The fight for student loan forgiveness

Published by Matthew Glover, Date: November 30, 2022
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In the Biden administration’s fight for student loan forgiveness, the U.S. Department of Education (ED) announced Nov. 22 they are extending the pause on student loan repayments.

Student loan repayments were paused early in the COVID-19 pandemic and have been in effect for almost three years.

This comes after two separate lawsuits have stalled the ED from forgiving student debt, which 26 million borrowers have already applied for, and 16 million borrowers have already been approved.

“We’re extending the payment pause because it would be deeply unfair to ask borrowers to pay a debt that they wouldn’t have to pay, were it not for the baseless lawsuits brought by Republican officials and special interests,” U.S. Secretary of Education Miguel Cardona said previously.

Repayments will resume 60 days after the ED is permitted to continue with loan forgiveness or the dispute it settled otherwise.

If the lawsuits are not resolved by June 30, 2023, then repayments will resume 60 days after that.

CNBC speculated that borrowers will have at most nine months before loan payments resume.

The Biden administration has asked the Supreme Court to review the lower court’s rulings.

The first court hurdle for the Biden administration came Oct. 21 when the 8th Circuit Court of Appeals ruled in favor of Republican states Arkansas, Iowa, Kansas, Missouri, Nebraska and South Carolina.

U.S. District Judge Henry Autrey in St. Louis sided with the states that argued Biden went around congressional authority with a plan that puts future tax revenues at risk and harms institutions that invest in student loans.

The ruling blocked the ED from following Biden’s executive order from forgiving debts and accepting new applications.

The Biden administration cannot implement debt cancellation until the appeals process is finished.

The second court hurdle came on Nov. 10 when U.S. District Judge Mark Pittman ruled Biden’s loan forgiveness plan unlawful citing that Biden did not follow procedures outlined in the Administrative Procedure Act that allow for public comment before announcement.

Pittman also supports the idea that the executive order usurped Congress’ power to make laws.

“The Court is not blind to the current political division in our country,” Pittman wrote. “But it is fundamental to the survival of our Republic that the separation of powers as outlined in our Constitution be preserved.”

The suit was filed by the Job Creators Network Foundation on behalf of two borrowers that don’t qualify or only qualify for some of the program’s benefits.

According to the lawsuit, they disagreed with the program’s eligibility criteria and were not given the opportunity to comment.

Plaintiff Alexander Taylor is eligible for only $10,000 of his student loans forgiven and argued that he should receive more.

Plaintiff Myra Brown has privately held loans that are not eligible for forgiveness but were eligible when the program was announced.

The Biden administration claimed that they were given authority by the Higher Education Relief Opportunities for Students Act of 2003, or the HEROES Act.

The Act says that the Secretary of Education may “waive or modify any statutory or regulatory provision applicable to the student financial assistance programs…as the Secretary deems necessary in connection with a war or other military operation or national emergency.”

Biden’s administration argued that the pandemic falls under the category of “national emergency,” and the U.S. Department of Justice argued the plan does not require notice or public comment.

Biden’s loan forgiveness plan would cancel $10,000 in student debt, or $20,000 if they received a Pell Grant, for borrowers making less than $125,000 or households making less than $250,000.

According to the Congressional Budget Office, the plan would eliminate about $430 billion of the $1.6 trillion in outstanding student debt.

However, according to PBS, the Congressional Budget Office also said the program will cost about $400 billion over the next three decades.

Many Republican politicians, lawyers and businesses are calling the plan an overstep and an “unfair government giveaway” that will negatively affect taxpayers who didn’t pursue higher education.

Rep. Kevin Brady (R-Texas), a ranking member of the House Ways and Means Committee argues that the plan will make rising costs worse rather than address the costs of higher education.

“The knowledge that the government can forgive debt with the stroke of a pen will lead many borrowers to take on more debt in the future, not less,” Rep. Tom Rice (R-S.C.) said previously, “and will create the expectation that debt will not have to be repaid in the future.”

Student loan debt exceeds both outstanding credit card and auto debt in the United States.

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