Appeals Court Rules Against Biden’s Student Loan Forgiveness Plan—Likely Sending Second Case To Supreme Court

Topline

A federal appeals court ruled against the Biden Administration’s student loan forgiveness plan Wednesday, siding with a lower court that struck down the policy, ensuring the program will remain blocked for at least the time being and likely teeing up a second case on the issue for the Supreme Court to decide.

Key Facts

What To Watch For

The 5th Circuit’s ruling means the White House is likely to quickly take the decision to the Supreme Court and ask it to consider the case alongside the GOP-led states’ lawsuit. Both lawsuits will have to be resolved in the Biden Administration’s favor for student loan forgiveness to take effect. The White House asked the Supreme Court in the other case to either immediately lift the block on student loan forgiveness, which would clear the way for the policy to take effect while the litigation moves forward, or else take up the case for oral arguments. It’s likely the administration will do the same with this case, though it remains to be seen how the Supreme Court will rule or if the court will consider both cases together. If the court decides to take up the cases for oral arguments, that means a final ruling on the program’s fate would come by June, though the legal proceedings could get stretched out for a longer period of time if the court instead chooses not to hear the cases now and leaves the issue to play out in the 5th and 8th Circuits.

Chief Critic

“When a district court judgment threatens harm to millions, provides benefit to none, and inflicts demonstrable harm on plaintiffs’ only concrete interest, the balance of equities is clear,” the Biden Administration wrote in its request for the 5th Circuit to halt the lower court’s ruling. “This Court should not permit the elimination of debt relief to so many Americans in need based solely on two individuals’ claim that the program did not go far enough.”

Key Background

The Biden Administration announced in August that it would forgive $10,000 in federal student debt for borrowers earning less than $125,000, or $20,000 in forgiveness for Pell Grant recipients. Some 26 million borrowers applied for debt relief before applications for the program were suspended following Pittman’s ruling, but Republicans have been heavily critical of the policy, resulting in a slew of litigation against it. The Job Creators Network lawsuit was brought on behalf of two borrowers, one of whom has commercially held loans and thus isn’t eligible for forgiveness, while the other was not a Pell Grant recipient and thus is only eligible for $10,000 in relief. The plaintiffs alleged the policy is “irrational, arbitrary, and unfair” in how it excluded them from at least some loan forgiveness, and argued the policy should have been subject to a public comment period. Pittman responded to the lawsuit by striking the policy down entirely, ruling it should have been left up to Congress and the Biden Administration was not justified to forgive debt under the federal law it cited. The Biden Administration argued to the 5th Circuit that Pittman striking down the policy did not actually grant the plaintiffs any relief, because they “have no greater opportunity to provide comments on the loan forgiveness program than before,” and the plaintiff who complained about not receiving the full $20,000 now would now also lose the $10,000 he was legally entitled to under the program, making him worse off than before.

Further Reading

Biden Asks Supreme Court To Reinstate Student Loan Forgiveness — Here’s Where Program Stands Now (Forbes)

Federal judge in Texas blocks Biden’s student loan forgiveness plan (CBS News)

Biden Administration Suspends Student Loan Forgiveness Applications (Forbes)