State of Missouri v. TrumpState of Missouri v. Trump
MEMORANDUM AND ORDER
The State of Missouri and six other states1 bring this suit against President Joseph R. Biden, Jr., Secretary of Education Miguel Cardona,2 and the United States Department of Education challenging the Secretary‘s rule, “Improving Income Driven Repayment for the William D. Ford Federal Direct Loan Program and the Federal Family Education Loan (FFEL) Program,” (the “Final Rule“). The Final Rule creates a new income-driven repayment (“IDR“) plan—referred to as the Savings on Valuable Education (“SAVE“) plan—to replace the Revised Pay-As-You-Earn (“REPAYE“) plan. Compared to the REPAYE plan, the SAVE plan: (1) increases the amount of a borrower‘s income that is exempt from payment calculations from 150% to 225% of the federal poverty line (“FPL“); (2) decreases the maximum percentage of discretionary income that can be used to calculate monthly payments on undergraduate loans from 10% to 5%; (3) decreases the maximum time in repayment for borrowers with low initial principal balances to qualify for loan forgiveness from 20 years for undergraduate loans to as little as 10 years3; and (4) provides that any accrued interest not covered by a borrower‘s calculated monthly payment is not charged to the borrower. The Final Rule is to take full effect on July 1, 2024, though the Secretary has designated some provisions for early implementation, including the early loan forgiveness provisions. Thus, the Secretary has already forgiven hundreds of thousands of loan balances for borrowers in the SAVE plan.4 Plaintiffs argue that Defendants lack congressional authority to implement these changes or otherwise have violated the law in promulgating the Final Rule. Plaintiffs seek prospective injunctive and declaratory relief to halt any further implementation of the Final Rule.
This matter is now before the Court on several motions. On April 16, 2024, Plaintiffs filed their Motion to Stay or, in the alternative, for a Temporary Restraining Order. ECF No. 6. On the same day, Plaintiffs filed a Motion to Stay or, in the alternative, for Preliminary Injunction.
The Court has thoroughly reviewed the parties’ briefing and exhibits and has carefully considered the parties’ arguments. Because the Court finds that at least one Plaintiff has standing and that venue is proper in this district, it will deny Defendants’ Motion to Dismiss. The Court also finds that Plaintiffs are likely to succeed on the merits of their argument that the early loan forgiveness provisions of the Final Rule were promulgated in a manner exceeding the Secretary‘s statutory authority. And because Plaintiffs have shown that Missouri faces impending harm from any additional loan forgiveness under the Final Rule, the Court finds it necessary to enjoin Defendants from any further implementation of the Final Rule‘s loan forgiveness provisions until this matter can be fully litigated. All other aspects of the Final Rule were promulgated properly. For these reasons and others set forth below, the Court will grant in part and deny in part Plaintiffs’ Motion for Stay or, in the alternative, for Preliminary Injunction.
Background
A. The Higher Education Act and Accompanying Regulations
In 1965, Congress passed the Higher Education Act (“HEA“) “[t]o strengthen the educational resources of our colleges and universities and to provide financial assistance for students in postsecondary and higher education.”
In 1993, Congress passed the Student Loan Reform Act, which created the Federal Direct Student Loan Program,5 which for the first time allowed the federal government to issue loans for post-secondary education.
In 1994, the Secretary promulgated the first regulations regarding the standards, criteria, and procedures governing ICR
In 2007, Congress again amended the HEA.
The 2007 amendments also created a specific plan of loan forgiveness for public service employees—the Public Service Loan Forgiveness (“PSLF“) program. Under
The 2007 amendments created yet another repayment plan—the income-based repayment (“IBR“) plan.
In 2010, Congress amended the terms of the IBR program. Congress lowered the “financial hardship” threshold to qualify for IBR from 15% of AGI less 150% of the FPL to 10% of AGI less 150% of the FPL. And “with respect to any loan made to a
Congress has made no significant amendments to the HEA since 2010, but the Secretary has promulgated regulations controlling ICR plans. In 2012, the Secretary implemented a new ICR plan known as Pay As You Earn (“PAYE“) and incorporated some of the 2010 statutory changes to the IBR plan into the Direct Loan and Federal Family Education Loan (“FFEL“) program. 77 Fed. Reg. 66,088-01. Under the 2012 regulations, which became effective on July 1, 2013, borrowers of loans disbursed after October 1, 2011,8 who could establish a partial financial hardship could elect to repay their loan through the PAYE program. Id. at 66,137;
In 2015, the Secretary issued additional regulations creating a new ICR plan called the Revised Pay As You Earn (“REPAYE“) repayment plan. 80 Fed. Reg. 67,204. These regulations became effective on July 1, 2016.
B. The Final Rule
On May 26, 2021, the Secretary published in the Federal Register his intent to
After concluding the negotiated rulemaking process, on January 11, 2023, the Secretary published a notice of proposed rulemaking (“NPRM“) outlining the proposed changes to the HEA loan repayment programs. 88 Fed. Reg. 1,894-01. The NPRM explains that:
The Secretary proposes to amend the regulations governing [ICR] plans by amending the [REPAYE] repayment plan, and to restructure and rename the repayment plan regulations under the William D. Ford Federal Direct Loan (Direct
Loan) Program, including combining the [ICR] and [IBR] plans under the umbrella term of “Income-Driven Repayment (IDR) plans.”
Id. The NPRM further explained the Secretary‘s intent to amend the regulations on IDR plans, specifically to “expand the benefits of the REPAYE plan” by (1) increasing the amount of protected income used to calculate borrowers’ monthly payments, (2) decreasing the share of unprotected income used to calculate borrowers’ monthly payments, (3) reducing the time for some low initial balance borrowers to receive loan forgiveness, and (4) no longer charging borrowers accrued interest each month after borrowers make a qualifying payment. Borrowers would also receive credit toward loan forgiveness for certain periods of deferment or forbearance that were not previously credited. The NPRM set the date to receive public comments on the proposed rule for February 10, 2023—30 days after the NPRM‘s publication. Id.
After receiving public comments, on July 10, 2023, the Final Rule was published in the Federal Register. 88 Fed. Reg. 43,820. In relevant part, the Final Rule‘s outlines its major provisions as follows:
The final regulations—
- Expand access to affordable monthly Direct Loan payments through changes to the [REPAYE] repayment plan, which may also be referred to as the Saving on a Valuable Education (SAVE) plan;11
. . .
- Increase the amount of income exempted from the calculation of the
borrower‘s payment amount from 150 percent of the [FPL] to 225 percent of FPL for borrowers on the REPAYE plan; - Lower the share of discretionary income used to calculate the borrower‘s monthly payment for outstanding loans under REPAYE to 5 percent of discretionary income for loans for the borrower‘s undergraduate study and 10 percent of discretionary income for other outstanding loans; and an amount between 5 and 10 percent of discretionary income based upon the
weighted average of the original principal balances for those with outstanding loans in both categories;
- Provide a shorter maximum repayment period for borrowers with low original loan principal balances;
. . .
- Provide that the borrower will not be charged any remaining accrued interest each month after the borrower‘s payment is applied under the REPAYE plan;
- Credit certain periods of deferment or forbearance toward time needed to receive loan forgiveness; [and]
- Permit borrowers to receive credit toward forgiveness for payments made prior to consolidating their [FFEL] loans[.]
Id.
The HEA provides procedural rules for when rules published by the Secretary may become effective. Under
Despite the Final Rule‘s July 1, 2024, onset date, the Secretary designated several portions of the Final Rule for early implementation under the procedural requirements provided by the HEA. Under § 1089(c)(2), “[t]he Secretary may designate any regulatory provision that affects the programs under [Title IV of the HEA] and is published in final form after November 1 as one that an entity subject to the provision may, in the entity‘s discretion, choose to implement prior to the effective date described in [§ 1089(c)(1)].” This designation of provisions for early
implementation is accomplished by publication in the Federal Register and “shall be effective with respect to that entity in accordance with the terms of the Secretary‘s designation.” Id. § 1089(c)(2)(B). Under this authority, the Secretary designated several provisions of the Final Rule for early implementation on July 30, 2023:
- Adjusting the treatment of spousal income in the REPAYE plan for married borrowers who file separately as described in § 685.209(e)(1)(i)(A) and (B);
- Increasing the income exemption to 225 percent of the applicable poverty guideline in the REPAYE plan as described in § 685.209(f);
- Not charging accrued interest to the borrower after the borrower‘s payment
on REPAYE is applied as described in § 685.209(h); . . . - Designating in § 685.209(a)(1) that REPAYE may also be referred to as the Saving on Valuable Education (SAVE) plan[; and]
- the changes to the definition of family size for Direct Loan borrowers in IBR, ICR, PAYE, and REPAYE in § 685.209(a) to exclude the spouse when a borrower is married and files a separate tax return . . . .
