Tammy Cowart: A journey through the maze of student loan forgiveness

Dr. Tammy Cowart

What if the debts incurred from your quest for higher education could be wiped away? Unearth the complexities of the Student Loan Forgiveness Plan with Dr. Tammy Cowart, UT Tyler Associate Professor of Accounting, Finance, and Business Law. Cowart navigates the recent Supreme Court ruling against President Biden’s plan, explores the Biden administration’s fresh strategy involving the Higher Education Act of 1965 and tackles questions about the legal, financial and societal impacts of loan forgiveness.

Cowart also investigates the potential of the Department of Education to expand the criteria for loan forgiveness and the possible court challenges that option may face. She explores what this might indicate for higher education and the prospects of students grappling with loan debts.

MIKE LANDESS: For UT Tyler Radio, I’m Mike Landess. At the end of June, the U.S. Supreme Court struck down President Joe Biden’s Student Loan Forgiveness Plan by a 6-3 vote. It didn’t take long for the White House to launch a new effort for student loan debt relief that involved the Higher Education Act of 1965. Here to discuss student loan forgiveness and how it would work and what effect it might have, is UT Tyler Associate Professor of Accounting, Finance and Business Law, Dr. Tammy Cowart. Welcome.

TAMMY COWART: Thanks, Mike.

LANDESS: You’ve got an update.

COWART: I do have an update, actually. So I, in fact, just this morning, was reading a news story that the Biden administration has actually announced, after the Supreme Court struck down its Student Loan Forgiveness Program, which was under something called the HEROES Act 2003, which was based on when there is war or a national emergency. So it was passed in the wake of 9-11, and our efforts to combat terrorism under 9-11. The Biden administration had enacted the Student Loan Forgiveness Program under that HEROES Act because of the COVID pandemic. The Supreme Court said of course in their ruling, “Nope, that’s, you went too far in doing that-”

LANDESS: Overstepped…

COWART: Overstepped. So the Biden administration has now said, OK, they’re going to go through really the normal rule-making process. This was announced, I think, yesterday. They’re going to go through the normal rule-making process to expand the basis under which a student can apply, or form a borrower can apply, for student loan forgiveness. Some of those are already in place for things like death of the borrower, or bankruptcy of the borrower, if there was fraud in the loan process. We do have a couple of cases in the past of for-profit colleges and universities, so there is a precedent for that. So now the Department of Education will go through the process of perhaps expanding those rules.

LANDESS: The Supreme Court rules that the president overstepped his powers with the first Student Loan Forgiveness Plan. Can a new plan, can this new plan, do you think, withstand the court challenge?

COWART: I actually do. If they’re going through kind of this normal rule-making process, there is a provision under the Higher Education Act, which you mentioned in the opening, that says that the Department of Education has the power to basically compromise and settle any debts. So that would explicitly include its ability to decide on what basis, according to its rules, it’s going to forgive student loan debt. The Supreme Court in this case said that was just handed down, said, “You can’t do that in just one fell swoop. You can’t do $430 billion worth of loan forgiveness for just everybody, or a huge swath of people.” But they probably can do it on a much more limited, case-by-case basis. And to be honest, Mike, that’s probably so much within the purview of the Department of Education that it probably is not subject to judicial review, at least from some of the legal scholars that I’ve read, that I’m reading, probably not reviewable by the Court. So in my view, too, that’s the proper way to handle this.

LANDESS: What do you think this means for higher education? Will it bring some in who figure they may be able to get out of paying for their student loans eventually?

COWART: You know, I think, given kind of what the Court’s opinion was-no, I really don’t. I think that this probably allows for some expansion of some of the conditions under which a student could request loan forgiveness. And I’ll give one example. The current rules allow a borrower to request loan forgiveness for total disability. So if you get complete disability, it doesn’t allow for forgiveness for partial disability. So one prediction is that the Department of Education will ask for a rule for partial disability, may ask for a rule for poverty, however that is defined. So I think it will be small. I think it will be based on limited circumstances. We’ll have to see what happens after the rule-making process plays out. But I think if it ends up being that — there are limited bases on which a borrower can apply for forgiveness. I don’t think that gets struck down by the court, and I think that’s less likely to be abused or to be taken out of context by borrowers as well.

LANDESS: Perhaps the elephant in the room is the question of what value that piece of paper really has for some people, that sheepskin. If they owe a fortune in student loans, but they can’t make a living that allows any kind of life while they’re trying to pay it back, that’s got to be a discouragement.

COWART: I think it certainly is, and I know in our university circles, we talk from time to time about what are the job opportunities in different fields, and maybe that does get into things like a public service. What if you’re working in a public service, medical field in a low-income area, where we’re working for a governmental entity, or you do work for the Peace Corps or whatever it may be, that there may be some opportunities depending upon what you do with that piece of sheepskin. I think we want to encourage people to be productive and to give back to their community.

LANDESS: For decades, the White House has, at times, gone around a sluggish Congress to get one agenda or another into play, and it sounds like the Supremes are pulling back the reins.

COWART: I think this Court that we have right now has begun to really, in a couple of decisions, beginning last year with the decision involving the EPA, has begun to really telegraph that they’re going to rein in the administrative agencies. So, beginning with the EPA, this case with the Department of Education. There’s another case upcoming that will involve the Securities Exchange Commission, the SEC, that there’s a lot of talk about whether the Court will do that. There’s some talk about a case involving the Federal Trade Commission as well. So the Court’s really sort of, I think if you read the opinion that came out about the student loan program, the justices are beginning to lay some groundwork in saying Congress authorizes an administrative agency to do this and they can’t. That doesn’t mean that they can just go and add to whatever their authorization is. They’ve got to stay within those boundaries and parameters.

LANDESS: Our guest has been UT Tyler Associate Professor of Accounting, Finance and Business Law, Dr. Tammy Cowart. To hear this conversation again or to share it, go to KVUT.org. I’m Mike Landess for UT Tyler Radio.

JEFF JOHNSON: Thank you for listening to the UT Tyler Radio Podcast on 99.7 KVUT. If you’d like to hear this episode again, or if you missed a previous episode, find the UT Tyler Radio Podcast on your favorite podcast platform or click “podcasts” on our website, KVUT.org.

(Transcripts are automatically generated and may contain phonetic spellings and other spelling and punctuation errors. Grammar errors contained in the original recording are not typically corrected.)