Judge dismisses student loan cancellation lawsuit by GOP-led states

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A federal judge on Thursday rejected an offer of six Republican-led states will block the Biden administration from moving forward with plans to forgive up to $20,000 in federal student loan debt for more than 40 million people, days after borrowers started registering for assistance.

The states filed a lawsuit last month, saying the administration overstepped its authority by creating the pardon program without going through Congress. They also claimed the plan would threaten the revenues of state entities that profit from the federal student loan, and they asked the court to stop the federal government. to cancel any debt as the case progresses.

GOP-led states urge judge to block Biden’s student debt relief plan

U.S. District Judge Henry E. Autrey of the Eastern District of Missouri issued a 19-page order finding the states lacked standing to sue to stop one of the administration’s flagship economic policies. “While the plaintiffs present significant and significant challenges to the debt relief plan, the current plaintiffs are unable to proceed with the resolution of those challenges,” he wrote.

The decision by Autrey, a George W. Bush appointee, was one of two victories Thursday for the administration’s plan. In a separate case, U.S. Supreme Court Justice Amy Coney Barrett denied a request by the conservative law firm Wisconsin Institute for Law and Liberty, working on behalf of a taxpayer association, to suspend the program. .

Nebraska Attorney General Doug Peterson (R), one of the state officials who sued the administration, said the coalition would appeal. “States continue to believe they do in fact have standing to raise their important legal challenges,” he said in a statement. “As a result, the states will appeal and seek immediate redress.” Other states involved in the lawsuit include Arkansas, Iowa, Kansas, Missouri and South Carolina.

An appeal would send the case to a conservative panel of judges at the United States Court of Appeals for the 8th Circuit.

The lawsuit, one of many filed against the pardon plan, was widely seen as one of the most serious legal challenges.

“Republican members of Congress and Republican governors are doing everything they can to deny student debt relief, even to their own constituents,” White House press secretary Karine Jean-Pierre said Thursday. Peter, in a press release. “The President will not stop fighting these lawsuits and working to help families recover from the pandemic.”

The Ministry of Education began accepting applications for help last Friday. More than 12 million people have filed to date, White House says, while 8 million more have been notified of their eligibility for automatic cancellation because their information is already registered. The administration said people should fill out the form by Nov. 15 to get them processed before federal student loan payments resume in January.

“The court made the right decision in rejecting this ideological challenge to debt relief,” said Abby Shafroth, director of the National Consumer Law Center’s Student Loan Borrower Assistance Project. “The six states have failed to establish that student debt relief is hurting them — in fact, it promises more than $46 billion in relief to working-class and middle-class residents in their states. . Their residents should applaud this decision with families across the country. »

Biden’s loan relief plan will forgive up to $10,000 in federal student debt for borrowers earning up to $125,000 a year, or up to $250,000 for married couples. Borrowers who have received Pell Grants are eligible for an additional $10,000 rebate.

The Biden administration insisted its debt cancellation plan was legal. The Department of Justice released a 25-page memo in August justifying the policy under a 2003 law authorizing the Secretary of Education “to mitigate hardship that federal student loan recipients may experience due to national emergencies”.

It’s the same law, known as the Heroes Act, that the Trump administration used at the start of the coronavirus. pandemic to suspend payments on federal student loans as Americans deal with the economic fallout from the national health crisis. Justice Department lawyer Brian Netter recently called him back to court and noted that there had been no attempt to challenge the legality of the payment moratorium.

‘This is an emergency law,’ Netter said in recent trial injunction hearing. “It seems hard to fathom that Congress would not have understood at the time that a greater national emergency was going to trigger and require greater action by the Secretary of Education.”

Judge Autrey in the hearing questioned whether the scale of the loan write-off, costing about $300 billion, warranted explicit authorization from Congress because of the economic and political importance, a legal idea known as the “major issues” doctrine. The Supreme Court invoked this doctrine earlier this year to limit the power of the Environmental Protection Agency to fight climate change. Higher education experts expected the doctrine to be used to invalidate Biden’s debt relief package.

Netter said the debt relief program was designed to respond to the scale of the national emergency and avert an anticipated wave of delinquencies when the pause in federal student loan payments lifts. The break has been extended until December 31.

“The way this Supreme Court analyzed the action of the agency could pose a threat [to the administration] if this case has gone that far,” said Kate Elengold, assistant professor of law at the University of North Carolina School of Law. “I think the department has a very strong case, but that’s what I’m watching more closely.”

The coalition of states involved in the trial argue that the administration has no right to take action on this scale without congressional approval. Additionally, they say, the policy would impose economic harm on state investment entities and student loan companies that hold debt from the defunct federal Family Education Loans (FFEL) program.

After Biden unveiled his cancellation plan in August, many FFEL commercial borrowers consolidated their loans into direct loans to receive relief. The states said the plan incentivizes borrowers to consolidate, which deprives their related entities of interest income.

But hours before the case was filed, the Biden administration reduced eligibility for the debt relief program, saying FFEL commercial borrowers could no longer consolidate to qualify for the one-time relief. Lawyers for the Justice Department said the ruling undermines the states’ claims.

Justice Autrey agreed. In Thursday’s ruling, he said, “the lack of continued incentive to consolidate runs counter to the claims of Arkansas and Nebraska.”

He also questioned whether Missouri had the right to sue on behalf of the Missouri Higher Education Loan Authority, a quasi-state organization that holds and manages FFEL debt. Autrey said that while the governor appoints five members of the corporation’s board of directors, its revenues and liabilities are independent of the state.

Most of the states involved in the lawsuit say they will lose tax revenue because of Biden’s policies. They take a cue from the federal government, which will not consider discharged student debt as taxable income until January 2026. Autrey rejected this claim, saying that “the tenuous nature of future income tax revenues is insufficient to establish recognizable harm to support standing. bring this action.

The six-state lawsuit is one of many legal challenges seeking to block Biden’s debt relief package.

Other pending cases include one filed by the conservative Job Creators Network Foundation on behalf of an FFEL commercial borrower who is not eligible for relief and an eligible borrower who is not eligible for relief. is not eligible for the full $20,000 of debt relief. The lawsuit alleges the administration denied borrowers the opportunity to voice their opinions on the policy by waiving a comment period. Justice attorneys have argued in other cases raising similar allegations that the Heroes Act requires no notice or comment, UNC Law School’s Elengold said. A hearing on the group’s injunction request is scheduled for Tuesday.

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