Student loan recipients are now on an indefinite wait to find out whether or not they will receive debt relief under President Joe Biden’s loan forgiveness plan after a federal judge in Texas ruled it illegal, effectively invalidating it.
The Justice Department immediately appealed to the 5th Circuit Court of Appeals, but the case will have to be resolved before the Biden administration can cancel any federal student loan debt under the program.
- The White House estimates that Biden’s plan to pay off some student loan debt costs $379 billion.
Although the Biden administration has faced several legal challenges to the student loan forgiveness program since it was announced in August, Thursday’s ruling is the biggest setback yet, prompting the Department of Education to stop accepting student loan applications. debt reduction.
Biden’s program was already on hold due to another legal challenge, but the administration had continued to accept applications, having received 26 million to date.
Under program rules, eligible low- and moderate-income borrowers can receive up to $10,000 in federal student loan forgiveness and up to $20,000 if they also received a Pell grant while enrolled in college.
What about student loan recipients now?
Borrowers will have to wait for the Government’s appeal to the 5th Circuit Court to be resolved. Although it can be difficult to keep up with all the legal challenges, borrowers can sign up for Department of Education updates and check the Federal Student Aid website for more information.
The court could take months to issue a final ruling. If it overturns the Texas trial court ruling, the Biden government could start canceling student debt.
The Department of Justice could also request an emergency stay of the Texas judge’s order. If granted — and if another appellate court ends his suspension from the program in a separate case — the administration could cancel the debt before the 5th Circuit renders a final judgment.
Initially, the Biden administration said it would begin granting student loan forgiveness before payments resume in January after a years-long hiatus due to the pandemic.
But Thursday’s ruling in Texas puts that deadline in jeopardy.
“For the 26 million borrowers who have already given the Department of Education the information necessary to be considered for debt relief—16 million of whom have already been approved for relief—the Department will retain your information so it can process his relief once we win in court,” House press secretary Blanca Karine Jean-Pierre said in a statement Thursday.
“We strongly disagree with the district court’s ruling on our student debt relief program,” he said.
What are the legal arguments?
The Biden administration has argued that Congress gave the education secretary the power to broadly cancel student loan debt in a 2003 law known as the HEROES Act.
However, a federal judge in Texas found that the law does not give the executive branch clear authorization from Congress to create the student loan forgiveness program.
“The program is therefore an unconstitutional exercise of the legislative power of Congress and must be struck down,” wrote Judge Mark Pittman, who was nominated for the post by then-President Donald Trump.
“In this country we are not governed by an all-powerful executive with a pen and a telephone,” he continued.
The Texas lawsuit was filed in October by a conservative group, the Job Creators Network Foundation, on behalf of two borrowers who did not qualify for debt relief.
One plaintiff was ineligible for student loan forgiveness because his loans are not held by the federal government, and the other plaintiff is only eligible for $10,000 in debt relief because he did not receive a Pell grant.
They argued that they could not disagree with the program’s rules because the administration did not put the program through a formal notice and comment process for rulemaking under the Administrative Procedure Act.
“This ruling protects the rule of law that requires the federal government to listen to all Americans,” Elaine Parker, president of the Job Creators Network Foundation, said in a statement Thursday.
The advocacy group was founded by Bernie Marcus, a major Trump donor and former CEO of Home Depot.
What is the status of the other lawsuits?
The Biden government has been prohibited from canceling any debt since the US Court of Appeals for the 8th Circuit placed an administrative stay on the program on October 21.
The appeals court has yet to rule on that lawsuit, brought by six Republican-led states. A trial judge dismissed the lawsuit on October 20, ruling that the states did not have the legal standing to bring the appeal.
The Biden government faces other legal challenges against the program. Supreme Court Justice Amy Coney Barrett has denied two separate requests to challenge the program.
Who is eligible for student loan forgiveness?
If the Biden program is allowed to go ahead, individual borrowers who made less than $125,000 in 2020 or 2021 and married couples or heads of household who made less than $250,000 annually in those years could receive a reduction in the debt of up to US$ 10,000.
If a qualified borrower also received a federal Pell Grant while enrolled in college, they are eligible for forgiveness of up to $20,000.
There are a variety of federal student loans, and not all are eligible for relief. Federal Direct Loans, including subsidized loans, unsubsidized loans, parent PLUS loans, and graduate PLUS loans are eligible.
In contrast, federal student loans that are government guaranteed but held by private lenders are not eligible unless the borrower has applied to consolidate those loans into a Direct Loan by September 29.