The quagmire created by litigation against President Biden’s student loan initiatives provides a preview, if anyone wanted one, of the potential effects of the Supreme Court’s recent decisions weakening the power of executive agencies that promulgate and enforce regulations governing myriad aspects of business conduct — the “administrative state.” The picture is not pretty: time-consuming and duplicative court proceedings, conflicting judgments issued by different courts, and suffering for those who have relied on the government to do what it says it will do.
Since April 2024, several attorneys general in Republican-led states have filed three lawsuits in different federal courts to challenge federal regulations intended to make student loan payments less burdensome for millions of borrowers. These lawsuits have resulted in overlapping injunctions blocking various of these new rules, as described in more detail below; the latest suit targets and seeks to block rules that had not even been finalized as of the filing of a complaint, representing a radical expansion of the power to shape regulation through selective and preemptive litigation. As a result of messy and complex litigation in multiple districts, the federal Education Department has essentially put on hold a new repayment plan reducing the monthly obligations of eligible borrowers, a move that protects them temporarily at the expense of delaying the eventual debt relief contemplated by the program.
This post first situates the student loan lawsuits in the context of three recent Supreme Court decisions that together advance an effort to undermine the power of the executive to regulate, then turns to the mess that courts have made of federal student aid.
The three decisions, Biden v. Nebraska, Loper Bright Enterprises v. Raimondo, and Corner Post v. Board of Governors, together form a trident aimed squarely at executive agencies. The conservative supermajority on the Court removed doctrinal hurdles to judicial second-guessing of agency actions, dramatically weakened limits on when legal challenges to agency actions can be filed, and allowed lawsuits by parties with scarcely anything at stake beyond bare policy disagreement. And once these decisions open the courthouse doors, courts can deploy the “major questions doctrine,” used by the conservative justices so forcefully in West Virginia v. Environmental Protection Agency, to undo agency actions by reasoning that if Congress had wanted to grant the regulatory authority at issue, then lawmakers would have said so more specifically than they did. The kind of litigation that these rulings invite aims not only to prevent new policy initiatives but also to undo past rules and, further, to shape future rules in favor of self-interested and well-funded litigants.
In brief, here is the doctrinal context, which may be familiar given the volume of writing on these decisions. First, in Biden v. Nebraska, the conservative supermajority ruled that the Biden Administration lacked authority to cancel between $10,000 and $20,000 per student loan borrower under a provision of the law the administration relied on, the Higher Education Relief Opportunities for Students Act of 2003. Such relief constituted too bold a policy step for the statutory language relied upon, the conservative justices explained, applying the major questions doctrine. But it is the decision to take the case at all that sets a worrisome precedent relevant to the critique here: the parties suing to block the cancellation scheme would not obviously suffer direct or certain loss. This implicates the doctrine of standing, the idea that federal courts only hear “cases or controversies” involving people with something to lose. On the theory advanced by the Republican attorneys general who sued, a company that serviced student loans (tracking borrowers, collecting payments, communicating with borrowers) could suffer financial loss in the form of reduced revenue from servicing loans if borrowers’ loans were canceled as a result of the Biden Administration’s proposal. The problem for this theory is that the plaintiffs were states, not servicers of student loans. The Court found that one plaintiff state, Missouri, had standing because it had created a private corporation that serviced loans and consequently, the majority concluded, financial harm to the servicer could possibly affect the state. The Court reached this conclusion even though that corporation operated independently of the state, to the point that the state had to use open records law to force the servicer to provide information to inform the lawsuit. The justices here opened the courthouse doors to partisan claimants with only tenuous exposure to the government action they did not like, rejecting more limited judicial action — like, say, simply requiring compensation for any loss ultimately suffered. This readiness to go big when a case presents an opportunity to inflict political damage on an ideological opponent perhaps means standing doctrine will undergo no general evolution — after all, other cases have gone the other way — but only a partisan, selective, and tactical expansion.
Next, in Loper Bright, decided last year, the conservative supermajority overruled Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., the well-known 1984 decision in which the Court called for judicial deference to an agency’s “reasonable interpretation” of a statute that its regulations implemented. In Loper Bright, Chief Justice John Roberts declared that actually, “agencies have no special competence in resolving statutory ambiguities.” Turning to the question of who does, the Supreme Court asserted that “[c]ourts do.” Time will reveal whether this is a significant power grab by the judiciary at the expense of the executive branch, but the ruling seems to invite any regulated entity displeased with an agency rule to file a lawsuit. It will take only one judge to disagree with an agency’s reasoning. And regulators, aware of the increased litigation risk, may think smaller as a result.
Finally, in Corner Post, also decided last year, the conservative supermajority essentially eliminated the statute of limitations that would otherwise constrain challenges to agency actions. The Court ruled that plaintiffs could sue within six years of any injury caused by a regulatory action rather than within six years of the action itself. (A separate federal law dictated the six-year statute of limitations but did not specify when the clock would begin to run.) So, a business unhappy with a rule that was adopted decades ago could nevertheless sue to block that rule’s application if the rule had an adverse effect on the business’s finances in the past six years. Perhaps unhappy owners of an affected business will just create a new business entity to suffer the harm anew and then sue.
In the student loan lawsuits, the plaintiffs are not businesses suffering regulatory harm, but as the majority showed in Biden v. Nebraska, that need not matter. The story begins with the 2023 announcement by the Education Department of a new repayment plan for student loan borrowers, dubbed Saving on a Valuable Education, or “SAVE.” The plan tied borrowers’ monthly payment obligations to income and family size, like prior income-linked repayment plans, but decreased the share of discretionary income used to determine required monthly payments, reduced more borrowers’ obligations to zero by adopting a more generous definition of discretionary income subject to that repayment calculation, and provided for cancellation of indebtedness after ten years of payments for borrowers whose initial balance was $12,000 or less. While not mass cancellation, the SAVE program was and is significantly more generous than previous repayment plans. Several million borrowers signed up for it.