88 Fed. Reg. at 43,820-21. The Final Rule also designated for early implementation the provision for awarding credit toward loan forgiveness to certain periods of deferment and provided that the Secretary “will publish a separate notice announcing the timing of the implementation.” Id. at 43,821.
On October 23, 2023, the Department designated for early implementation a provision that eliminated “the requirement for borrowers returning to SAVE after having previously been on REPAYE to provide prior years’ income.” 88 Fed. Reg. 72,685-01. This effectively eliminated the obligations of borrowers under the SAVE plan to recertify their previous year‘s income to remain on the plan.
On January 16, 2024, the Department designated for early implementation the provision of the Final Rule permitting early forgiveness for certain borrowers with low initial principal balances. 89 Fed. Reg. 2,489-01. Since early implementation of the forgiveness provision, the Secretary has forgiven hundreds of thousands of loan balances for borrowers opting for the SAVE plan.
C. Biden v. Nebraska
The Supreme Court‘s recent ruling regarding the Secretary‘s previous student loan forgiveness plan is instructive. Though the Secretary in that case claimed the authority to forgive loans under a different statute not at issue here, there remains some overlap between the Supreme Court‘s analysis in that case and the issues presented here.
In 2001, following the September 11 terrorist attacks, Congress passed the Higher Education Relief Opportunities to Students Act of 2001, which authorized the Secretary to modify or waive provisions of the HEA student loan programs “in connection with the national emergency.”
Rather than let the Act terminate on September 20, 2003, Congress passed the Higher Education Relief Opportunities for Students Act of 2003 (the “HEROES Act“), which again granted the Secretary the authority to modify or waive “any statutory or regulatory provision applicable to the student financial assistance programs under title IV of the Act as the Secretary deems necessary in connection with a war or other military operation or national emergency . . . .”
The Secretary invoked this authority in the wake of the President‘s declaration of a national emergency for the COVID-19 pandemic13 to promulgate modifications and waivers to
the student loan repayment program. One such set of modifications and waivers was published in the Federal Register on October 12, 2022. 87 Fed. Reg. 61,512-01. There, the Secretary announced
Several states, including Plaintiffs Missouri and Arkansas, subsequently sought to enjoin the implementation of the Secretary‘s forgiveness plan. Nebraska v. Biden, 636 F. Supp. 3d 991 (E.D. Mo. 2022). On October 20, 2022, the district court dismissed the case for lack of standing. Id. But on November 14, 2022, the Eighth Circuit granted the plaintiff States’ Emergency Motion for an injunction pending appeal to the Supreme Court. Nebraska v. Biden, 52 F.4th 1044, 1048 (8th Cir. 2022).
On June 30, 2023, the Supreme Court sided with the States and held the Secretary‘s loan forgiveness plan under the HEROES Act was unlawful. The Supreme Court in a six-to-three majority opinion authored by the Chief Justice found that the plaintiff States had standing because the Higher Education Loan Authority of the State of Missouri (“MOHELA“) is an instrumentality of the State of Missouri, and therefore Missouri suffered direct harm when MOHELA suffered harm from the loan forgiveness program. Biden v. Nebraska, 143 S. Ct. 2355, 2366-68 (2023)14 (“The Secretary‘s plan harms MOHELA in the performance of its public function and so directly harms the State that created and controls MOHELA. Missouri thus has suffered an injury in fact sufficient to give it standing to challenge the Secretary‘s plan.“). The
Supreme Court further held that the Secretary‘s forgiveness plan was unlawful under the major questions doctrine, holding that the HEROES Act language that granted the Secretary authority to “modify or waive” provisions of the student loan repayment plans was not “clear congressional authorization” for the mass debt cancellation program. Id. at 2375. The decision never directly spoke to the Secretary‘s authority to implement repayment procedures under the HEA that are at issue in this case.
D. The Parties’ Motions
Plaintiffs filed two motions, though their requested relief for each is essentially the same. Recognizing that their requested forms of relief significantly overlap, Plaintiffs filed a combined Memorandum in Support of both Motions. ECF No. 10. Plaintiffs ask this Court to stay the Final Rule under the Administrative Procedure Act (“APA“). See
Anticipating a challenge from Defendants regarding their standing to sue, Plaintiffs present several arguments to support their standing. Plaintiffs then argue that they will likely be successful on the merits. In particular, Plaintiffs contend that the Final Rule violates separation of powers principles requiring invocation of the major questions doctrine and otherwise runs afoul of the APA. Plaintiffs argue that these violations necessitate vacatur of the Final Rule in its entirety. Finally, Plaintiffs argue that they face impending injury if the Final Rule is allowed
In their Motion to Dismiss, Defendants ask the Court to dismiss this case for two reasons. First, Defendants argue that the Court should not reach the merits of this case because Plaintiffs have not established standing, and therefore the case should be dismissed under
Because the issues briefed by the parties overlap considerably, the Court will discuss the parties’ arguments by topic rather than in the order they were presented for the sake of clarity.
1. Standing
Plaintiffs allege several theories of standing, though they emphasize that if the Court finds standing for any one of them on any theory, the case should proceed as to all Plaintiffs. Defendants vigorously oppose all of Plaintiffs’ standing theories and insist that each Plaintiff must separately establish standing under each alleged theory before the Court can consider granting Plaintiffs’ requested relief.
a. Missouri‘s Standing Via Harm to Its State Instrumentality
Plaintiff Missouri asserts that it has standing based on alleged past and future harms to MOHELA from the implementation of the Final Rule. Under this theory, Missouri is harmed because its public instrumentality, MOHELA, will lose revenue in two ways. First, Missouri argues that when the Direct Loans serviced by MOHELA are forgiven under the SAVE plan, those loan accounts will be closed and MOHELA will no longer collect administrative servicing fees for those accounts. Second, Missouri argues that the Final Rule encourages borrowers to consolidate FFEL loans into Direct Loans and therefore will (1) deprive MOHELA of interest revenue from consolidated FFEL loans, (2) decrease the value of FFEL loans on the tradable market, and (3) harm MOHELA‘s ability to issue bonds. Plaintiffs emphasize that Missouri‘s theory regarding the loss of income from loan servicing fees when loans are forgiven, was accepted by the Supreme Court in Biden v. Nebraska and should have the same force here.
Defendants argue that the Supreme Court‘s determination in Biden v. Nebraska that Missouri had standing in that case does not mean that Missouri has standing here. Defendants specifically attack the theory that Missouri has established that MOHELA is facing actual and imminent financial harm from ongoing loan forgiveness under the Final Rule. Defendants point to MOHELA‘s recent request that the Department reallocate 1.5 million of its Direct Loan accounts to other federal servicers.15 See ECF No. 22-3. At the same time, Defendants admit that, as of the date of its Motion to Dismiss, MOHELA had “discharged approximately 28,000 borrowers’ accounts under SAVE, and an estimated further 53,000 have been identified for forgiveness and are being processed.” ECF No. 22 at 11; ECF No. 11-2 at ¶ 33. Defendants argue that, because MOHELA has voluntarily requested that 1.5 million accounts be transferred to other servicers, Missouri cannot simultaneously claim
Defendants also argue that MOHELA will actually benefit from the SAVE plan. First, Defendants argue that with fewer loans to service because of loan forgiveness, MOHELA will be less likely to incur financial penalties, like a recent $7.2 million penalty imposed for servicing errors. Second, the Department has already distributed to MOHELA $1.6 million in transition costs as part of the switch to SAVE. Third, Defendants contend that the Final Rule will reduce borrower delinquency, decreasing servicing costs and permitting MOHELA to collect additional servicing fees on accounts that will otherwise fall into delinquency and default under previous loan repayment programs.
Defendants are also highly critical of Plaintiffs’ theory that the Final Rule encourages borrowers of FFELs to seek consolidation. Defendants argue that any harm under such a theory is contingent on the action of independent third parties and is far from certain. Defendants also argue that, even if FFEL consolidation were to increase because of the Final Rule, Plaintiffs have not established with sufficient certainty that such consolidation would actually harm MOHELA.
