Cato Institute Sues to STOP Biden’s Student Loan Giveaway

President Joe Biden, joined by Education Secretary Miguel Cardona, delivers remarks about student loan forgiveness, Wednesday, August 24, 2022, in the Roosevelt Room at the White House. (Official White House Photo by Erin Scott)

The Cato Institute, which I have supported for many years, has sued the Biden administration for its unlawful student loan giveaway. Below you can read a letter from Cato’s President and CEO, Peter N. Goettler, to Cato supporters, outlining the lawsuit. He writes:

Dear Cato Club and Trenchard & Gordon Society Sponsors,

Today the Cato Institute filed suit in federal court in Kansas challenging the legality of the Biden Administration’s unconstitutional mass cancellation of student loan debt. The administration’s move is a massive overreach of executive power. It will also do nothing to rein in the runaway cost of higher education—a problem fueled by federal education policy. In fact, it likely makes the problem worse.

But this action is more than illegal. It’s immoral. Forcing all American taxpayers—including those who forego higher education, lack the means to afford it, or repay their own loans—to bail out other people’s choices is just plain wrong.

Cato is represented in this case by the New Civil Liberties Alliance, an organization with a well-earned reputation for protecting civil liberties from unlawful administrative power. At Cato, the project will be quarterbacked by Clark Neily, senior vice president of legal studies, and general counsel Evan Bolick.

The federal government has no constitutional authority to operate student loan programs in the first place. And the president and Department of Education have no legal basis on which to cancel them unilaterally. The administration claims such power—quite implausibly—on the basis of the HEROES Act: a law passed by Congress in 2003 to help deployed members of the military by forgiving some of their student loan debt. If you fail to see the connection between the HEROES Act and cancelling student debt en masse, welcome to the club.

Neal McCluskey, director of our Center for Educational Freedom, has brought much attention to this issue with his “top five reasons federal student debt cancellation is a bad idea.” Neal testified before the Senate last May on the unconstitutionality and negative impacts of federal student loan programs, and recently appeared on the Dr. Phil Show to argue against the Biden Administration’s plan. And Brian Kilmeade gushed that Cato is “my favorite institute” while highlighting Neal’s work on the Fox News show Gutfeld!.

Of course, the issues at stake transcend the student loan issue. When congress doesn’t act, policy doesn’t get implemented. That’s a feature—not a bug—of our system. We’ve all watched as presidents of both parties have exercised power they do not possess, simply because congress didn’t do as they wished. We must pursue any means at our disposal to bring this dangerous practice to a halt.

We look forward to keeping you apprised of the suit’s progress. In the meantime you can find more details on the suit in our official press release below.

Thanks so much for the support and partnership that makes important projects like this possible.

With best regards,

Peter N. Goettler
President and CEO
Cato Institute
1000 Massachusetts Ave. NW
Washington, DC 20001

Cato Institute Sues Administration on Student Loan Debt Cancellation

Washington, D.C.—The Cato Institute filed suit in federal court in Kansas today, challenging the legality of the Biden Administration’s program of mass cancellation of student loan debt.

“Forcing taxpayers to pick up the tab for other people’s college loans is bad policy,” said Cato President and CEO Peter Goettler, “but in the case of President Biden’s order, it is also illegal, because neither President Biden nor the Department of Education has the power to cancel student loans without congressional authorization.”

Cato is represented by the New Civil Liberties Alliance, an organization dedicated to protecting civil liberties from unlawful administrative power.

A key issue in this case, as in other challenges to President Biden’s debt-cancellation scheme, is the question of standing to sue. Cato’s standing is based on the congressionally enacted Public Service Loan Forgiveness program, which was designed to help 501(c)(3) organizations like Cato, the ACLU, the American Red Cross, and others attract employees by providing debt relief to those who choose to work for non-profits.

By providing across-the-board loan-forgiveness, the Biden scheme completely—and unlawfully—undermines Congress’s goal in enacting the Public Service Loan Forgiveness program.

“The Constitution does not give the federal government the power to fund, guarantee, or cancel student loans. But if it’s going to wield illegitimate power, it should at least do so without additional, maybe even more fundamental, violence to the rule of law,” said Goettler. “Allowing the executive branch to undermine the explicit policy choices of the legislative branch, as President Biden’s debt-cancellation scheme plainly does, is completely beyond the pale.”

Several current and former Cato employees have participated in the Public Service Loan Forgiveness program.

The HEROES Act, which the Administration claims provides the authority for the mass program, was passed in 2003 in an effort to help deployed members of the military by forgiving some of their student loan debt.

“The Administration’s claim that its plan is legal under the HEROES Act is totally implausible and represents yet another illegitimate attempt by executive-branch officials to usurp Congress’s sole constitutional prerogative to make policy,” said Clark Neily, Senior Vice President for Legal Studies at Cato.

Sheng Li, Russ Ryan, and Mark Chenoweth will be the NCLA attorneys on the case.

“Ideally, federal student loans would be phased out altogether,” said Neal McCluskey, director of Cato’s Center for Educational Freedom. “They fuel rampant college price inflation, are a major burden on taxpayers, and do not have constitutional warrant to exist. Cancelling them by executive fiat compounds all of these huge problems.”

About the Cato Institute: 
The Cato Institute is a libertarian think tank dedicated to the principles of individual liberty, limited government, free markets, and peace. Our vision is to create free, open, and civil societies founded on libertarian principles. Cato does not undertake lobbying efforts, back political candidates, or engage in political activities. It does not associate with any political organization or party. In order to maintain its independence, Cato does not accept government funding, but receives approximately 80 percent of its operating budget through tax-deductible contributions from individuals, with the remainder of its support coming from foundations, corporations, and the sale of books and publications.