Student Loan Debt Relief Still Delayed by Legal Challenges: Will It Ever Happen?


Shortly after President Joe Biden announcement his project of pay off $10,000 to $20,000 in student debt for borrowers earning less than $125,000 a year, opponents of the program sued to stop it. Six major lawsuits have been filed against the one-time federal debt relief for student loans program in courts across the country so far.

On Friday, October 21, the Eighth Circuit Court of Appeals threw a spanner in student debt relief plan by issuing an “administrative stay” which essentially functions as a temporary injunction, suspending student loan forgiveness payments indefinitely until the court decides on the injunction petition. Borrowers who were previously told debt cancellation could begin Oct. 23 are now in limbo.

Learn about the White House’s student loan debt relief plan’s biggest legal challenges and how they could affect the timing of forgiveness for eligible borrowers. To learn more about student loan forgiveness, learn how debt forgiveness can change your credit score and whether you will have to pay state taxes on your discharged loans.

What are the legal arguments against the White House student loan debt relief plan?

Legal arguments against student debt forgiveness so far fall into five main categories: claims for harm to borrowers; allegations of harm to states and state agencies; claims for damages due to the devaluation of Cancellation of civil service loans; claims that the program violates the Administrative Procedure Law; and asserts that the program is unconstitutional. Many lawsuits include multiple claims for damages.

One of the biggest challenges for those who oppose student debt relief in court has been finding plaintiffs with legal status who would suffer direct harm from the student loan forgiveness program. This was first demonstrated by Garrison v. US Department of Education: Borrower Frank Garrison claimed he was wronged because his automatic student loan debt cancellation would result in a tax burden for the State of Indiana. Garrison’s legal status appeared to be removed when the Department of Education announced that borrowers could opt out of debt forgiveness. The case is still on appeal.

What are the biggest legal challenges to the student debt relief plan?

The biggest lawsuit opposing one-time student debt relief right now is Nebraska vs. Bidenwhere six Republican-led states (Arkansas, Iowa, Kansas, Missouri, Nebraska and South Carolina) say the White House plan will hurt their tax revenues and state-based lending agencies.

The state-based lawsuit is the first legal challenge to date that has materially impacted the debt cancellation plan. Just one day after a judge in the Eastern District of Missouri dismissed the case for lack of standing, a federal circuit court suspended the program indefinitely pending its decision on the appeal.

Other lawsuits against student debt relief have yet to have much luck stopping the plan.

As mentioned above, Garrison c. US Department of Education — which claimed the plaintiff would be harmed by state taxes on automatic debt relief — was dismissed by the District Court for the Southern District of Indiana. The decision has been appealed, but the case seems unlikely to succeed.

Likewise, in Brown County Taxpayers Association v Biden, a Wisconsin court has dismissed a lawsuit brought by taxpayers who claimed they should pay more taxes because of the student debt relief plan. The court ruled that there is no “taxpayer standing”.

The taxpayers group also claims that the debt cancellation plan is unconstitutional. He filed emergency motions with the Seventh Circuit Court of Appeals and the United States Supreme Court to stop the plan, but both motions were denied without explanation.

Three other legal challenges to the student debt relief program are still pending in court.

The first one, Arizona vs. Biden, takes a slightly different approach than the Nebraska trial. Led by Arizona Attorney General Mark Brnovich, the lawsuit makes three allegations of injury. He says the state will lose tax revenue because student debt cancellation cannot be enforced until 2025; the program will increase inflation, which harms the state’s economy; and recruitment for government jobs will be penalized by the devaluation of the civil service loan cancellation program. Arizona has not sought a temporary injunction, and court hearings in the case have yet to begin.

A libertarian think tank also says it will be harmed by the one-time weakening of student loan debt relief from the Civil Service Loan Forgiveness Program, which will make it more difficult to hire employees who would be eligible. The defendants in Cato Institute v. US Department of Education were served last week and hearings are expected to begin soon.

Finally, in Brown v. US Department of Educationtwo Texas borrowers – an applicant with non-federally held FFEL loans and an applicant who did not receive a Pell grant – say the debt relief plan should be canceled because it did not not required a “notice-and-comment period” as required by the Administrative Procedure Act. The case began hearings this week.

How does the White House legally defend the one-time student debt relief program?

The Department of Education argues that its unique student debt relief plan is protected by the Higher Education Relief Opportunities for Students Act 2003, also known as the HEROES Act. This act authorizes the Secretary of Education to change any regulations relating to any student financial assistance program for Americans who “have suffered direct economic hardship as a direct result of war or other military operation or ‘a national emergency’.

President Joe Biden and Education Secretary Miguel Cardona stand at a podium

Biden announced his unique student debt relief plan with Education Secretary Miguel Cardona on August 24.

Washington Post/Getty Images

The White House says the COVID-19 public health emergency gives the Department of Education the legal basis to forgive student loan debt under the HEROES Act.

The United States has been in a public health emergency since the Secretary of Health and Human Services declared one due to COVID-19 on January 31, 2020. This emergency declaration has been extended several times since, most recently on October 13, 2022. .

When will the student loan debt forgiveness lawsuits be resolved?

Legal experts are divided on the impact of lawsuits on the $10,000 to $20,000 student loan debt repayment plan. Regardless, no student loan debt will be forgiven under the current plan until the Eighth Circuit Court of Appeals issues its decision on the motion for a temporary injunction.

This 11-judge federal appeals court is dominated 10-1 by Republican appointees. While arguments on the injunction motion were expected from the states and the Department of Education the week of October 24, there is no indication when the court will issue its decision.

In an interview with Time NextAdvisor, student financial aid expert Mark Kantrowitz predicts that “there will be a slight delay,” but “state attorneys general are unlikely to prevail in their appeal.” .

On Thursday, October 27, Biden went even further in an interview with NewsNation, saying, “We’re going to win this case. I think in the next two weeks you’re going to see those checks coming out.”


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