Plaintiffs in their Reply ask that the Court to reject Defendants’ preferred balancing approach when assessing potential harms to MOHELA. According to Plaintiffs, if MOHELA can show that it will lose a single dollar because of the Final Rule, that is enough.
b. North Dakota‘s Standing Via Harm to Its State Instrumentality
Plaintiff North Dakota argues it has a separate basis for standing through alleged harms to the Bank of North Dakota (the “Bank“). The Bank provides loans to students enrolled in North Dakota institutions of higher education. According to Plaintiffs, the Final Rule will “unlawfully impose[] a direct competitive harm” on the Bank because the loan terms offered by the SAVE plan are better than those offered by the Bank. Under this theory, the Bank will lose potential revenue because fewer borrowers will choose to take out loans from the Bank and will instead chose to take out Direct Loans to take advantage of the SAVE plan.
Defendants contest the bases of this theory. Defendants first note that North Dakota has not clearly established that the Bank is an instrumentality of the state. Defendants further assert that this kind of competitor standing has never been extended to situations where the government itself was considered a competitor, but instead has been limited to cases in which government action increased the competitive advantage of one non-governmental actor over another non-governmental actor. Defendants also argue that North Dakota‘s standing argument improperly relies on the actions of independent third parties that are not certain to occur.
c. Plaintiffs’ Recruitment Theory
Plaintiffs also contend that each of them has standing because the Final Rule harms their ability to recruit and retain talent. According to Plaintiffs, they rely on the PSLF program‘s 10-year loan forgiveness timeline to recruit and retain talent for state and local government employment. Plaintiffs allege that without the PSLF program‘s comparatively strong benefits over traditional student loan repayment plans, recruits will be lured away from government work by the promise of higher pay in the private sector and a 10-year loan forgiveness timeline under the SAVE plan. Plaintiffs support these contentions with sworn affidavits from State employees who attest to the importance of the PSLF program in the recruitment and retention
Defendants argue that Plaintiffs’ theory improperly relies on the actions of independent third parties and is speculative. Defendants contend that the SAVE plan will continue to provide significant benefits to borrowers seeking PSLF forgiveness in the form of lower payments and limited interest accrual and may even increase participation in the PSLF program. Defendants assert that any injunction preventing the additional benefits provided by SAVE plan will actually exacerbate Plaintiffs’ concerns about recruitment.
d. Georgia, Missouri, North Dakota, Oklahoma, and Ohio‘s Lost Tax Revenue Theory
Plaintiffs Georgia, Missouri, North Dakota, Oklahoma, and Ohio separately argue that they have standing because the Final Rule will decrease their tax revenues. Generally, forgiven student loan balances (besides those forgiven via PSLF) are considered taxable income under the federal definition of AGI.
shall be the taxpayer‘s federal [AGI] subject to the modifications in this section.“). Thus, in these States, forgiven loan balances are generally considered taxable income. But the American Rescue Plan Act of 2021 at
Defendants argue that such a theory of standing is self-inflicted and precluded by binding Supreme Court precedent. Defendants assert that the alleged loss of potential tax revenue is of the Plaintiff States’ own making and is unduly speculative. Defendants contend that these Plaintiffs have the ultimate power over their tax codes and can, if they so desire, change those tax codes to avoid losing tax revenue.
2. Venue
Defendants argue that the case should also be dismissed for the independent reason that venue is improper in the Eastern District of Missouri. Defendants argue that under
Defendants also state that the allegation in Plaintiffs’ Complaint that “a substantial part of the events or omissions giving rise to the Complaint occurred within this district,” id., is not supported by any other factual allegations. According to Defendants, the Complaint merely describes actions taken by the federal government in the District of Columbia and lists no specific actions taken by any party in the Eastern District of Missouri. For these reasons, Defendants request dismissal of this case for improper venue or, in the alternative, transfer to the Western District of Missouri or the District of D.C.
Defendants assert in their Reply that the Ninth Circuit and other district courts were mistaken in finding that a State can bring a suit in any judicial district within that State. Defendants ask the Court to reject the rationale used in the cases cited by Plaintiffs. Defendants similarly discount Plaintiffs’ argument that Missouri‘s residence has any connection to the location of MOHELA‘s principal place of business.
3. Dismissal of President Biden
Defendants briefly argue that Defendant Joseph R. Biden, Jr., should be dismissed because President Biden is not subject to Plaintiffs’ requested relief. According to Defendants, the Court lacks jurisdiction to enjoin the president.
Plaintiffs argue that the Court has the authority to issue declaratory relief and to issue injunctive relief against the President when injunctive relief against the remaining Defendants will not fully redress Plaintiffs’ alleged injuries. They argue that the Court can, and should, enter
injunctive relief against the President to prevent him from pursuing loan cancellation by executive order.
4. Statutory Authority and the Major Questions Doctrine
Plaintiffs assert that the Final Rule was promulgated in excess of statutory authority, violates separation of powers principles, and implicates the major questions doctrine. Under the major questions doctrine, when an agency takes an action touching on issues of important economic and political significance, the agency must find clear congressional authority delegating such action to the agency. Plaintiffs contend that the Final Rule is of such economic and political significance that it requires clear congressional authorization and that Defendants have no clear statutory authority to promulgate a rule with the provisions found in the Final Rule.
Plaintiffs further allege that the
Plaintiffs also contend that the SAVE program under the Final Rule will make the IBR program irrelevant, indicating that the Final Rule is not statutorily authorized. According to Plaintiffs, the Secretary cannot make an ICR program more generous than the IBR program because the IBR program was created by Congress. Plaintiffs argue that any specific conditions set by Congress in the IBR program, like the percent of a borrower‘s income considered when calculating payments, cannot be more generous under an ICR program because Congress would have set those conditions by statute as they did with the IBR plan. Plaintiffs use this same theory to attack the provisions of the Final Rule providing for limits on the interest accrual as long as a borrower participates in the SAVE plan because the IBR plan only permits the Secretary to subsidize a borrower‘s interest for a maximum of three years.
Additionally, Plaintiffs argue that the Secretary‘s interpretation of his power under the
Defendants argue that the Court need not rely on the major questions doctrine to decide this case because the issues presented can be resolved using typical tools of statutory interpretation. And even though Defendants dispute the applicability of the major questions doctrine, they still assert that Congress has provided clear authority for the Final Rule‘s provisions via the
Additionally, Defendants reject the applicability of the Biden v. Nebraska decision to this case. According to Defendants, the Biden v. Nebraska decision invoked the major questions doctrine in relation to the Secretary‘s reliance on the
Defendants contend that Congress has granted them statutory authority to create ICR plans in
Defendants also question Plaintiffs’ position that the statutory provisions of the IBR plan are implicit limitations on the Secretary‘s authority to promulgate ICR plans. In Defendants’ view, if Congress wished to restrict the IBR plan‘s provisions to borrowers experiencing a partial financial hardship, Congress would have explicitly limited the ICR plan in the way Plaintiffs suggest. And because Congress has not done so, the Court should not find the Secretary‘s authority contains this implicit limitation.
Plaintiffs argue in their Reply that Defendants’ alleged admission that the Secretary has implied authority to forgive loans under the ICR plan is sufficient to show that there is no clear statutory authority for the Secretary to do so. Plaintiffs further argue that, despite the Secretary previously creating ICR plans that provided loan forgiveness, the Final Rule is of such economic and political significance that it invokes the major questions doctrine and requires the Secretary to established clear congressional authority for the Final Rule.
5. The Administrative Procedure Act and Arbitrary and Capricious Agency Action
Plaintiffs contend that, regardless of whether the Final Rule implicates the major questions doctrine, it is also unlawful because it is arbitrary and capricious agency action or otherwise violates the
a. The Final Rule‘s Cost Estimate
Plaintiffs contend the Final Rule‘s cost estimate is so inaccurate that its inclusion in the Final Rule indicates that the Final Rule is arbitrary and capricious. According to Plaintiffs, the cost estimate is flawed because it underestimates the cost of implementation
Defendants dispute that the Final Rule is arbitrary and capricious despite its seemingly inaccurate cost estimate. Defendants argue the
Additionally, Defendants argue that, regardless of whether the Court agrees that the Secretary should have conducted an alternative cost-benefit analysis, such an error by the Secretary is not prejudicial. Defendants take the position that reducing the burdens of student debt via the Final Rule was a priority of the President and the Secretary and—despite the Supreme Court‘s decision to strike down the previous loan forgiveness plan in Biden v. Nebraska—the costs associated with that plan were known to the Secretary and were acceptable because of its purported benefits. Defendants argue that whether the costs of the
b. Defendants’ Alleged Failure to Consider Important Aspects of the Final Rule
Plaintiffs assert that the Final Rule is arbitrary and capricious agency action because Defendants allegedly did not consider Plaintiffs’ reliance on state tax revenues and the PSLF program as part of the Final Rule. Plaintiffs also argue that Defendants did not adequately consider the inflationary effects of the Final Rule.
