May 19, 2024

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Cato Institute files suit against student loan forgiveness program in Kansas federal court

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On Monday, the Biden Administration formally launched its controversial student loan forgiveness program, which has already launched a raft of lawsuits.

One day later, the Cato Institute, a libertarian think-tank registered as a Kansas corporation, filed another in the Federal District Court of Kansas.

In a release, Cato called the program a “massive overreach of executive power.”

Cato is arguing that the program is unconstitutional.

“The federal government has no constitutional authority to operate student loan programs in the first place,” the release reads. “The president and Department of Education have no legal basis on which to cancel them unilaterally. The administration claims such power … on the basis of the HEROES Act: a law passed by Congress in 2003 to help deployed members of the military by forgiving some of their student loan debt.”

According to Clark Neily, senior vice president of legal studies for the Cato Institute, President Biden should have sought congressional approval.

“The President simply lacks the constitutional authority,” Neily said in a phone interview. “Because there is no statute that authorizes the executive branch to commit what amounts to an appropriation. 

“Our contention is that only Congress … can authorize this kind of federal action — and it simply hasn’t done so.”

Similar student loan forgiveness lawsuits struck down

On Thursday, two similar lawsuits were struck down, one in Federal Court for the District of Missouri. United States Supreme Court Justice Amy Coney Barrett declined to take up another for lack of standing without comment.

Missouri US District Judge Henry Edward Autrey dismissed the suit for “lack of jurisdiction” and said the plaintiffs “failed to show concrete harm the debt relief would cause them.”

The case will likely be appealed to the 8th Circuit Court of Appeals.

Barrett dismissed a long-shot case out of Wisconsin in which, according to Business Insider, “the Brown County Taxpayers Association in Wisconsin filed an emergency request at the Supreme Court, claiming that Biden’s student-debt cancelation program should be halted because the president exceeded his constitutional power by enacting the relief without Congress’ approval.”

Lower courts had already dismissed the group’s challenges on the basis of a lack of standing to challenge.

Standing to sue is required to move forward

The issue of standing is a hurdle any legal challenge must cross before it can move forward. In essence, plaintiffs in a lawsuit must show they have suffered concrete harm before the case can move forward.

“I’ve been a constitutional litigator for about 20 years, and my experience is that the courts will sometimes use the standing doctrine — or what we might call the ‘avoidance doctrine,’ to avoid reaching the merits of a case,” said Neily, who helped litigate the landmark Washington D.C. v. Heller decision. He said that, as a rule, the doctrine of requiring plaintiffs to show they were harmed is a good one. 

“But in the … last couple decades, I think the courts have really kind of gone out of their way to sort of engage in creating thinking and creative analysis so that the question isn’t so much ‘does this person or does this organization have standing to challenge this policy, but ‘I figured out some clever way to assert or to hold that the person or the agency or organization has no standing to challenge whatever it is the government’s doing.'”

Cato, in addition to the constitutional issues, is arguing that the up to $20,000 in debt relief undermines the hiring benefits nonprofits like Cato — and the ACLU — gain from the Public Service Loan Forgiveness (PSLF) program, which is intended to cancel student debt for government and nonprofit workers after ten years of qualifying payments.

Neily noted that nonprofits often cannot pay wages that are competitive with the private market, but the PSLF gave those groups a competitive advantage, allowing them to attract the sort of top-notch talent they might otherwise not be able to afford.

“Now, that’s not something that distinguishes nonprofit corporations in the marketplace,” Neily said. “Don’t get me wrong, as a libertarian organization, we don’t think Congress had any business guaranteeing student loans in the first place, but that’s not the world we live in.

“But now the Executive Branch comes along and undermines that policy and law. 

“Nonprofits are demonstrably and concretely disadvantaged by it, and I think that’s plainly an injury.”

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