Student loan forgiveness: Judge rules Wednesday if Biden’s plan can move forward


Washington
CNN

A US district judge could decide on Wednesday whether President Joe Biden’s student loan forgiveness program should be temporarily blocked from taking effect.

Six Republican-led states filed a lawsuit last month challenging the legality of the policy and asking the court to grant a preliminary injunction that could put student loan cancellations on hold until the judge issues a final ruling in the case.

The Department of Education is expected to open an application for student loan forgiveness this month. That The Biden administration, which released a preview of the filing Tuesday, aims to provide debt relief worth up to $20,000 to millions of borrowers before federal student loan payments resume in January after a nearly three-year pandemic-related pause.

The motion for a preliminary injunction will be heard by District Judge Henry Edward Autrey, who was appointed by former President George W. Bush.

The lawsuit was filed in federal court in Missouri by attorneys general from Missouri, Arkansas, Kansas, Nebraska and South Carolina, as well as legal representatives from Iowa.

The states argue that the Biden administration does not have the legal authority to grant broad student loan forgiveness. The states also claim the policy would hurt them financially, as well as the revenue of a Missouri-based student loan servicer known as MOHELA.

The loan forgiveness policy creates an incentive for borrowers to consolidate federal family education loans owned by MOHELA into direct loans owned by the government and “deprives them (MOHELA) of the ongoing revenue it earns from servicing those loans,” according to the lawsuit.

On the same day the lawsuit was filed, the Department of Education changed its policy so that borrowers whose federal student loans are guaranteed by the government but held by private lenders — including those made by the former Federal Family Education Loan program — were no longer eligible for debt consolidation.

In a court filing, government lawyers argue that Congress gave the Secretary of Education the power to release debt in a 2003 law known as the HEROES Act. They also argue that the plaintiffs lack standing to seek an injunction.

To win a preliminary injunction, states are required to demonstrate that the student loan forgiveness policy will cause them irreparable harm if the injunction is not implemented.

The last-minute policy change to exclude the FFEL borrowers could weaken the states’ lawsuit.

“I think the government’s move to cut off the path to debt relief for people whose student loans are not owned by the federal government undermines much of the standing of this case,” said Abby Shafroth, staff attorney at the National Consumer Law Center.

The losing party could immediately appeal the judge’s Wednesday ruling on the ban, sending the case to the 8th Circuit Court of Appeals, where it is likely to face a panel of conservative justices.

The Biden administration is also facing several other lawsuits over the student loan forgiveness policy. Two of the lawsuits have already been dismissed. An ongoing lawsuit was filed by Arizona Attorney General Mark Brnovich, and another was filed this week by a conservative group, the Job Creators Network Foundation, on behalf of two Texas student loan borrowers who do not qualify for the full $20,000 in debt relief according to Biden’s program.

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