Defendants dispute Plaintiffs’ contention that the Secretary did not adequately consider the reliance interests of the States or the inflationary effects of the Final Rule. Defendants point to the Secretary‘s responses to comments in the Final Rule showing that he indeed did consider the effect the Final Rule may have on state tax revenues, the PSLF program, and inflation. Defendants contend that
c. Alleged Procedural Violations
Plaintiffs argue that the Final Rule violates the
Defendants argue that there is no specific requirement under the
d. Plaintiffs’ Other Arguments
Plaintiffs make several other arguments as to why the Final Rule is arbitrary and capricious, including that Defendants have: (1) allegedly “departed from 30 years of regulatory practice“; (2) improperly stated the SAVE plan is a “loan” program when it is allegedly a grant program; (3) implausibly assumed that borrowers at 100% of the FPL are statistically indistinguishable from those at 225% of the FPL; and (4) provided for early implementation of portions of the Final Rule without proper explanation. Plaintiffs assert that, for each of these reasons, they are likely to succeed on the merits.
Defendants dispute Plaintiffs’ contentions on each of these issues. On each account, Defendants refer to the Secretary‘s explanations in the Final Rule itself or challenge the adequacy of Plaintiffs’ explanations.
6. Irreparable Harm
Plaintiffs argue that if they are not granted immediate relief, they will suffer irreparable harm. They argue that MOHELA will suffer financial harm when (1) loans are forgiven under the SAVE plan sooner than they would have been under previous ICR plans, or (2) borrowers consolidate FFEL loans to take advantage of the SAVE program. North Dakota argues that, without a TRO or preliminary injunction, the Bank—and thus North Dakota—will experience competitive injury by having to compete with the federal government for student loan business. Similarly, Plaintiffs assert that they will experience irreparable harm by the loss of competitive advantage in the job market because of the alleged decreased appeal of the PSLF program and the loss of tax revenue in those States that tie their State definition of AGI to the federal definition.
Defendants’ arguments regarding Plaintiffs’ failure to establish irreparable harm mirror those used to support their arguments against Plaintiffs’ standing. But Defendants additionally argue that the timing of Plaintiffs’ Motions exhibits a lack of irreparable harm and weighs against granting a TRO or preliminary injunction. Defendants assert that Plaintiffs’ nine-month‘s delay between the publication of the Final Rule and the filing of this lawsuit
Plaintiffs deny that they delayed bringing this suit and that such delay undermines their assertion of impending irreparable harm. Plaintiffs argue that unreasonable delay can undermine an argument for irreparable harm only when (1) the harms have already occurred, and (2) the parties cannot be returned to the status quo. For Plaintiffs, neither is true in this case because a vast majority of the harms they complain of will occur in the future and can therefore be rectified by the injunctive relief they seek.17 Plaintiffs also state that there was no unreasonable delay here because the first time they were made aware of early implementation of the Final Rule was in February 2024, and they filed suit 48 days later.
Plaintiffs further argue that unnecessary delay cannot be a valid argument here because Plaintiffs, specifically the Missouri Attorney General‘s Office, pursued non-litigation avenues before bringing this case. Plaintiffs allege that in December 2023, the Missouri Attorney General‘s Office participated in the negotiated rule-making process for a different student loan rule. According to Plaintiffs, that participation was Missouri‘s attempt to pursue non-litigation avenues to resolve this dispute. Plaintiffs admit that the Missouri Attorney General‘s Office failed to make any progress during the negotiations and eventually withdrew from the process.
7. The Public Interest
Plaintiffs argue that the public interest heavily favors their position because they face irreparable harm while Defendants merely face a delay in implementation. According to Plaintiffs, “[a]n injunction will re-establish the status quo as it existed before the publication of the Final Rule and the Department‘s early implementation of various provisions.” ECF No. 10 at 49. However, Plaintiffs are asking only for a stay or injunctive relief to prevent any further loan forgiveness and full implementation of the Final Rule. Plaintiffs also argue that borrowers receiving loan forgiveness under the Final Rule will receive a huge windfall while the American public will have to pay for it. Plaintiffs then state that the public interest cannot lie in keeping the allegedly unlawful Final Rule in place because the public has an interest in ensuring lawful agency rulemaking.
Defendants argue that the public interest favors keeping the Final Rule in place. Defendants assert that the public will experience several impending harms if the Final Rule were to be put on hold, including loan defaults, delinquency, adverse effects on borrowers’ credit scores, decreased borrower liquidity to make important purchases, decreased enrollment in higher education, slowed national economic growth, and increased reliance on federal welfare programs. In Defendants’ view, these harms are certain to occur if the Final Rule is put on hold, while Plaintiffs have only presented speculative injuries. Defendants also contend that the status quo is that portions of the Final Rule have already gone into effect and that injunctive relief at this time would “result in chaos and uncertainty . . . .” ECF No. 22 at 55.
Defendants assert that Plaintiffs’ requested relief is overbroad. Defendants suggest that, if the Court finds that the Final Rule is unlawful, it should grant limited relief only to those Plaintiffs that can establish standing and only as to provisions of the Final Rule that are found to be harmful. Defendants also suggest that the provisions of the Final Rule are severable such that the Court in its discretion can grant injunctive relief only as to the specific provisions of the rule found to be unlawful.
Plaintiffs argue that their ultimate requested relief, i.e., vacatur of the entire rule, is required under the
Similarly, while Plaintiffs agree with Defendants that regulations can sometimes be severed, Plaintiffs contend that severability is the exception and not the rule. According to Plaintiffs, the limited severability exception is not applicable here because Defendants have failed to show that the Secretary would have adopted the Final Rule if only the unchallenged portions remained. Plaintiffs also contend that the remaining portions of the regulation would not function sensibly without the provisions Plaintiffs seek to strike.
Legal Standard
A. Motion to Dismiss
When a party challenges the Court‘s subject matter jurisdiction, at issue is the Court‘s “very power to hear the case.” Osborn v. United States, 918 F.2d 724, 730 (8th Cir. 1990) (citation omitted). The Court has substantial discretion and is “free to weigh the evidence and satisfy itself as to the existence of its power to hear the case.” Little Otters of Love, LLC v. Rosenberg, 724 F. App’x 498, 501 (8th Cir. 2018) (per curium) (citation omitted).
In deciding a motion under
Defendants have not made clear whether they are lodging a facial or factual attack to Plaintiffs’ standing. See ECF No. 21 and 22. But in reviewing Defendants’ arguments, and despite the Defendants’ submission of additional exhibits for the Court‘s consideration, the Court interprets Defendants’ arguments as raising a facial challenge to Plaintiffs’ standing. Thus, the Court must accept as true all facts alleged in Plaintiffs’ Complaint as it would on any motion to dismiss raised under
Defendants moving to dismiss under
(b)... A civil action may be brought in— . . . (2) a judicial district in which a substantial part of the events or omissions giving rise to the claim occurred, or a substantial part of property that is the subject of the action is situated; . . . (e)(1) . . . A civil action in which a defendant is an officer or employee of the United States or an agency thereof acting in his official capacity or under color of legal authority, or an agency of the United States, or the United States, may, except as otherwise provided by law, be brought in any judicial district in which (A) a defendant in the action resides, (B) a substantial part of the events or omissions giving rise to the claim occurred, or a substantial part of property that is the subject of the action is situated, or (C) the plaintiff resides if no real property is involved in the action.
Plaintiffs allege that Defendants are agencies or officers of the United States sued in their official capacities. Plaintiffs further allege that Plaintiff Missouri is a resident of the Eastern District of Missouri and a substantial part of the events or omissions giving rise to the Complaint occurred within this district. ECF No. 1 at ¶ 35. In analyzing Defendants’ Motion to Dismiss, the Court must determine whether Plaintiff Missouri resides within this district or whether a substantial part of the events giving rise to this case occurred within this district. If venue is improper, the Court may either dismiss the action or transfer it to the proper district.
