In August, the Biden Administration announced its plan for student loan forgiveness outside of the recently expanded Public Service Loan Forgiveness program. In the debate over the this new program’s lawfulness, a common argument is that the program’s critics have been too hasty. They should wait, it is argued, for the Department of Education’s final action on the program before assessing the agency’s reasons and legal authority for adopting the plan. The implicit assumption seems to be that the Department will issue a rule establishing the program. But does it have to issue a rule? If so, how and when? This post will analyze these questions, focusing on them as a matter of administrative procedure and leaving aside the substantive details of the program and the Department of Education’s legal authority for creating and implementing it.

To start: how do we know what we know about the loan forgiveness program? When the Biden Administration announced the program on August 24, it did not issue an Executive Order (as is sometimes erroneously said), but instead posted a “Fact Sheet” on the White House’s website. That same day, the Department of Education issued a press release containing basically the same announcement. The day before, the Department of Justice’s Office of Legal Counsel made available its opinion on the scope of the Department of Education’s statutory authority to forgive student loans. At the same time, the Department of Education published a notice in the Federal Register. The notice officially rescinded a January 2021 memorandum opinion, signed by then-Principal Deputy General Counsel Reed Rubinstein, concluding that the Department lacks the statutory authority to forgive students loans on a categorical basis. Published as an appendix to the August 2022 notice is a new opinion, signed by the Department’s current General Counsel, Lisa Brown, coming to the opposite conclusion. Since the program’s announcement in August, the Department of Education has posted additional online announcements providing details about the program.

As of this writing, the Department of Education has not published a proposed or final rule establishing and explaining the student loan forgiveness program. Does it have to?

First, as a matter of the general principles of administrative law, does the Department have to issue a rule? The short answer, I think, is yes. The Department could forgive loans incrementally, through case-by-case adjudication of individual loan obligations. It seems clear, however, that the Department has rejected this option in favor of announcing a general, prospective policy according to which the loan obligations of all similarly situated borrowers will be identically adjudicated. Under the Administrative Procedure Act (APA), this is a rule. Moreover, it appears to be a legislative rule presumptively subject to the APA’s notice-and-comment requirements. Why? Because it seems to be designed and intended to bind the Department’s future adjudications of individual borrower obligations. In similar circumstances, the DC Circuit has held that such a policy is a legislative rule that must be issued in accordance with the APA’s notice-and-comment procedures.

But what about § 553(a)(2) of the APA, which exempts “matter relating to . . . public property, loans, grants, benefits, or contracts” from notice-and-comment requirements? That doesn’t apply here because § 492 of the Higher Education Act (HEA), codified at 20 U.S.C. § 1098a, requires the Department of Education to use negotiated rulemaking to develop regulations. In addition, 20 U.S.C. § 1232(d) sharply and expressly limits the availability of § 553(a)(2)’s exemption. Thus, for example, the current regulation setting forth the borrower’s obligation to repay, which must be waived to effectuate loan forgiveness, was promulgated through a negotiated rulemaking process that included public comment on a proposed rule.

Second, is there an agency-specific statute that alters this analysis? Yes. The DOJ and Department of Education’s legal memoranda have identified The HEROES Act, 20 U.S.C. § 1098bb, as the statutory basis for the program. I’ll confine my analysis to this statute because I haven’t seen another statute identified as a possible legal basis for the program. § 1098bb(b)(1) expressly exempts the Department from the APA’s notice-and-comment requirements:

In General. Notwithstanding section 1232 of this title and section 553 of title 5, the Secretary shall, by notice in the Federal Register, publish the waivers or modifications of statutory and regulatory provisions the Secretary deems necessary to achieve the purposes of this section.

In addition, § 1098bb(b)(3) provides that the Department can proceed categorically rather than by individual adjudications:

Case-by-Case Basis. The Secretary is not required to exercise the waiver or modification authority under this section on a case-by-case basis.

The upshot (procedurally) is that the Department is not required to publish a proposed rule and conduct a notice-and-comment rulemaking to establish this program under § 1098bb. It is, however, required to publish a “notice” of the program in the Federal Register. I don’t think the August 23 Federal Register notice (discussed above) satisfies this requirement. Indeed, it doesn’t purport to satisfy § 1098bb(b)(1). The notice revises the Department’s interpretation of The HEROES Act, but does not describe the loan forgiveness program and only addresses how “this authority could be used to effectuate a program of categorical debt cancellation.” It does not seem to actually invoke or exercise the authority granted by The HEROES Act.

Third, will the Department publish a notice or rule governing the loan forgiveness program, explaining the agency’s policy choice, and articulating the legal rationale for the program? I have no inside knowledge, so I can only speculate! When the Department has previously invoked its HEROES Act authority, it has usually satisfied the publication requirement of § 1098bb(b)(1) by publishing a “rule” in the Federal Register. But not always. The student loan payment “pauses” that have been in place during the COVID-19 pandemic were based on The HEROES Act but were not noticed (by rule or otherwise) in the Federal Register. (This history is chronicled in the OLC opinion.) The Biden Administration’s announcement of the loan forgiveness program included an extension of the payment pause from August 31, 2022 to December 31, 2022. That pause is already underway, of course, but no notice of it has been published in the Federal Register.

It seems clear that the Department’s implementation of the student loan forgiveness program is already well underway. The Department has announced that around 8 million borrowers may be granted relief without applying, while others will need to apply using a form that will be available in early October. Borrowers are also advised to apply by mid-November, to ensure that relief comes through before payments resume in January 2023. This does not seem to be a planned or contemplated program, but a program already in progress.

Because the Department has not yet published a notice of or rule governing the program (the final agency action everyone seems to be waiting for), the program remains malleable even as its implementation is already underway. Indeed, the Department’s guidance to borrowers changed just this week (compare this snapshot from Monday, September 26 to this snapshot from today). “Nearly 8 million borrowers may be eligible to receive relief automatically,” changed to “[n]early 8 million borrowers may be eligible to receive relief without applying–unless they choose to opt out.” This change presumably was made in response to the lawsuit filed earlier this week challenging the program’s legality, to defeat the plaintiff’s standing (and prevent others from having such standing).

This raises a troubling possibility: that the Department of Education has not published a notice or rule establishing the loan forgiveness program (as § 1098bb requires) precisely because the absence of a final agency action makes a legal challenge more difficult. Maybe a notice or rule will be forthcoming–perhaps when the first borrowers receive the promised loan forgiveness. If so, millions of borrowers might be granted relief before a court could consider a challenge to the program’s legality. And perhaps that, too, is the goal.

Note: This post has been updated to address the application of § 553(a)(2).