On April 17, the Department of Education (DOE) released a proposed regulation titled “Student Debt Relief for the William D. Ford Federal Direct Loan Program (Direct Loans), the Federal Family Education Loan (FFEL) Program, the Federal Perkins Loan (Perkins) Program, and the Health Education Assistance Loan (HEAL) Program.” The plan represents yet another attempt by the Biden administration to forgive student loans en masse. The proposed regulation goes far beyond the authority of the Department, in violation of both Supreme Court precedent and previous DOE policy.

Implementation of the proposed regulation will have a serious upon the American economy. Estimates of the regulation’s total cost range from $150 billion to $750 billion . For comparison, the HEROES Act forgiveness plan threatened a cost of less than $500 billion. Cancelling such a large debt would have vast effects on the American economy, creating moral hazards encouraging young people to take out additional loans under the assumption they will be forgiven, thus growing the total student debt numbers.

Under the Trump administration, the Office of General Counsel (OGC) for the DOE considered whether the Secretary of Education had any authority under any provisions of the Higher Education Act to forgive vast quantities of student debt. Included in this report was an analysis of the statute the DOE uses to justify this new regulation, 20 U.S.C. § 1082(a)(6). The OGC at that time concluded the Department cannot excuse student loans on a vast basis under this statute. The Department appears to have since then forgotten about this memorandum.

The Supreme Court has also ruled on this issue in Biden v. Nebraska. They held that a similarly broad plan of student loan forgiveness was unconstitutional. The attempt by the DOE to use the Higher Education Relief Opportunities for Students (HEROES) Act was found to violate the Major Questions Doctrine, as the Secretary of Education used a vague statute to try to force billions of dollars of costs upon the American people. This proposed regulation does something similar, although the vague statute they rely on is different.

Finally, the proposed regulation violates the right to contract and is an obvious attempt to buy the support of young voters in 2024. When borrowers took out student loans, they voluntarily agreed to the terms of the contract. It is not the American people’s responsibility to pick up the tab when borrowers fail to live up to their end of the agreement, no matter what the DOE may believe.

Furthermore, the use of taxpayer funds to forgive student debt seeks to shore up support among the youth before an election, a complete misallocation of taxpayer funds and a distortion of public interests.

For these reasons, Landmark requested the DOE rescind the proposed rule. Landmark will continue to provide updates on this matter as they arise.

Read our regulatory comment here