B. Motions for Stay or, in the alternative, for TRO or Preliminary Injunction
Plaintiffs seek a stay of the Final Rule, or, in the alternative, a TRO or a preliminary injunction enjoining Defendants from any further implementation of the Final Rule. At this stage in the litigation, the Court will determine whether a stay or a preliminary injunction is appropriate.
As to the Court‘s authority to issue a stay of the Final Rule, Section 705 of the
The Court has the discretion to issue a stay and considers four factors: “(1) whether the stay applicant has made a strong showing that he is likely to succeed on the merits; (2) whether the applicant will be irreparably injured absent a stay; (3) whether issuance of the stay will substantially injure the other parties interested in the proceeding; and (4) where the public interest lies.” Nken v. Holder, 556 U.S. 418, 434 (2009) (citation omitted). The mere possibility of irreparable injury is not sufficient. Id. at 434–35 (citation omitted). When the government opposes the stay, the final two factors merge into an assessment of the public interest. Id. at 435.
“A movant shows a likelihood of success on the merits when it demonstrates a ‘fair chance,’ not necessarily ‘greater than fifty percent,’ that it will ultimately prevail under applicable law.” Cigna Corp. v. Bricker, — F.4th —, 2024 WL 2839930, at *3 (8th Cir. June 5, 2024) (citing Heartland Acad. Cmty. Church v. Waddle, 335 F.3d 684, 690 (8th Cir. 2003)).
“Irreparable harm occurs when a party has no adequate remedy at law, typically because its injuries cannot be fully compensated through an award of damages.” Gen. Motors Corp. v. Harry Brown‘s, LLC, 563 F.3d 312, 319 (8th Cir. 2009). Plaintiffs “must show more than the mere possibility that irreparable harm will occur.” Ng, 64 F.4th at 997 (quoting Sessler v. City of Davenport, 990 F.3d 1150, 1156 (8th Cir. 2021)). Rather, “[t]o demonstrate irreparable harm, [the movant] must show harm that is certain and great and of such imminence that there is a clear and present need for equitable relief.” H&R Block, Inc. v. Block, Inc., 58 F.4th 939, 951 (8th Cir. 2023) (internal quotation marks omitted).
Discussion
A. Standing
“The law of Article III standing, which is built on separation-of-powers principles, serves to prevent the judicial process from being used to usurp the powers of the political branches.” Clapper v. Amnesty Int‘l USA, 568 U.S. 398, 408 (2013) (citations omitted).
An injury in fact is “‘an invasion of a legally protected interest’ that is ‘concrete and particularized’ and ‘actual or imminent, not conjectural or hypothetical.‘” Spokeo, Inc. v. Robins, 578 U.S. 330, 339 (2016) (quoting Lujan, 504 U.S. at 560). “A concrete injury must be de facto; that is, it must actually exist” in reality rather than in the abstract. Id. at 340 (cleaned up). “For an injury to be particularized, it must affect the plaintiff in a personal and individual way.” Id. at 339 (cleaned up).
“Although imminence is concededly a somewhat elastic concept, it cannot be stretched beyond its purpose, which is to ensure that the alleged injury is not too speculative for Article III purposes—that the injury is certainly impending.” Clapper, 568 U.S. at 409 (emphasis in original and citations omitted). “[A]llegations of possible future injury are not sufficient.” Id. (emphasis in original).
“For causation to exist, the injury has to be fairly traceable to the challenged action of the defendant, and not the result of the independent action of some third party not before the court.” Agred Found. v. U.S. Army Corps of Eng’rs, 3 F.4th 1069, 1073 (8th Cir. 2021) (citation omitted). This “requires the plaintiff to show a sufficiently direct causal connection between the challenged action and the identified harm. That connection cannot be overly attenuated.” Id. (citation omitted).
“[W]hen the plaintiff is not himself the object of the government action or inaction he challenges, standing is not precluded, but it is ordinarily substantially more difficult to establish.” Lujan, 504 U.S. at 562 (citation and internal quotation marks omitted). “To satisfy that burden, the plaintiff must show at the least that third parties will likely react in predictable ways.” California v. Texas, 593 U.S. 659, 675 (2021) (citation and internal quotation marks omitted).
Redressability requires the plaintiff to show that “it is likely, as opposed to merely speculative, that the injury will be redressed by a favorable decision.” Lujan, 504 U.S. at 561 (cleaned up). In assessing redressability, the court must “consider the relationship between the judicial relief requested and the injury suffered.” California v. Texas, 593 U.S. at 671 (citation and internal quotation marks omitted).
“If at least one plaintiff has standing, the suit may proceed.” Biden v. Nebraska, 143 S. Ct. 2355, 2365 (2023) (citing Rumsfeld v. Forum for Acad. and Institutional Rights, Inc., 547 U.S. 47, 52 n.2 (2006)).
The Final Rule calls for accelerated loan forgiveness for a set of borrowers with low initial principal balances who elect repayment through the SAVE plan and make a set number of qualifying payments. To the extent MOHELA services accounts subject to this early forgiveness—and there is no dispute that MOHELA does service such accounts—MOHELA will lose revenues from administrative servicing fee when those accounts are forgiven. For forgiveness to occur, borrowers must first opt into the SAVE program and make the necessary number of qualifying payments. There is some question of whether such a theory of harm relies too heavily on the actions of third-party borrowers who may decide to not choose the SAVE program or who may otherwise not qualify for early forgiveness because they have failed to make the necessary payments. But in reality, thousands of loans once serviced by MOHELA have already been forgiven by the Secretary under the early implementation of the Final Rule. Thousands more are primed for forgiveness in the coming weeks and months, making the alleged harm to MOHELA from early loan forgiveness certain to occur. “This financial harm is an injury in fact directly traceable to the Secretary‘s plan . . . .” Biden v. Nebraska, 143 S. Ct. at 2366. And “[t]he [Final Rule‘s] harm to MOHELA is a harm to Missouri” because “MOHELA is a ‘public instrumentality’ of the State.” Id. (citing Mo. Rev. Stat. § 173.360). Granting Plaintiffs’ requested injunctive relief would redress this impending harm by stopping any additional forgiveness.
To the extent Defendants ask this Court to assess the alleged harms to Missouri by conducting a balancing test by weighing the Final Rule‘s potential benefits to MOHELA against the loss of administrative fees, the Court declines to do so. Defendants have cited no case law from this Circuit indicating that any court has dismissed a case for lack of standing because a plaintiff could potentially benefit from the alleged injurious actions of a defendant even though those alleged harms appear certain to occur.
Defendants cite to Bueno v. Experian Information Sols., Inc., 664 F. Supp. 3d 800, 806 (N.D. Ill. 2023) for the contention that a plaintiff‘s windfall is not an injury. But the plaintiff in Bueno alleged harm from a false—but ultimately beneficial—statement on her credit report. The district court found that because the false statement actually provided the plaintiff with a benefit, the plaintiff failed to establish an injury sufficient to establish standing. Defendants argue that the same can be said for MOHELA here because MOHELA has requested that the Secretary reallocate 1.5 million of its Direct Loan accounts to other loan servicers and MOHELA may receive additional benefits under the Final Rule. The Court does not agree, and again rejects the invitation to conduct a balancing test. Under Biden v. Nebraska, it is enough that MOHELA has shown that it has been and will be harmed by the Final Rule‘s loan forgiveness provisions. Any potential “benefits” MOHELA receives are incidental and do not affect the Court‘s standing analysis.
Defendants next cite to Texas v. United States for the contention that some courts recognize an exception where a court considers “offsetting benefits that are of the
[o]nce injury is shown, no attempt is made to ask whether the injury is outweighed by benefits the plaintiff has enjoyed from the relationship with the defendant. Standing is recognized to complain that some particular aspect of the relationship is unlawful and has caused injury. Our standing analysis is not an accounting exercise.
Id. at 155–56 (citations, footnotes, and internal quotation marks omitted).
MOHELA‘s loss of administrative fees when loans it services are forgiven by the Secretary is not of the same type nor does it arise from the same transaction as the loss of administrative fees when the Secretary reallocates Direct Loans held by MOHELA to other servicers. Similarly, the other purported benefits of the Final Rule to MOHELA do not offset the alleged and actual harms experienced by MOHELA. Taking Plaintiffs’ allegations as true, Missouri has adequately alleged that the Final Rule has and will harm Missouri via early forgiveness of loans serviced by MOHELA.
