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Supreme Court of the United States • 2023

Biden v. Nebraska

600 U.S. 477

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Takeaway

In short, Biden v. Nebraska held that Missouri could challenge the plan through MOHELA, but the HEROES Act did not clearly authorize the Secretary to create a $430 billion mass student-debt cancellation program.

Background

The Higher Education Act governs federal student-aid programs and authorizes the Secretary of Education to forgive or discharge student loans in specified circumstances, such as death, permanent disability, bankruptcy, certain school misconduct, and qualifying public service. The HEROES Act separately permits the Secretary, in connection with a national emergency, to “waive or modify” statutory or regulatory provisions governing those programs when necessary to ensure that affected borrowers are not placed in a worse financial position with respect to their assistance.

After the COVID-19 national emergency declaration, the Department of Education had already paused payments and interest accrual on federally held student loans. In August 2022, the Secretary announced a broader debt-relief plan under the HEROES Act. Eligible borrowers earning under the applicable income thresholds could receive up to $10,000 in cancellation, or up to $20,000 if they had received Pell Grants. The program was expected to affect about 43 million borrowers and cancel roughly $430 billion in principal.

Six States sued, arguing that the Secretary exceeded statutory authority. The District Court dismissed for lack of standing. The Eighth Circuit issued a nationwide preliminary injunction pending appeal, concluding that Missouri likely had standing through the Missouri Higher Education Loan Authority, or MOHELA. The Supreme Court granted certiorari before judgment, reversed the District Court, and held that Missouri had standing but that the HEROES Act did not authorize the cancellation program.

Issues

Issue #1

Whether Missouri had Article III standing to challenge the student-loan cancellation plan based on its relationship with MOHELA.

Holding

Yes. Missouri had standing because the plan would financially injure MOHELA, an instrumentality of Missouri, and that injury counted as a direct injury to the State.

Reasoning

Article III requires a concrete injury that is traceable to the challenged government action and likely redressable by judicial relief. MOHELA serviced millions of federal student-loan accounts and received administrative fees for each account. Because the cancellation plan would eliminate many accounts that MOHELA otherwise would service, it was expected to cost MOHELA about $44 million annually in lost fees. That financial injury was caused by the plan and would be redressed by an injunction.

The Court treated MOHELA's injury as Missouri's own injury. Missouri created MOHELA by statute as a public instrumentality to perform the governmental function of helping Missourians obtain student loans. The State appoints and oversees its board, requires financial reporting, and may dissolve the entity. MOHELA also supports state educational purposes through grants, scholarships, and institutional projects.

Although MOHELA has a separate corporate identity and can sue in its own name, that did not defeat Missouri's standing. Relying on Arkansas v. Texas and decisions treating government-created corporations as governmental instrumentalities for relevant purposes, the Court reasoned that a State may sue when a public corporation it created and controls is injured while carrying out a public function. Because Missouri had standing, the Court did not address the States' alternative theories of injury.

Issue #2

Whether the HEROES Act authorized the Secretary of Education to cancel up to $20,000 of student-loan principal for most qualifying borrowers.

Holding

No. The HEROES Act permits limited waivers or modifications of existing student-aid provisions, not the creation of a sweeping new debt-cancellation program.

Reasoning

The Court read “modify” according to its ordinary meaning: to make moderate, minor, or incremental changes. That understanding was reinforced by MCI Telecommunications Corp. v. AT&T, which held that authority to modify a statutory scheme does not permit an agency to make basic and fundamental changes to it. Past HEROES Act modifications had likewise been narrow adjustments, such as extending deadlines, relaxing paperwork requirements, or easing conditions for existing relief.

The cancellation plan was not a modest adjustment to Congress's existing discharge provisions. Congress had carefully identified limited grounds for loan discharge, including death, disability, bankruptcy, school closure or misconduct, and specified public-service work. The Secretary instead made cancellation available to nearly every borrower below an income cap, affecting about 43 million people and eliminating an estimated $430 billion in principal. In the Court's view, that replaced Congress's targeted discharge system with a fundamentally different regime.

The Secretary could not justify the plan as a “waiver.” A waiver ordinarily eliminates an identified legal requirement. Here, the Secretary did not waive a borrower obligation imposed by a particular statutory provision; instead, he set new eligibility rules, forgiveness amounts, and income limits. The plan therefore depended on adding new substantive terms, and the Court concluded that the power to modify could not support additions that transformed the statutory scheme.

The HEROES Act's requirement that the Secretary publish the replacement “terms and conditions” to apply in lieu of waived or modified provisions did not supply independent substantive authority. The Court characterized that provision as a reporting requirement. Any replacement terms remained bounded by the Secretary's underlying power to waive or modestly modify existing law.