Two lawsuits, one led by Missouri and the other by Kansas, attacked the statutory authority for the SAVE plan, which rested on provisions of the Higher Education Act of 1965 that called on the Department to create an “income contingent repayment plan.” The provision containing that phrase does not explicitly provide for cancellation of debt, but for decades the Department has approved cancellation of remaining indebtedness for borrowers who have reached the end of a plan’s repayment terms; this is consistent with statutory language that authorized another, prior repayment plan and that required the Department to “repay or cancel any outstanding balance” owed by borrowers who made payments on that plan for at least ten years and met certain other conditions. One lawsuit, filed in the Eastern District of Missouri, claimed that the authority granted for one repayment plan did not extend to another, and that absent explicit language empowering it to do so, the Department could not cancel borrowers’ remaining debts. The trial court found that claim sufficiently persuasive that it issued a preliminary injunction against cancellation of indebtedness under SAVE. The injunction did not bar other aspects of the plan. Meanwhile, the other lawsuit, filed in Kansas, resulted in a preliminary injunction that enjoined only parts of the SAVE plan that were to take effect on July 1 of this year but not those already in effect. Appeal followed. Confused yet?
A three-judge panel of the Eighth Circuit Court of Appeals took up the Missouri case, found that the new payment plan was an “order of magnitude broader than anything that has come before,” and issued an injunction pending appeal that prohibited the Department from canceling principal or interest and from not charging accrued interest, one of SAVE’s key affordability features. Such specificity in the appellate court’s order was necessary because the trial court’s prior preliminary injunction from the trial court had enjoined cancellation of indebtedness but notother aspects of the SAVE plan. The appellate panel’s injunction extended beyond the bounds of the states’ initial complaint and calls into question the Department’s statutory authority for other repayment plans that include cancellation provisions and that have been in operation for decades. Avoiding such courthouse crawls through the weeds of agency regulations was a reason to extend deference to executive rulemaking.
For the Tenth Circuit Court of Appeals, hearing the Kansas case (now the Alaska case because the trial court found only some states had standing to proceed), this state of affairs was sufficiently confusing that the judges first stayed the trial court’s injunction pending appeal and then ordered the parties to provide briefing on the meaning of the order by the Eighth Circuit.
The Department and the states in both cases tried to get the Supreme Court to intervene; Justices Gorsuch and Kavanaugh denied the applications. The Department continued with its policy of not collecting payments from and not charging interest to those borrowers who already enrolled in the SAVE plan. For now, for these borrowers, the litigation has produced at least this unexpected benefit, but it is unclear how long it will last.
A third case has pushed the limits of possible litigation against agencies even further. The same group of Republican attorneys general sued in federal court in Georgia to prevent the Education Department from canceling student debt pursuant to regulations that the Department had not even issued yet. In doing so, they asserted the same theory of standing that the Supreme Court condoned in Nebraska. The Department, the plaintiffs warned, was “implementing this [cancellation] plan without publication.” The district court granted the plaintiffs’ application for a temporary restraining order, finding that if the alleged “[r]ule goes into effect, Defendants will unlawfully cancel billions of dollars in student loans.” Whatever ultimately happens in this litigation, the implications of the plaintiffs’ initial success are profound: they have successfully prevented a federal regulatory initiative without even waiting for an agency to issue final rules. In the future, entities or individuals potentially subject to regulation may use litigation to shape any rules, usurping agencies’ already waning authority. Private litigants with means thus will be able to supplant agencies that, whatever their shortcomings, at least are ultimately democratically accountable.
The Supreme Court will eventually have a chance to resolve the three cases working their way through federal courts. The conservative justices face a conundrum: partisan political priorities dictate a decision adverse to the Biden Administration. But the complexity of unraveling borrower repayment plans — especially if the conservative supermajority determines that multiple repayment plans, not just the newest one, lack statutory authority — could conceivably prompt the Education Department to extend its payment pause indefinitely on the grounds that aid programs have become impossible to administer. Presumably someone, maybe anyone, could then file a lawsuit to compel the Department to collect loan payments, but that lawsuit would have to identify the statutory basis for borrowers’ repayment obligation, and Chief Justice Roberts in Biden v. Nebraska wrote that “[n]o specific provision of the [Higher] Education Act establishes an obligation on the part of student borrowers to pay back the government.” That sounds pretty conclusive.
It would be ironic if the Biden Administration could win by losing, proceeding to cancel student debt obligations as a practical matter because of the trainwreck that the courts engineered in federal student aid programs, then directing any complaints about the policy to the judicial branch. The executive agency would be in a constitutional crucible, unable to comply with its statutory mandate and also unable to comply with a judicial disposition. This prospect, more than any argument about the harm to borrowers, about methods of statutory interpretation, or about the need to preserve the administrability of federal regulatory schemes generally, may prompt the courts to take a more measured approach, shutting down cancellation efforts prospectively but not retrospectively, for example. Pragmatism and politics could save the day for borrowers, but this is no way to run a government program. The consequences of the chaotic state of federal student lending for borrowers are worrisome enough and may take years to become evident, but the effectiveness of the partisan litigation by Republican attorneys general should serve as a warning of future challenges to agency actions across the board. Because the Supreme Court in that trio of decision discussed above has slackened requirements that plaintiffs must satisfy in order to establish standing to sue, eliminated the requirement that courts show deference to the judgment of executive agencies implementing the law, and opened up the time frame within which plaintiffs can claim an injury that establishes such standing, we are stepping into a doctrinal world in which someone, maybe anyone, can successfully attack — or through litigation prevent or refashion — any rule, in any federal court, at any time.
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