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The Biden administration faces a difficult legal path for jump-starting its student loan cancellation plan after a federal judge in Texas blocked it on Thursday.
As a result, the Department of Education has stopped accepting applications for the program after nearly 20 million people submitted their income statements in recent weeks. The administration immediately moved to appeal the decision and could file a motion seeking to stay the Texas decision for the time being. But even if that bid is successful, the White House is still facing a roadblock in a separate case pending another jurisdiction.
Louis lived in St. Louis Eighth US Circuit Court of Appeals has put the project on hold in a temporary order last month, in a case brought by Republican leaders in six states. That court will make another decision in the coming days.
On Wednesday, before canceling the debt reduction plan, President Biden identified the program as an important initiative that encourages young voters to turn for the middle places in the “early years. “
“We will keep the borrowers informed of our efforts to provide targeted aid,” Education Secretary Miguel Cardona said Friday. “Separately, we remain committed to taking further action to address the long-standing issues in the student loan forgiveness system and hold schools accountable for leaving students behind. mountains of debt, no skills and preparation to find a good job.”
Biden administration officials are carefully preparing for the possibility that a court would reject the plan, administration officials said, and have discussed legal and policy responses to such a move.
President Biden announced in August that his administration would forgive up to $20,000 in federal student loan debt for tens of millions of Americans. Independent estimates put the plan at a cost of more than $300 billion over 10 years. Photo: Evan Vucci/AP
In particular, it is unclear whether the administration will seek to extend the pandemic period for student loan payments. Interest has been frozen and payments suspended since March 2020, but the ministry plans to end the hiatus from January 1.
An online petition from the Student Debt Crisis Center, a debt support organization, had more than 20,000 signatures by late Friday morning, asking Mr.
Biden’s debt-forgiveness plan would forgive up to $10,000 for student-loan borrowers earning less than $125,000 a year, or $250,000 for married couples. Pell Grant recipients are eligible for an additional $10,000 in assistance.
U.S. District Judge Mark Pittman’s ruling called the Biden plan an “unlawful exercise of Congress’ constitutional authority” and said creditors could not face the consequences of the plan. through the legislative process. The lawsuit was sponsored by the Job Creators Network Foundation, a philanthropic group founded by Home Depot Inc.
co-founder Bernie Marcus.
The Department of Education said it was ready to move quickly to forgive the debts of the 16 million borrowers who have already processed their recovery requests, “provided the courts approve.”
Some lending advocates criticized the agency for not moving to automatically cancel the loans, instead of giving opponents of the program time to mount a legal challenge. Legal experts are divided on whether borrowers will find their loan balances repaid if they are foreclosed on as part of a program that is ruled illegal.
Several lawsuits have been filed in courts around the country challenging the student-loan program. As of Thursday, no one had succeeded in challenging the project’s legitimacy. The Republican-led case pending in the Eighth Circuit focused on the primary issue of whether GOP leaders had standing to challenge the debt settlement for their six states. A U.S. District Court judge in St. Louis who thought of that question first said no.
Separately, the Supreme Court has dismissed two long-running bids to block the agency’s plans.
The legal dispute comes as the administration works to overhaul the state’s student-finance system. This year, the Department of Education has issued several regulations and proposed regulations to make it easier for groups of borrowers to pay off some of their debt and have the balance forgiven.
Budget analysts have estimated that the more affordable income-based payment programs could cost nearly $500 billion and turn federal student loans into something more like purpose of the grant.
The Biden administration’s modest approach to reforming student-finance programs has resulted in tens of billions of dollars in debt being forgiven so far, including the settlement of millions of debt claims against nonprofits. -advantages like Corinthian Colleges.
The massive debt relief plan will come under increased scrutiny if Republicans capture the House of Representatives after the midterm elections are counted. GOP lawmakers have criticized congressional Democrats for not holding oversight hearings on the administration’s plan.
“This ambitious project should be completely scrapped,” said Rep. Virginia Foxx of North Carolina, the Republican leader of the Education and Labor Committee, said after Thursday’s decision.
Write to Gabriel T. Rubin at gabriel.rubin@wsj.com
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