Issue #3

Whether the major questions doctrine required clear congressional authorization for the mass debt-cancellation program.

Holding

Yes. The program involved an issue of vast economic and political significance, and the HEROES Act did not clearly authorize it.

Reasoning

The Court concluded that the plan had extraordinary economic and political significance: it would cancel approximately $430 billion in debt, affect tens of millions of borrowers, and exercise control over a substantial part of the economy. The Secretary had never before used the HEROES Act to assert authority remotely comparable in scope, and prior uses of the statute were narrow and limited.

The Court also stressed that broad student-debt cancellation had been repeatedly considered in Congress, but Congress had not enacted such a program. In those circumstances, the Court reasoned that the basic policy choices involved in mass debt cancellation were choices Congress would likely have intended to make itself rather than leave to administrative discretion.

The major questions doctrine applied even though the program conferred benefits rather than imposed regulatory burdens. Congress's control over public spending is central to the separation of powers, and the Court's prior major-questions cases included disputes involving government benefits. Because ordinary statutory interpretation did not authorize the plan, the HEROES Act necessarily fell short of the clear authorization required for an initiative of this magnitude.

Concurrences

Justice Barrett

Reasoning

Justice Barrett joined the Court's opinion in full but wrote to explain her understanding of the major questions doctrine. She rejected the view that the doctrine is a strong substantive canon that forces Congress to speak with extraordinary clarity in order to protect a judicially selected value, such as a heightened version of the nondelegation principle.

Instead, she viewed the doctrine as an ordinary interpretive principle rooted in context and common sense. A statute's words must be read against the constitutional structure, legislative practice, the agency's ordinary domain, and the scale of the authority claimed. In a system where Congress holds legislative power, a reasonable reader normally would not assume that Congress delegated a major policy decision to an agency through vague or peripheral language.

Justice Barrett illustrated the point with agency and everyday examples: a general instruction to a clerk to buy apples does not ordinarily authorize an implausibly large purchase, and a parent's instruction to a babysitter to make children have fun does not ordinarily authorize a costly overnight amusement-park trip. Context may nevertheless show that broad authority was intended, so the doctrine does not permit a court to adopt an inferior reading of statutory text merely to limit agency power.

Applying that framework, she agreed that the Secretary's claim failed. Although education and student loans lie within the Secretary's usual domain, the cancellation program's enormous cost, breadth, and political salience made it unlikely that Congress authorized it through the HEROES Act's general power to waive or modify provisions. The doctrine therefore reinforced, rather than displaced, the majority's ordinary textual analysis.

Dissents

Justice Kagan

Reasoning

Justice Kagan, joined by Justices Sotomayor and Jackson, first argued that the Court lacked jurisdiction because Missouri was not injured. MOHELA, not Missouri, would lose servicing revenue. Missouri law makes MOHELA a legally and financially separate public corporation: it owns its own assets, bears its own liabilities, can contract, and can sue and be sued in its own name. MOHELA chose not to bring this case and did not support Missouri's litigation effort.

In the dissent's view, Arkansas v. Texas did not control because the University of Arkansas lacked MOHELA's relevant financial and legal separateness, and Arkansas itself owned the university property at stake. Likewise, the Amtrak cases held only that a government-created corporation may be a state actor for constitutional purposes; they did not make government corporations interchangeable with their sovereign creators in litigation. Allowing Missouri to rely on MOHELA's injury, Justice Kagan argued, improperly evaded the rule that plaintiffs ordinarily may not sue based on another entity's rights and interests.

On the merits, Justice Kagan read the HEROES Act as a broad emergency delegation. When a national emergency exists and the statutory conditions are met, the Secretary may “waive or modify any” applicable student-loan provision and may impose replacement terms and conditions. In her view, the phrase “waive or modify” authorizes changes along a spectrum, from modest adjustments to complete elimination of existing requirements.

The Secretary used that authority by waiving the ordinary statutory and regulatory limits on discharge and replacing them with temporary income-based cancellation conditions aimed at addressing the pandemic's effects on borrowers' ability to repay. Justice Kagan maintained that the statute expressly anticipates replacement terms in lieu of waived or modified provisions, so the plan fit the statutory text. She warned that the majority's narrow reading would also cast doubt on the pandemic-era repayment and interest pause, despite the statute's evident purpose of enabling substantial emergency relief.

Finally, Justice Kagan criticized the major questions doctrine as a judicially created device that overrides Congress's broad delegations whenever an agency action is consequential or politically contested. The HEROES Act's central provision expressly assigned emergency student-loan relief to the Secretary of Education, whose ordinary responsibilities include administering federal student-loan programs. In her view, the Court substituted its own policy judgment for the politically accountable judgments of Congress and the Executive Branch.