Posted BY: Jay Tucker

The legality of President Biden’s student loan forgiveness proposal (Proposal) is much debated.  The legal dispute revolves, in significant part, around the language of the HEROES Act.  Biden’s lawyers claim that the HEROES Act authorizes the proposed student loan forgiveness.  Others claim that it does not.  Let’s explore why so many others claim that the Proposal does not comply with the specific legal requirements established by Congress.

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The HEROES Act states that the secretary of education (the “Secretary’) may waive or modify certain statutes and regulations as may be necessary to ensure that recipients of student financial assistance are not placed in a worse position financially because of the pandemic.  In order for the Secretary, or anyone else, to determine whether a person’s financial position has worsened, one must examine that person’s financial statements (balance sheets, income statements, and tax returns) of the beginning and end and during the period in question.  Then, and only if a comparison of the financial statements reveals that the borrower’s financial position has worsened, a further review must be made of such financial statements to determine the extent, if any, to which change in financial position was actually caused by the pandemic.  These reviews must be made as to each borrower in order to determine the relief and forgiveness to which such a borrower is entitled.  (The option granted to the Secretary under the HEROES Act to determine qualifications and benefits of all those claiming benefits in one case rather than in case-by-case proceedings does not, as argued by the administration, delete or remove the qualification requirements and calculation of the maximum permitted benefit for each borrower.  Indeed, Biden’s Proposal itself adopts a scheme that will grant differing amounts of relief to various borrowers at differing income levels.)

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