Reverse Biden Administration’s Illegal Student Loan Giveaway

Authored by Abhishek Kambli & Erin Gaide via RealClearPolicy,

Even in the waning days of the Biden administration, they are circumventing Congress and the rule of law to illegally forgive billions of dollars in student loan debt through the collusive class action settlement of Sweet v. Cardona. As one of his first acts on January 20, President-elect Trump should shut down this travesty.

The controversy stems from a class action lawsuit against the federal Department of Education initiated by borrowers in 2019. The Trump administration negotiated a legal settlement, but it was rejected by the U.S. District Court for the Northern District of California in 2020. Once the Biden administration took office, the parties negotiated a fresh settlement in what became Sweet v. Cardona. The 2022 settlement included something that had never been on the table: erasing $6 billion in student loan debt for roughly 200,000 borrowers.

The settlement has no statutory or regulatory basis. In reaching the settlement, Biden’s Education Secretary, Miguel Cardona, disregarded his duty to faithfully follow his statutory and regulatory responsibilities and, in doing so, he infringed on Congress’ power of the purse. Furthermore, by approving a settlement that, by design, undermines the Constitution’s separation of powers protections, the district court also abused its discretion.

Also troubling are the procedural defects. The revised settlement fails to meet basic class certification requirements, creating three subclasses with divergent claims and relief. One blatant example of the settlement’s procedural flaws is its violation of Rule 23 of the Federal Rules of Civil Procedure, which requires a unified class. The district court should have rejected this settlement outright, but it did not. But by approving this collusive settlement, the court allowed the Biden administration’s unlawful actions to stand.

And there were those who properly objected to the settlement as well. Four of the schools that were maligned in the case were initially allowed to intervene to object.  But though the district court found the schools had a legal interest in the case, it ignored their valid concerns and approved the settlement.

The settlement was temporarily put on pause pending an appeal filed by the schools in 2023. Unfortunately, on November 5 of this year, the Ninth Circuit ruled 2-1 to uphold the Biden administration’s blatant abuse of executive power. The ruling thereby affirmed the district court’s approval of the underlying revised settlement that was struck between the Biden administration’s Department of Education and a plaintiff class of student borrowers seeking relief from federal student loan payments under the borrower-defense statute, 20 U.S.C. 1087e(h), and accompanying regulations.  It also disregarded the schools’ objection, creating a novel test to keep them out of the case and avoid reaching the tough questions as to the legality of the settlement.  

Judge Daniel Collins recognized these issues in his dissenting opinion. Collins rightly noted the settlement’s lack of legal basis and failure to meet class certification standards. His dissent also provides a roadmap for further legal challenges.

The settlement represents a dangerous erosion of the separation of powers. The Biden administration and Education Secretary Cardona have failed to faithfully execute the law, instead using clearly flawed settlements to achieve political aims. By disguising what amounts to legislation as a judicial settlement, the Biden administration’s class action settlement creates a backdoor for broader student debt relief, which has long been a major political goal of the Biden administration.  If allowed to stand, this precedent will open the door to further abuses.

The incoming Trump administration must move swiftly to challenge and overturn this unconstitutional settlement. The Department of Education, under Trump’s watch, should admit error and work to correct this overreach. Congress should also investigate the Education Department’s misuse of settlement authority to circumvent the legislative process.

 Our system of government depends on each branch respecting constitutional limits. The Sweet v. Cardona settlement flagrantly violates those limits. It must not be allowed to stand. And it won’t, if the incoming Trump administration makes it a priority.

Abhishek Kambli is a Deputy Attorney General at the Office of the Kansas Attorney General where he leads the Special Litigation Division. Erin Gaide is an Assistant Attorney General in the Special Litigation Division at the Office of the Kansas Attorney General.