Loan Forgiveness, the Strongest Case for It and Why It Still Fails

Nothing builds respect for Article I of the Constitution like watching an administration try to skip it. In August 2022 the Biden administration announced that the Department of Education would cancel up to $10,000 of federal student debt for most borrowers, and up to $20,000 for those who had received Pell Grants. Borrowers were promised relief by the stroke of a pen. Three hundred and some years of English and American constitutional development, from Parliament's fight over the purse to the Federalist Papers, were handled in a press release.

Let me do something the other side rarely does for us. I'm going to give the argument for loan cancellation at its strongest, because it's stronger than the bumper-sticker version, and because you will meet people who make it sincerely. Then I'll answer it. If you cannot state your opponent's case in terms he would accept, you have not earned the right to say he is wrong.

The case at its strongest

Here is the best version, in five claims.

1. A generation was told to borrow. Parents, guidance counselors, politicians of both parties and the culture at large told eighteen-year-olds that college was the only road to the middle class and that debt was a fine investment. They followed the advice.
2. The government set the terms. Washington wrote the rules for federal loans: the interest, the repayment plans, what happens when interest piles up. A borrower who signed a promissory note was not negotiating with a bank. He was accepting a government product.
3. The debt hurts families now. Some borrowers have paid for years and watched their balance grow, because interest accrued faster than payments reduced it. Others borrowed for programs that never paid off, or were at schools that closed. The loans delay home purchases, businesses and children.
4. Government forgives debts all the time. Congress forgave Paycheck Protection Program loans for businesses that met its conditions. Bankruptcy law discharges debts. Why is it unthinkable to forgive a loan when the government is the lender?
5. The economy would benefit. Money not spent on loan payments would be spent on rent, cars and diapers.

Those are real arguments, made by real people, and some of them deserve real sympathy. Now the answers.

One: Congress decides who gets federal money, not the executive

The first answer is not about student loans at all. It is about who is in charge of the Treasury.

Article I, Section 8 gives Congress the power to lay and collect taxes, to borrow money on the credit of the United States, and to spend for the general welfare. Article I, Section 9 says that no money may be drawn from the Treasury except in consequence of appropriations made by law. That is the Appropriations Clause. It is not a technicality. It was the whole point of centuries of struggle with kings who spent what they wanted and asked permission later. The founders put the purse in the legislature so that the people who face voters every two years would decide where the money goes.

A federal student loan is a claim of the United States against a borrower. When an official cancels it, he is giving away the Treasury's money. That might be wise. It might even be humane. But it is not a decision the Constitution entrusts to a Cabinet department. It belongs to the branch that writes the checks. The administration's cancellation plan came with an estimated cost in the hundreds of billions of dollars, a figure the Supreme Court's opinion put at roughly $430 billion. Imagine a department secretary telling you he had decided, on his own authority, to spend that kind of money. You would want to see the statute.

Which brings us to the statute.

Two: the HEROES Act does not say what the administration needed it to say

The administration's legal argument rested on the Higher Education Relief Opportunities for Students Act of 2003, the HEROES Act. Congress passed it after the September 11 attacks to help service members and others affected by war and national emergency. It lets the Secretary of Education "waive or modify" certain provisions of student aid law in connection with a war, a military operation or a national emergency, so that affected borrowers are not placed in a worse financial position because of their status.

The administration pointed to the COVID-19 national emergency, declared in March 2020, and argued that the Act let the Secretary cancel debt for nearly all borrowers.

Read the words. "Waive or modify" are verbs for small adjustments to existing rules: waive a deadline, modify a requirement. They are not verbs for creating a new program that wipes out hundreds of billions of dollars in obligations. And the Act's own purpose is to protect people from being made worse off by an emergency. A plan that reached borrowers regardless of whether the pandemic had touched them, including people who had held high-paying jobs through it, did not fit that purpose.

The Supreme Court agreed. In Biden v. Nebraska, decided on June 30, 2023, Chief Justice Roberts wrote for a 6-3 Court that the Act gives the Secretary the power to modify, and that is not the power to rewrite the statute from the ground up. The Court noted that the plan's size was staggering and that a program of that magnitude required clear congressional authorization.

Three: the major questions doctrine is not an invention

Critics called the decision a power grab by judges. It was nothing of the sort. It applied a principle the Court had stated the year before in West Virginia v. EPA (2022): when an agency claims the power to decide a question of vast economic and political significance, it needs clear authorization from Congress, not a stretched reading of an old and general provision.

Why is this a good rule? Because the alternative is government by hint. If a general delegation in a 2003 law can be read to support a half-trillion-dollar program in 2022, then Congress has no way to know what it is authorizing when it writes anything, and a president can claim any power he likes by finding a verb that might fit. That is as dangerous for conservatives as for progressives, and it will matter to you the next time an administration you like wants to try something creative. The rule that constrains your opponent today constrains your side tomorrow. For the wider story of how the courts have handled agency power, see Chevron Is Gone, and Here Is What Loper Bright Changed for Everyone and Justice Jackson's Three-Box Test for Presidential Power, Put to Work.