Because the Court finds that Plaintiff Missouri has standing, it need not address Plaintiffs’ other theories of standing. This suit may proceed “[i]f at least one plaintiff has standing.” Biden v. Nebraska, 143 S. Ct. at 2365. Even so, the Court notes that Plaintiffs’ other theories of standing are tenuous at best. But because it finds that at least Missouri has standing, the Court will deny Defendants’ Motion to Dismiss on the grounds that Plaintiffs lack standing.
B. Venue
In what appears to be an issue of first impression in this Circuit, Defendants argue that this case should be dismissed for improper venue, or, in the alternative, this case should be transferred to the Western District of Missouri or the District of D.C. Defendants argue that the rules of venue require Missouri to file cases as a plaintiff only in the Western District of Missouri because Missouri‘s capital, and thus its principal place of business, is located in that district. In support, Defendants cite instances where courts have dismissed cases for improper venue when plaintiffs sued State officials in the federal judicial district that does not include the State‘s capital. The Court agrees that when a plaintiff seeks to sue Missouri officials for official actions, the Western District is the proper venue for such a case generally. But that is not the case here, where Missouri, and not a Missouri state official, is a plaintiff. Defendants cite to no cases where a court found venue improper when a plaintiff State sued in a district within that State where the State‘s capital does not sit.
On the contrary, Defendants’ argument has been rejected by every court where it has been raised. See Utah v. Walsh, No. 2:23-cv-016, 2023 WL 2663256, at *3 (N.D. Tex. Mar. 28, 2023) (“[Plaintiff] Texas resides everywhere in Texas.“); see also California v. Azar, 911 F.3d 558, 570 (9th Cir. 2018) (“A state is ubiquitous throughout its sovereign borders.“). In line with other courts considering this argument, the Court finds that the State of Missouri resides everywhere in Missouri and thus resides in this district. Cases where “a defendant is an officer or employee of the United States or an agency thereof . . . or an agency of the United States . . . may . . . be brought in any judicial district in which ... the plaintiff resides . . . .”
The State of Missouri resides in the Eastern District of Missouri, and therefore venue is proper in this
C. President Biden
Defendants argue that President Biden should be dismissed as a Defendant because the Court lacks the authority to issue injunctive relief against the President. Plaintiffs agree that the Court lacks the authority “in general” to issue an injunction against the President. But Plaintiffs also argue that the Court has such authority in limited circumstances when an injury “cannot be ‘redressed fully by injunctive relief against the remaining Defendants.‘” ECF No. 26 at 54 (quoting Hawaii v. Trump, 859 F.3d 741, 788 (9th Cir. 2017), vacated on other grounds, 583 U.S. 941 (2017)). Plaintiffs specifically point to statements made by President Biden indicating his intent to, in Plaintiffs’ words, “evade the Supreme Court.” Id. Plaintiffs contend that without entering declarative relief against President Biden, he will simply attempt to enforce the same student loan forgiveness via executive action. Therefore, Plaintiffs say declaratory and injunctive relief against President Biden are both proper and necessary.
At this early stage in the litigation, the Court cannot conclude that Plaintiffs will not prevail against President Biden. In so deciding, the Court makes no determination of whether such relief will be appropriate once Plaintiffs’ claims have been fully litigated. But, at this time, the Court will deny Defendants’ request to dismiss President Biden as a Defendant.
D. Likelihood of Success on the Merits
Satisfied that it has jurisdiction over this case, the Court will next discuss the likelihood that Plaintiffs will be successful on the merits. The Court will first discuss whether Plaintiffs are likely to succeed on their argument that the
play in this analysis. The Court will then discuss whether Plaintiffs are likely to succeed on their arguments that Defendants’ actions in promulgating the Final Rule were arbitrary and capricious agency action or otherwise violate the
1. The Secretary‘s Authority Under the HEA
On its face, the
Faced with these statutory provisions, Plaintiffs argue that the Secretary‘s authority to promulgate rules for ICR plans under the
The Court finds that Plaintiffs’ arguments regarding the Secretary‘s authority to set payment schedules and interest accrual limitations are unlikely to succeed on the merits. A reading of the plain language of the statute supports the Secretary‘s promulgation of the Final Rule as to the modified ICR repayment schedules and interest accrual under the SAVE program. Student loan repayment programs are well within the wheelhouse of the Secretary and the Department. Congress, in passing the
Further, the Secretary‘s discretionary changes to the ICR program here appear reasonably tailored to accomplish the Secretary‘s stated goal. The Secretary explains that the Final Rule was promulgated in an attempt to curb the tremendous rise in student loan balances and to ease the burdens borrowers face in paying off loans under existing repayment plans. The Secretary also states that the Final Rule‘s goal is ensuring that fewer borrowers fall into delinquency and default. Having the SAVE plan offer low-income borrowers a repayment plan that permits low payment amounts—as low $0 per month—and limits additional interest accrual and capitalization
The Final Rule‘s loan forgiveness provisions present a more difficult issue. According to Defendants, Congress intended to grant the Secretary authority under the
Despite this history, the plain text of the statute does not support Defendants’ position. The Court is not free to replace the language of the statute with unenacted legislative intent. Thigulla v. Jaddou, 94 F.4th 770, 777 (8th Cir. 2024) (citation omitted); see also Iverson v. United States, 973 F.3d 843, 849 (8th Cir. 2020) (The case must be a strong one indeed, which would justify a court in departing from the plain meaning of words in search of an intention which the words themselves did not suggest.) (quoting Bouie v. City of Columbia, 378 U.S. 347, 362–63 (1964)) (cleaned up); Argus Leader Media v. U.S. Dep‘t of Agric., 740 F.3d 1172, 1176 (8th Cir. 2014) (Congress expresses its purpose by words. It is for [courts] to ascertain—neither to add nor to subtract, neither to delete nor to distort.) (citation and internal quotation marks omitted). It is true that offering forgiveness of loan balances after 25, or even 10, years of repayments to borrowers under the SAVE plan will ensure that fewer borrowers will default or become delinquent. These loan forgiveness provisions thus comport with the Secretary‘s expressed purpose for creating the Final Rule. But because the statute is silent on loan forgiveness under the ICR program, it is at least equally as likely that the
Plaintiffs’ alternative reading—that
2. The Major Questions Doctrine
Plaintiffs assert that the Final Rule violates separation of powers principles. As part of this argument, Plaintiffs state that this case requires the Court to invoke the major questions doctrine.
The major questions doctrine has been recently invoked by the Supreme Court in several decisions relating to actions taken by various executive agencies. In these cases, the Supreme Court explains that when the agency action complained of involves a matter of vast economic and political significance, the agency must find clear congressional authority approving of such action. Alab. Ass‘n of Realtors v. Dep‘t of Health and Hum. Servs., 594 U.S. 758, 764 (2021) (finding no clear congressional authority for the CDC to issue a nationwide eviction moratorium); see also Nat‘l Fed‘n of Indep. Bus. v. OSHA, 595 U.S. 109, 114 (2022) (per curiam) (finding that OSHA had no clear congressional authority to issue a vaccine mandate during the COVID-19 pandemic and stating that [a]dministrative agencies are creatures of statute [that] accordingly possess only the authority that Congress has provided.); West Virginia v. EPA, 597 U.S. 697, 723 (2022) (finding that the EPA had no clear statutory authority to implement regulations that would have brought more sources of greenhouse gas emissions under the EPA‘s authority and stating that in certain extraordinary cases, both separation of powers principles and a practical understanding of legislative intent make us reluctant to read into ambiguous statutory text the delegation claimed to be lurking there. To convince us otherwise, something more than a merely plausible textual basis for the agency action is necessary. The agency instead must point to clear congressional authorization for the power it claims.) (quoting Util. Air Regul. Grp. v. EPA, 573 U.S. 302, 324 (2014)); Biden v. Nebraska, 143 S. Ct. at 2374 (finding that the Secretary did not have clear authority under the HEROES Act to promulgate its previous loan forgiveness program and stating that [a] decision of such magnitude and consequence on a matter of earnest and profound debate across the country must rest with Congress itself, or an agency acting pursuant to a clear delegation from that representative body.) (cleaned up).
Here, there is no real dispute that the Secretary‘s Final Rule touches on issues of vast economic and political significance and therefore may implicate the major questions doctrine. But to the extent it is necessary to invoke the major questions doctrine here at this stage of litigation, it merely confirms what the Court has found using the typical tools of statutory interpretation. Under the express terms of the
3. Alleged Arbitrary and Capricious Agency Action
Under the
Agency action is arbitrary and capricious if:
the agency has relied on factors which Congress has not intended it to consider, entirely failed to consider an important aspect of the problem, offered an explanation for its decision that runs counter to the evidence before the agency, or is so implausible that it could not be ascribed to a difference in view of the product of agency expertise.
