Bad News: Judge Vacates Biden’s Student Debt Forgiveness Plan

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Author: Wilson Ross

President Biden’s proposal to wipe off federal student loan obligations for tens of millions of students encountered a legal snag. Texas’s U.S. District Court judge ruled it unconstitutional and canceled the debt relief program.

The federal government promptly challenged the verdict weeks before student loan payments began in January. The application was already delayed while a federal appeals court in St. Louis heard a related complaint filed by six states.

The judge’s reasoning for rejecting debt forgiveness

President Donald Trump appointed Judge Mark T. Pittman, who declared that the program was a “complete usurpation” of congressional authority by the executive branch. The judge dismissed the Biden administration’s contention that, under the HEROES Act, Congress had previously granted the president the power to cancel student loan obligations in times of national emergency and that the COVID-19 outbreak constitutes such an urgent situation.

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“In this country, we are not ruled by an all-powerful executive with a pen and a phone,” Pittman wrote. “Instead, we are ruled by a Constitution that provides for three distinct and independent branches of government.” 

“We strongly disagree with the District Court’s ruling on our student debt relief program,” White House spokesperson Karine Jean-Pierre said.

The Appeal Process May Take Time

The White House stated that it had filed an appeal against the ruling. The 5th Circuit Court will hear the request of the Appellate, which is known for being the most conservative of the federal appeals courts. Following that, another appeal would take the matter to the United States Supreme Court, which has already refused to entertain objections to Biden’s rescue proposal. Borrowers will be waiting for a solution on debt relief for several weeks.

For now, student loan payments will start in January. On November 3, President Biden revealed that about 26 million Americans had submitted to the Education Department the needed documentation to apply for forgiveness. The government was already on schedule to approve forgiveness for 16 million borrowers. The agency cannot revoke the loans unless the courts favor it.

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The Lawsuits seeking to halt Biden’s debt forgiveness proposal

A federal court stopped Biden’s relief plan. The court could hear a second challenge filed by six states – Nebraska, Missouri, Arkansas, Iowa, Kansas, and South Carolina.

The states contended that allowing debtors to combine these loans and qualify for debt cancellation would affect many state-based loan servicers who handle old, privately owned government loans.

How did everything start?

During the United States presidential election, Biden promised to forgive at least $10,000 in student debt per individual. In August, the president presented his loan forgiveness proposal, offering to erase up to $10,000 in loans for individuals who did not obtain Pell grants and $20,000 for those who did. 

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In September, twenty-two Republican governors protested Biden, questioning his authority to proceed with the forgiveness program. According to the Congressional Budget Office, the project will cost $400 billion over the next 30 years.

Bottom Line

“This attempted illegal student loan bailout would have done nothing to address the root cause of unaffordable tuition: greedy and bloated colleges that raise tuition far more than inflation year after year while sitting on $700 billion in endowments,” stated Elaine Parker. “We hope the court’s decision today will lay the groundwork for real solutions to the student loan crisis.”

About 26 million Americans have registered for one-time student loan debt forgiveness, with 16 million applications accepted. The initiative would forgive $10,000 in student loan debt for persons earning less than $125,000 per year or for household incomes less than $250,000 per year. Pell Grant recipients would have an additional $10,000 in debt canceled.

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