Four: Congress can forgive loans, and has, by passing laws

The PPP comparison actually proves the point. Congress forgave those loans because Congress wrote a law that said so, with eligibility rules, a limit, and a procedure. The same is true on the student loan side. Congress created Public Service Loan Forgiveness in the College Cost Reduction and Access Act of 2007. Congress built forgiveness into income-driven repayment after a set number of years of payments. Congress wrote the Teacher Loan Forgiveness program. Congress provided for discharge in cases of death and total disability.

So the real choice is not between forgiveness and no forgiveness. It is between forgiveness written by the people's representatives, who must answer to voters and find the money, and forgiveness invented by an agency. If a majority in Congress wants to cancel student debt, there is a place to make that case. It is called a bill. That the proposal has not passed is not a loophole for the executive. It is an answer.

Five: fairness, and the neighbors who are not in the story

This is the point that does not appear in the headlines, and it is the one working families raise at the kitchen table.

Picture four hypothetical households on the same street. One family had a daughter who borrowed for a degree. Another family skipped the four-year route: their son took an apprenticeship, worked while he learned, and has never owed a student loan. A third family spent years saving, taking a second job, living in a smaller house, to pay a child's tuition up front. A fourth paid off their loans by driving a delivery truck at night.

Cancellation tells the second, third and fourth households that their choices were mistakes. The apprentice's taxes help cover the bill for the daughter's degree. The saver gets nothing for the sacrifice. The fourth family, which finished paying, is told they could have waited. Plenty of taxpayers never attended college at all. Many of them make less than the graduates whose debts they would be asked to cover.

The strongest reply is that fairness is complicated, that society subsidizes many things for some people and not others, and that the debt is already out there. That's true. But a subsidy that Congress votes on, with its cost on the table, is a policy debate. A subsidy that arrives by executive announcement skips the debate in which the people who are paying for it get a say.

Six: cancellation does nothing about the price that created the debt

This one is the deepest, and it is the one that should bother people on every side of the issue.

Suppose you cancelled every dollar. The next class of freshmen arrives in September. The price on the brochure is the same. The loan limits are the same. The incentives for colleges, which can raise prices because someone else's credit will cover them, are the same. In four years you have another cohort with another mountain of debt, and another demand for relief, with the expectation, now, that it will be granted. What you have done is teach every future student that borrowing is nearly free, since forgiveness is on the way, and teach every college that it can raise prices again.

Economists argue about how much federal aid pushes prices up. I walk through that debate in Does Federal Aid Raise Tuition? The Bennett Hypothesis Tested, and it is not as settled as either side claims. But nobody serious says cancellation lowers the price of a degree. It treats a symptom, while the cause, a system in which the person who borrows, the school that charges and the government that lends do not feel the real cost, goes on as before. A doctor who keeps the patient in a room with the leaking gas pipe and gives her a new set of lungs every four years is not a good doctor.

What the other side still gets right

I said I would be fair, so here it is. Some borrowers were genuinely defrauded by schools that took the money and delivered nothing. For them there are legal remedies, like borrower defense, and Congress should keep them working. Some borrowers have been repaying for years with a balance that does not fall, and that signals a design problem in the loan system. And the instinct behind the proposal, that young people should not be buried in debt for taking the advice they were given, is a decent one.

The answer to a decent instinct is not an unconstitutional method. It is reform that fixes the system: price transparency, limits tied to programs that pay off, schools that share the risk when students cannot repay, a simpler repayment plan, and a real look at the cost of the credentials we demand. The worksheet in A Worksheet for the True Cost of a College Degree Before You Sign Anything will help any family judge a loan before signing it. The explainer in How a Federal Student Loan Works and Why the Balance Keeps Growing describes how interest and capitalization work.

The verdict

Here is what I think. The claim that the president could cancel hundreds of billions of dollars of debt by executive action was wrong on the text, wrong on the structure and wrong on the principle. The Court was right to stop it, and not because the policy was cruel. It was because a country that governs by statute cannot let a half-trillion-dollar decision turn on a verb in a twenty-year-old law.

The enumerated-powers principle in Congress Can Only Do What the Constitution Lists and Madison Said So is not a conservative hobby. It is the thing that keeps any administration, of any party, from deciding what the budget is. And the lesson of the budget fights in Nixon Impounded the Money, Congress Fought Back, and the 1974 Law Still Rules is that the purse cuts in both directions: a president cannot refuse to spend what Congress ordered, and he cannot spend what Congress did not. Both rules protect you.

The bottom line

• Congress holds the purse under Article I. Cancelling hundreds of billions in debt is a spending decision, and it belongs in a bill, not a press release.
• The HEROES Act lets the Secretary "waive or modify" rules in an emergency. In Biden v. Nebraska (2023), the Court held that does not reach a program of that size.
• Cancellation is unfair to families who saved, paid or chose another path, and it does nothing to lower the price of a degree.
• Real reform is available: price transparency, risk-sharing by colleges, limits tied to outcomes, and protection for borrowers defrauded by schools.
• Ask any candidate who promises to cancel debt two questions: which law lets you do it, and what stops the next class from borrowing the same way?