Id. at 580 (quoting Missouri ex rel. Bailey v. U.S. Dep‘t of Interior, 73 F.4th 570, 576–77 (8th Cir. 2023)). The court must also consider if an agency is acting within its sphere of expertise. Id. (citations omitted).
Plaintiffs allege that the Final Rule is arbitrary and capricious agency action under the
a. The Final Rule‘s Cost Estimate
First, Plaintiffs argue that the Final Rule‘s cost estimate is arbitrary because it failed to account for the potential that the Supreme Court would strike down its previous loan forgiveness program in Biden v. Nebraska. The Final Rule estimates the costs of its implementation to be $156 billion over the first ten years. 88 Fed. Reg. 43,820. This cost estimate does not consider the potential effect of the Supreme Court finding that the previous loan forgiveness program under the HEROES Act was unlawful even though the Final Rule was not published until after the Supreme Court decided Biden v. Nebraska.
Plaintiffs contend that the cost of the Final Rule is much higher. Plaintiffs cite to
Plaintiffs claim that the Secretary‘s decision to promulgate the Final Rule under such an inaccurate estimate means that the Secretary did not act reasonably. In this view, the Secretary‘s decision to publish the Final Rule without conducting an additional analysis was arbitrary and capricious and requires vacatur. For support, Plaintiffs cite to two cases from outside this district in which an executive agency action was found to be arbitrary and capricious because it relied on outdated environmental data. ECF No. 10 at 39 (citing Dow AgroSciences LLC v. Nat‘l Marine Fisheries Servs., 707 F.3d 462, 473 (4th Cir. 2013) (finding that reliance on outdated water monitoring data that was not representative of current environmental conditions indicated arbitrary and capricious decision-making because the agency chose to continue relying on the outdated data without explaining why.); and Sierra Club v. EPA, 671 F.3d 955, 966–68 (9th Cir. 2012) (finding that the EPA‘s use of outdated emissions data when promulgating a rule was arbitrary and capricious because it did not analyze this new data or explain why it chose not to analyze the data . . . .)). Neither case is particularly relevant to the question of whether the Secretary‘s cost estimate, which Plaintiffs conceded at oral argument that the Secretary is under no obligation to conduct, means that the Final Rule is arbitrary and capricious.
Defendants contend that, despite the inaccuracy of the cost estimate and failure to conduct an additional cost estimate after Biden v. Nebraska, there is no basis to find that the Final Rule was arbitrary and capricious. Defendants contend that that the Secretary‘s cost estimate is unreviewable because it is under no obligation to conduct one, let alone an accurate one. They also argue that the Secretary finalized the Final Rule before the publication of Biden v. Nebraska and support this contention with an affidavit of an employee who attests to have knowledge of the Final Rule being signed by the Secretary and submitted for publication on June 24, 2023. ECF No. 22 at 43; ECF No. 22-1 at ¶ 3. Defendants also contend that the Secretary acted reasonably by not considering the effects of a negative decision in Biden v. Nebraska because, when the Final Rule was finalized, the Secretary believed the Supreme Court would uphold its authority to promulgate the loan forgiveness plan under the HEROES Act. Finally, Defendants argue that Plaintiffs have failed to establish that, if there was an error, that such an error was prejudicial. Defendants state that because the Secretary knew of the estimated costs of the HEROES Act forgiveness plan and approved that plan,
The Court finds that Plaintiffs are not likely to succeed on the merits of this argument. Despite the allegedly inaccurate cost estimate, the Secretary‘s reliance on that cost estimate in promulgating the Final Rule was not unreasonable. Congress has never required the Secretary to consider costs when promulgating rules for the ICR plans, and the Secretary cannot be said to have entirely failed to consider the cost of the Final Rule.
There is also no indication that the Secretary‘s reasoning for creating the Final Rule is somehow invalidated by Plaintiffs’ preferred cost estimates. Defendants have explained that their priority in promulgating the Final Rule was to reduc[e] the crushing burdens of student-loan debt. ECF No. 22 at 45. Plaintiffs seemingly have shown that the cost of such actions are high but have not established that a high cost somehow would fail to reduce the burdens of student loan debt. As Defendants have explained, whether costs were to occur under the Final Rule or would be spread between the Final Rule and the HEROES Act forgiveness plan, the Secretary found that the need to provide relief to borrowers outweighs the estimated costs. And though the Secretary knew there was a risk that the Supreme Court would find its HEROES Act forgiveness plan unlawful when the Final Rule was finalized, it was reasonable for the Secretary to rely on his belief that he had the authority to promulgate the stricken rule. On this record, the Court has not found a sufficient basis to conclude that the Secretary‘s cost estimate in the Final Rule makes the entire Final Rule arbitrary and capricious agency action.
Plaintiffs urge the Court to find that Defendants’ harmless error arguments evince an unalterably closed mind, indicating that the Secretary‘s action was not rationally considered. Under this theory, because the Secretary would have promulgated the Final Rule despite its increased cost, the Secretary‘s actions were not reasonable. Plaintiffs cite to a completely inapposite case from the D.C. Circuit in support of this standard. ECF No. 26 at 40 (citing Air Transp. Ass‘n of Am., Inc. v. Nat‘l Mediation Bd., 663 F.3d 476, 487 (D.C. Cir. 2011)). Plaintiffs have cited no cases endorsing this unalterably closed mind approach. In fact, the Supreme Court appears to have recently rejected a substantially similar test. Little Sisters of the Poor Saints Peter and Paul Home v. Pennsylvania, 591 U.S. 657, 685 (2020) (We decline to evaluate the final rules under the open-mindedness test.). The Court finds no authority or reasoned basis to use such a test here.
The Court therefore finds that Plaintiffs have failed to show that they are likely to succeed on the merits of their claim that the Final Rule‘s cost estimate constitutes arbitrary and capricious agency action.
b. The Secretary‘s Alleged Failure to Consider Certain Issues
Plaintiffs assert that the Secretary failed to consider the Final Rule‘s implications on State tax revenues, the State‘s reliance on the PSLF program as a recruiting tool, and the Final Rule‘s alleged inflationary effects. But the Final Rule in fact does consider and respond to comments that dealt with these issues. See 88 Fed. Reg. 43,877 (responding to comments about the Final Rule‘s effect on State tax revenues);
c. The Secretary‘s Findings Regarding Income-Exemption
Plaintiffs argue that the Final Rule‘s explanation for an increase in income-exemption under the SAVE plan from 150% of the FPL to 225% is based on unlikely and implausible conclusions. Plaintiffs take issue with the Final Rule‘s statement that, in the Secretary‘s analysis, people with incomes at 100% of the FPL and those with incomes at 225% of the FPL are statistically indistinguishable. The Final Rule states that:
[t]he Department chose the 225 percent threshold based on an analysis of data from the U.S. Census Bureau‘s Survey of Income and program Participation (SIPP) for individuals aged 18–65 who attended postsecondary institutions and who have outstanding student loan debt. The Department looked for the point at which the share of those who report material hardship—either being food insecure or behind on their utility bills—is statistically different from those whose family incomes are at or below the FPL.
88 Fed. Reg. 43,832.
Plaintiffs decry this conclusion as implausible. According to Plaintiffs, a person or family with an income at 100% of the FPL cannot experience the same financial difficulties of a person or family making 225% of the FPL. But this is not the reasoning the Secretary used. Instead, the Secretary conducted an analysis of SIPP data to determine at what income level Americans who previously attended college begin to experience material economic hardships like food instability and inability to pay utility bills. According to this analysis, Americans at 225% of the FPL report these economic hardships to a similar degree as those at 100% of the FPL. This is a reasonable explanation of the statistical analysis the Secretary relied on as its basis to set the income expectation under the SAVE plan at 225% of the FPL.
