Consumer Law Center, said a challenge to the loan-forgiveness plan could falter in several ways, including the specific reference to national emergencies in the 2003 law.

“Today's action is significant, but not different in kind,"  Shafroth said.

A separate issue may be finding someone who is harmed by the administration's action and has legal standing to sue, she said.

The Job Creators Network, which promotes conservative economic policies, said it was weighing a lawsuit to try and block Biden's plan.

“This executive overreach transfers taxpayer dollars from hardworking ordinary Americans and small businesses to disproportionately higher earners with college degrees,” said Alfredo Ortiz, president and CEO of the group. “It does nothing to address the underlying issue of outrageous college costs. Indeed, it rewards colleges for making education unaffordable and entrenches the failing status quo.”

An Education Department memo, produced in the final days of the Trump administration, concluded that there was no authority to cancel debt on a broad basis.

The department has never invoked the law, or any other statute, “for the blanket or mass cancellation, compromise, discharge or forgiveness of student loan principal balances,” Reed Rubinstein, then an Education Department lawyer, wrote in January 2021.

The issue has been under review for some 18 months, Lisa Brown, the top lawyer at the Education Department, wrote in a separate memo that was released Wednesday and called on Education Secretary Miguel Cardona to rescind Rubinstein's memo.

Pelosi also reversed course. In Las Vegas Tuesday, Pelosi said that she “didn’t know what – what authority the President had to do this. And now clearly, it seems he has the authority to do this.”

The White House is expected to face lawsuits over the plan, because Congress has never given the president the explicit authority to cancel debt. We don't know yet how that might impact the timetable for student loan forgiveness.  

If his plan survives legal challenges that are almost certain to come, it could offer a windfall to many in the run-up to this fall's midterm elections. 

The Associated Press contributed to this report


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