Biden student debt forgiveness plan on temporary hold after appeals court ruling

A demonstrator protests near Grand Army Plaza in Brooklyn, New York on April 3, 2021 during a rally to cancel student loan debt.

By Ariana Figueroa, Michigan Advance

A federal appeals court on Friday temporarily blocked the Biden administration from carrying out its student loan forgiveness plan, until the court makes a determination on a request for an injunction brought by six Republican-led states, according to multiple media reports.

The 8th U.S. Circuit Court of Appeals is giving the Biden administration until Monday to respond, and those six states—Nebraska, Missouri, Arkansas, Iowa, Kansas and South Carolina—will have until Tuesday to respond. The court said the order prohibited the administration from “discharging any student loan debt,” according to a copy of the document posted by the New York Times.

Karine Jean-Pierre, President Joe Biden’s press secretary, said in a statement Friday night: “Tonight’s temporary order does not prevent borrowers from applying for student debt relief at studentaid.gov – and we encourage eligible borrowers to join the nearly 22 million Americans whose information the Department of Education already has. It also does not prevent us from reviewing these applications and preparing them for transmission to loan servicers.

“It is also important to note that the order does not reverse the trial court’s dismissal of the case, or suggest that the case has merit.  It merely prevents debt from being discharged until the court makes a decision.

“We will continue to move full speed ahead in our preparations in compliance with this order. And, the Administration will continue to fight Republican officials suing to block our efforts to provide relief to working families.”

Biden on Friday, during a speech at Delaware State University earlier Friday about student debt, said 22 million people have already applied for the program, for which applications launched earlier this week.

“Republican members of Congress and Republican governors are doing everything they can to deny this relief even in their — to their own constituents,” Biden said, according to a White House transcript.

A federal judge earlier had rejected efforts by the six states to block the Biden administration’s plan to forgive up to $20,000 in individual, federal student loans for more than 40 million people. The states immediately appealed.

The six states led by Republicans took the administration to federal court last month, arguing that the president had no authority by creating a loan-forgiveness program without the approval of Congress.

On Thursday, U.S. District Judge Henry Autrey of the Eastern District of Missouri issued a 19-page ruling that declared the states don’t have legal standing to sue the administration over the program, despite the “important and significant challenges” they have raised in the case.

The lawsuit was filed on behalf of Iowa Gov. Kim Reynolds, a Republican, and by the attorneys general in Nebraska, Arkansas, Missouri, South Carolina and Kansas.

The lawsuit is one of several legal challenges faced by the loan-forgiveness plan. Another of those challenges, mounted by a conservative taxpayer-advocacy group, suffered a setback Thursday when U.S. Supreme Court Justice Amy Coney Barrett refused to put the program on hold pending the resolution of related legal issues.

Under the Biden administration’s plan, student-loan borrowers can qualify for up to $10,000 in loan forgiveness, while the recipients of Pell Grants can apply for an additional $10,000 in debt relief. The program is intended to assist borrowers who earn no more than $125,000 per year, and couples who earn up to $250,000 per year.

The Biden administration’s defense of the program is grounded in a 19-year-old federal law that gives the secretary of education the power “to alleviate the hardship that federal student loan recipients may suffer as a result of national emergencies.” The administration argued in court that this is the same law the Trump administration used to pause student-loan payments at the beginning of the COVID-19 pandemic.

The states argued the financial implications of Biden’s $300 million plan are so significant that congressional approval is required. They also argued that the plan would deny the states revenue that would otherwise flow to state-based student loan companies that now own the debt.

They pointed out that some states don’t consider discharged student-loan debt to be “income” that can be taxed, further depriving the states of revenue.

During oral arguments, according to the Missouri Independent, lawyers for the Biden administration said the potential loss of tax revenue isn’t enough to give the states standing in the case, especially since the states are free to expand their definition of taxable income to include the canceled student-loan debt.

In his decision, Judge Autrey appeared to agree, saying the “tenuous nature of future income tax revenue” wasn’t sufficient to establish injury to support the states’ claim that they had standing to file their lawsuit.

Autrey had previously signaled that the states’ standing to bring the case forward was likely to be a factor in his decision.

“It is hard to make a cake if you don’t have a pan to put that cake in,” Autrey said during oral arguments. “That pan is standing. It doesn’t matter if you have all the ingredients.”

Michigan Advance is part of States Newsroom, a network of news bureaus supported by grants and a coalition of donors as a 501c(3) public charity. Michigan Advance maintains editorial independence. Contact Editor Susan Demas for questions: [email protected]. Follow Michigan Advance on Facebook and Twitter.

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