Student loan forgiveness: Federal court strikes down Biden’s program


Student loan borrowers are now waiting indefinitely to see if they will get debt relief under President Joe Biden’s student loan forgiveness program after a federal judge in Texas struck down the program Thursday and declared it illegal.

The Justice Department immediately appealed to the U.S. District Court of Appeals. But that case will have to run before the Biden administration can cancel any federal student loan debt under the program.

While the Biden administration has faced several legal challenges to the student loan forgiveness program since it was announced in August, Thursday’s ruling is the most significant setback yet — prompting the Education Department to stop accepting applications for debt relief.

Biden’s plan was already on hold because of a separate legal challenge, but the administration continued to accept applications, having received 26 million to date.

Under program rules, eligible low- and moderate-income borrowers can receive up to $10,000 in federal student loan forgiveness and up to $20,000 in cancellation if they also received a Pell Grant while enrolled in college.

The legal path forward is murky, but it may be many months before the issue is resolved.

The Texas decision “increases the likelihood that the issue will eventually reach the Supreme Court, although it’s still too early to say,” said Avi Shaprot, a staff attorney at the National Consumer Law Center.

Borrowers will have to wait until the government’s appeal to the 5th Circuit Court comes to fruition. Although it can be difficult to keep track of all the various legal challenges, borrowers can sign up for updates from the Department of Education and check the Federal Student Aid website for more information.

It may take months before the court makes a final ruling. If it overturns the Texas lower court’s ruling, then the Biden administration can begin eliminating student debt.

But the Justice Department can also request an emergency stay under the Texas judge’s order. If accepted—and if another appeals court ends the program’s temporary stay in a separate pending case—then the administration will be free to cancel the debt before a final ruling is issued by the Fifth Circuit.

Also Read :  How Democrats won America’s culture wars

Initially, the Biden administration said it would begin granting student loan forgiveness before payments are set to resume in January after a years-long pandemic hiatus.

But Thursday’s ruling in Texas puts that timeline at risk.

“For the 26 million borrowers who have already provided the Ministry of Education with the necessary information to be considered for debt relief – of which 16 million have already been approved for relief – the ministry will keep their information so that it can quickly process their relief once. We are winning in court,” said the White House press secretary , Karin Jean-Pierre, in a statement Thursday.

“We strongly disagree with the district court’s ruling regarding our student debt relief program,” she said.

The Biden administration argued that Congress gave the Secretary of Education the authority to generally discharge student loan debt in a 2003 law known as the HEROES Act, passed in the wake of the 9/11 terrorist attacks.

The government’s lawyers argue that the law allows the secretary to discharge duties in the event of a national emergency, including the Covid-19 pandemic.

But the Texas federal judge found that the law did not provide the executive branch with clear congressional authorization to create the student loan forgiveness program.

“The plan is therefore an unconstitutional exercise of Congress’s legislative authority and must be vacated,” wrote Judge Mark Pittman, appointed by then-President Donald Trump.

“In this country, we are not ruled by an all-powerful manager with a pen and a phone,” he continued.

The Texas lawsuit was filed by a conservative group, the Job Creators Network, in October on behalf of two borrowers who did not receive debt relief.

One plaintiff was not eligible for the student loan forgiveness program because her loans are not held by the federal government and the other plaintiff was only eligible for $10,000 in debt relief because he did not receive a Pell Grant.

Also Read :  Live updates: Paul Pelosi, Nancy Pelosi's husband, attacked at couple's home

They argued that they could not express their disapproval of the plan’s rules because the administration had not submitted it to a formal notice-and-comment process under the Administrative Procedure Act.

“This ruling protects the rule of law that requires all Americans to have their voices heard by their federal government,” Elaine Parker, president of the Job Creators Network, said in a statement Thursday.

The advocacy group was founded by Bernie Marcus, a major Trump donor and former Home Depot CEO.

Beyond the Texas case, the Biden administration faces several other lawsuits over the student loan forgiveness program.

A lawsuit filed by six Republican-led states is pending in the 8th U.S. Circuit Court of Appeals. On October 21, the appeals court placed an administrative hold on the program, barring the administration from canceling any debt.

The states argued that the Biden administration lacked the legal authority to grant broad student loan forgiveness, as well as that the plan would hurt them financially for a variety of reasons. The lower court dismissed the case and ruled that the states did not have legal standing to sue. The states immediately appealed to the 8th Circuit.

The Biden administration has had few court victories so far, as prosecutors have struggled to show they have standing to sue.

One lawsuit, filed by a group of Wisconsin taxpayers, was also dismissed by a federal judge at the trial level, ruling that the group lacked standing to bring the challenge. The prosecutors claimed that the loan forgiveness program, which is estimated to cost about 400 billion dollars, will harm the taxpayers and the US Treasury. Supreme Court Justice Amy Cooney Barrett also denied the taxpayer group’s request for the Supreme Court to intervene.

A separate case, which was also dismissed by Barrett and dismissed by a lower court, was filed by a borrower who argued that the upcoming loan forgiveness would leave him with a larger state tax bill. Some states may tax debt forgiveness, but it is not taxable at the federal level.

Also Read :  US rolls out tool for Afghans to reunify with family members

The Biden administration also faces pending lawsuits from Arizona’s GOP Attorney General Mark Barnovich and the Cato Institute, a libertarian think tank. Both lawsuits claim that the president does not have the legal authority to cancel student loan obligations in general.

Barnovich argues that the state has standing to sue because the student loan forgiveness program could reduce Arizona’s tax revenue. State code does not consider loan forgiveness taxable income.

The Arizona complaint also claims that the amnesty policy will harm the Attorney General’s Office’s ability to recruit. Currently, its employees may be eligible for the federal public service loan forgiveness program, but some potential job applicants may not see it as an advantage if their student loan debt is already canceled, the lawsuit alleges.

The Cato Institute makes a similar argument about the amnesty program making it difficult for it to recruit.

If Biden’s plan is allowed to move forward, single borrowers who earned less than $125,000 in 2020 or 2021 and married couples or heads of households who earned less than $250,000 annually in those years could see up to $10,000 of their federal student loan debt written off.

If an eligible borrower also received a federal Pell Grant while enrolled in college, the person is eligible for debt forgiveness of up to $20,000.

There are a variety of federal student loans and not all are eligible for relief. Federal Direct Loans, including subsidized loans, unsubsidized loans, Parent Plus Loans and Graduate Plus Loans, are eligible.

But federal student loans guaranteed by the government but held by private lenders are not eligible unless the borrower applied to consolidate those loans into a direct loan before September 29.

This title and article have been updated with additional information.


Leave a Reply

Your email address will not be published.

Related Articles

Back to top button