Plaintiffs offer no reasonable basis to question the Secretary‘s analysis. Plaintiffs’ do not present an alternative analysis of SIPP data that undermines the Secretary‘s conclusions. Nor do Plaintiffs offer a cogent critique of the Secretary‘s statistical methodology. Plaintiffs do not even cite a single point in the SIPP data that may call the Secretary‘s use of this data into question. Having failed to contend with the Secretary‘s analysis on its terms, Plaintiffs’ argument falls flat. Accordingly, Plaintiffs’ point here is not well taken, and the Court finds that Plaintiffs are unlikely to succeed on the merits under this theory.
d. The Secretary‘s Alleged Failure to Explain Early Implementation
Plaintiffs argue that the Secretary has failed to adequately explain the reasons why certain portions of the Final Rule were designated for early implementation. Plaintiffs primarily dispute the Secretary‘s publication in the Federal Register of his intention to implement the early forgiveness provision in January 2024 rather than waiting until July 1, 2024, for full implementation. Defendants dispute Plaintiffs’ position and point to an explanation published on the Department‘s website five days before the publication in the Federal Register.23 More importantly, Plaintiffs have cited to no case, statute, or
4. Alleged Procedural Violations
Plaintiffs allege that the Final Rule was promulgated in violation of the
The Supreme Court has repeatedly stated that the text of the
Under the
E. Irreparable Harm
The Court‘s analysis of irreparable harm largely overlaps with its analysis of injury in fact for Plaintiffs’ standing. The Court finds that Plaintiff Missouri has adequately pled an injury in fact to grant it standing to sue. The question now is whether Plaintiffs face irreparable harm without the imposition of their requested injunctive relief. The Court believes that Plaintiffs have shown impending irreparable harm to MOHELA via impending loan forgiveness under the Final Rule.24
[T]he United States, as sovereign, is generally immune from suits seeking money damages. Dep‘t of Agric. Rural Dev. Rural Housing Serv. v. Kirtz, 601 U.S. 42, 48 (2024) (citation omitted). But
Here, Plaintiffs seek injunctive relief, not money damages. As mentioned above, Plaintiffs clarified at oral argument
The Eighth Circuit has found that delay is only significant if the harm has occurred and the parties cannot be returned to the status quo. Ng. v. Bd. of Regents of Univ. of. Neb., 64 F.4th 992, 998 (8th Cir. 2023) (alterations accepted and internal quotation marks omitted) (quoting McKinney ex rel. NLRB v. S. Bakeries, LLC, 786 F.3d 1119, 1125 (8th Cir. 2015)). [T]he reasonableness of delay is context dependent. Id.
Here, the Final Rule was published on July 10, 2023, and Plaintiffs filed this case nearly nine months later on April 9, 2024. Plaintiffs then waited another week before filing their Motions for Stay, TRO, or Preliminary Injunction. Plaintiffs explain that their delay was reasonable because had they brought the case earlier, it would have been dismissed as unripe. According to Plaintiffs, it was only when the government announced in February 2024 that it had forgiven loans under the early implementation of the Final Rule that they believed they had a basis to sue. The Court questions the bases of Plaintiffs’ arguments. Because of Plaintiffs’ delay, some alleged harms have already occurred, which also weighs against Plaintiffs’ position.
Even so, because Plaintiffs have explained that they seek only prospective relief, their delay does not undermine a finding that they are facing irreparable harm. What Plaintiffs ultimately seek is an injunction preventing the full implementation of the Final Rule on July 1, 2024, and any additional loan forgiveness under the SAVE plan. Plaintiffs’ alleged harms are entirely focused on the Final Rule‘s early loan forgiveness provisions, and this is what they seek to stop. The status quo is where we are now with borrowers already making payments under early implementation of the SAVE plan and expecting impending loan forgiveness. Though their delay in bringing this case diminishes Plaintiffs’ claims of imminent harm, Plaintiff Missouri has adequately alleged a threat of irreparable harm in the form of this early loan forgiveness.
F. The Public Interest
Plaintiffs argue that the public interest favors a stay or preliminary injunction because the costs of the Final Rule will fall on the shoulders of the American public and that it is fundamentally unfair to ask taxpayers to shoulder the burden of student loan debt owned by a relatively small portion of the population. Plaintiffs also argue that there is no public interest in allowing the Defendants to promulgate an allegedly unlawful rule.
Defendants counter that the public at large faces several impending harms if Plaintiffs are granted injunctive relief, including increased default and delinquency on student loans, adverse effects on credit scores, decreased liquidity, decreased enrollment in higher education, drags on economic growth, and increased reliance on federal welfare programs. According to Defendants, these harms would result if
The Court must, of course, also consider the practical impacts of enjoining the Final Rule‘s implementation because, again, there are millions of borrowers who have already switched to the SAVE plan. These borrowers have already made payments under the program, have already had those payments calculated under the early implementation of certain provisions of the Final Rule, and some borrowers anticipate imminent forgiveness. These borrowers and the public have an interest in ensuring consistency in loan repayment programs, and any preliminary injunction would harm their expectations of such consistency.
Taking these factors under consideration, the Court finds that there are serious public interest concerns favoring both parties’ arguments. While there are clear effects on taxpayers who have never received student loan benefits or have already repaid their loan balances in full, the benefits to the economy from the SAVE plan and increased educational opportunities it offers may outweigh these generalized public burdens. Similarly, while the public has an interest in consistency in student loan repayment programs and borrowers have a vested interest in knowing how the provisions of those repayment programs will affect their repayment timelines and monthly bills, the public at large has an interest in ensuring that those repayment programs are lawful. Given these competing, albeit speculative, public interests, the Court finds that the public interest factor does not particularly weigh in favor of either party.
G. Appropriate Relief
Plaintiffs request a stay in implementation of the Final Rule, or in the alternative, a TRO or preliminary injunction. Plaintiffs argue that eventual vacatur of the entire Final Rule is statutorily mandated under the
The question then is: what is the appropriate scope of a preliminary injunction, if any, at this time? Defendants argue that any relief should be limited to the redressing only the cognizable injuries of only those Plaintiffs who have established standing. In Defendants’ view, if the Court has found that only Missouri has standing, then any relief should be directed towards those harms that Missouri has been able to adequately connect to specific portions of the Final Rule.
In the Court‘s analysis, Plaintiffs have only alleged impending harm from the Final Rule‘s loan forgiveness provisions. At this time, Plaintiffs have not stated a cognizable injury related to the other provisions of the SAVE program, and they conceded at oral argument that they are primarily seeking relief only from the Final Rule‘s loan forgiveness provisions. Plaintiffs’ claims under the
This brings the Court to the issue of severability. Defendants contend that, under
Severability makes sense in the context of the
Here, the Secretary made clear his intention that each portion of the Final Rule is severable. [E]ach of the components of this final rule can operate in a manner that is independent and severable of each other. The analysis used to justify their inclusion are all different. And while they help accomplish similar goals, they can contribute to those goals on their own. 88 Fed. Reg. 43,828. The fact that Defendants now argue for the severability of the provisions of the Final Rule provide additional support for the proposition that the Department intended for portions of the Final Rule to be severable. Thus, the first element of the severability test is satisfied.
The Court also finds that, on this record, the Final Rule can function sensibly if the Secretary is enjoined from enforcing only the offending portions of the Final Rule. Here, the Court has found that the only argument for which Plaintiffs are likely to be successful on the merits is that the Secretary lacks the requisite congressional authority to forgive loans under the SAVE plan. Without the provisions allowing for loan forgiveness under the SAVE plan, the Final Rule still provides a vast majority of borrowers with a plan that is likely to lower their payments and limit interest accrual. At this stage of the litigation, Plaintiffs have not shown that these provisions harm them, and these pieces of the Final Rule still appear to function adequately even if participants in the SAVE plan cannot receive forgiveness under the plan.
Thus, the Court finds that it is appropriate to limit a preliminary injunction to only those provisions of the SAVE plan that permit loan forgiveness. As litigation progresses, the Court can determine whether that preliminary injunction should become permanent or if any other portions of the Final Rule require additional injunctive relief.
Conclusion
Accordingly,
IT IS HEREBY ORDERED that Plaintiffs’ Motion to Stay or, in the alternative, a Preliminary Injunction (ECF No. 7) is GRANTED in part and DENIED in part.
IT IS FURTHER ORDERED that Plaintiffs’ Motion to Stay or, in the alternative,
IT IS FURTHER ORDERED that Defendants are preliminarily enjoined from any further loan forgiveness for borrowers under the Final Rule‘s SAVE plan until such time as this Court can decide the case on the merits.
IT IS FURTHER ORDERED that Defendants’ Motion to Dismiss (ECF No. 21) is DENIED.
Dated this 24th day of June, 2024.
JOHN A. ROSS
UNITED STATES DISTRICT JUDGE