Obama’s top education lawyer says canceling collective student debt is legally risky

President Barack Obama’s former chief attorney at the Education Department wrote in a legal analysis that President Biden would be on shaky legal ground if he were to pursue large-scale student debt cancellation through executive action.

Mr. Biden is seriously considering canceling some of the debts of some borrowers, even as legal experts have long debated whether the president has the authority to take such a step.

Using executive action to cancel student borrowing debts without linking the forgiveness to their individual needs and using regulatory procedures would put the Biden administration at risk of having its plan canceled in court, according to a legal analysis by Charlie Rose, who served as president. Attorney at the Department of Education under President Obama from 2009 to 2011.

“If the case is sued, the most compelling analyzes tend to support the conclusion that the executive branch likely does not have the unilateral authority to engage in collective student debt cancellation,” Rose wrote in a note to his law firm Hogan Marren Babbo & Rose, Ltd. He noted that loan-servicing companies and investors who own student-backed securities may be in a position to sue management over large-scale debt cancellation.

“If this issue is sued, the most compelling analyzes tend to support the conclusion that the executive branch likely does not have the unilateral authority to engage in student collective debt cancellation.”


– Charlie Rose, former General Counsel for the Department of Education

The analysis, dated May 7, 2021, is titled “Top Secret” and has not been previously reported. No client has been identified as the recipient of the memo, although it does contain recommendations for the Biden administration. In an email, Mr. said. Rose confirmed that the memo was prepared for a private client and was never intended to be published.

The administration has yet to decide how it will proceed with its student debt policies. Mr. Biden has stressed that any loan forgiveness would be less than the $50,000 per borrower that some influential Democrats are seeking, and he has signaled to advisers and others that he is more comfortable with debt forgiveness in the $10,000 range, the Wall Street Journal reported.

White House Press Secretary Jen Psaki told reporters Tuesday that the president is considering limiting student loan forgiveness to borrowers earning less than $125,000 a year. More than 40 million borrowers own about $1.6 trillion in federal student loan debt.

A series of revised emails and memos were released by the Education Department last August showing the administration was grappling with the legal issue of debt cancellation. White House Chief of Staff Ron Klein revealed in April that the White House had requested legal review. Rose’s note cites this request in its introduction. It is not clear whether management has reviewed mr. Rose note. The White House declined to comment on the memo.

A spokesperson for the Ministry of Education did not directly respond to Mr. Rose’s legal argument, but said that “the administration’s overall goal is long-term change that reduces indebtedness and makes colleges affordable, including through rule-making. … the department’s review of broad-based debt cancellation continues.”

Mr. Biden has also raised questions about whether he has the ability to take executive action to cancel student debt on a large scale. “I don’t think I have the authority to do this by signing with a pen,” Mr. Biden said during a CNN meeting last year. some mr. Biden’s advisers have also notably raised concerns that broad debt forgiveness could face legal challenges, according to people familiar with the matter. Other advisers see the president on solid legal ground.

President Biden has raised questions about whether he has the ability to take executive action to cancel student debt on a large scale.


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The idea sparked political debate among Democrats, with some in the party claiming it would help revitalize major blocs of voters in a midterm year. Other Democrats worry that such a move could alienate voters who do not currently or never have student debt, and Republicans have broadly opposed the debt forgiveness proposals.

The legal debate on student debt cancellation focuses on how courts interpret the Minister of Education’s powers under the Higher Education Act of 1965, which allows the Secretary of Education to “consent to amend” loans, and “compromise, waive, or forgive” unspecified amounts of student debt. .

Advocates of broad abolition say the law’s lack of explicit restrictions is deliberate, giving the executive flexibility with its “compromise power” to manage its relationship with borrowers. They noted that previous presidents of both parties had used the law to waive debt on a smaller scale.

“In this area of ​​law, courts have traditionally been respectful of agencies,” said Luke Herren, a doctoral candidate in law at Yale University and co-founder of Debt Collective, an advocacy group. Mr. Hearn’s legal theory and other similar theories became popular with the left and were cited by the senator. Elizabeth Warren (D., Massachusetts) in her proposals for debt cancellation.

Mr. Rose’s note calls for caution in this regard. While Congress has created many debt-forgiveness and payments programs in different groups of borrowers—public servants or low-income borrowers, for example—”It is fair to understand that Congress has concluded that [Education] The department should not decide the issue of collective exemption for performing loans.”

Navient’s latest $1.7 billion settlement will wipe out student debt for 66,000 borrowers. Josh Mitchell of the WSJ broke down the settlement and explained which borrowers would get debt forgiveness. Photo: Storyblocks

The Trump administration has also rejected broad readings of the settlement authority, sticking to the legal dogma that Congress “does not hide elephants in rats,” in the words of the 2001 Supreme Court opinion of Justice Antonin Scalia.

Money that Congress has appropriated for student financial assistance programs must be used for purposes mandated by law, wrote Reed Rubinstein, who served as acting general counsel for the Department of Education at the end of the Trump administration. The regulations for these programs require the department to “collect all debt aggressively,” with limited wiggle room.

while mr. Rose’s memo warns of the legal risks associated with mass cancellation, much of which focuses on how the Biden administration is finding legal avenues for cancellation as part of a more piecemeal approach. He recommends a series of rule changes that would result in the forgiveness of part or all of the debts owed to large groups of borrowers, including about seven million defaulters. This strategy will take longer, as it will depend on federal regulatory processes, but it will lead to a stronger legal basis for debt forgiveness, the master said. Rose argued.

“Rose’s letter indicates that conducting regulatory processes is likely to receive greater consideration by the courts,” said Howell Jackson, a Harvard law professor who reviewed Mr. Howell Jackson. Rose note and agreed with her conclusions. “There is more isolation if there is a regulatory process.”

The Biden administration has taken this piecemeal approach thus far. Using existing programs, it has canceled about $18.5 billion in loans to more than 750,000 borrowers. The administration also overhauled programs approved by Congress for public servants and low-income borrowers, eventually bringing millions closer to tolerance.

Payments and interest on federal student loans have been held since the start of the public health emergency in March 2020 and are not due to resume until August. 31.

write to Gabriel T. Rubin at gabriel.rubin@wsj.com

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