Biden’s Student Loan Forgiveness Plan Kept On Hold As Court Sides With GOP States

Topline

The Biden Administration will remain blocked from dispersing student loan forgiveness to millions of borrowers, at least while litigation against its policy plays out, as a federal appeals court ruled Monday to continue barring the White House from moving forward with the debt relief plan, siding with GOP-led states that sued to block it.

President Joe Biden speaks on the student debt relief plan as Secretary of Education Miguel Cardona … [+] (R) listens on October 17 in Washington, DC.

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Key Facts

The 8th Circuit Court of Appeals blocked the Biden Administration’s plan to forgive at least $10,000 in federal student loans for most borrowers nationwide, despite the Biden Administration asking any order against it to be limited to just the six states that sued: Arkansas, Iowa, Kansas, Missouri, Nebraska and South Carolina.

The court ruled Education Secretary Miguel Cardona’s “universal suspension of both loan payments and interest on student loans” would harm revenues for the Missouri Higher Education Loan Authority and thus impact the state’s ability to fund public higher education.

The hold will remain in place until further action from this appeals court or the Supreme Court.

The court had previously blocked the Biden Administration from dispersing loan relief on Friday, but only until it could hear from both sides and decide whether to issue a more lasting injunction halting the policy as the litigation plays out.

Republican-led states argued the White House exceeded its authority in imposing the student loan forgiveness policy, and told the appeals court that allowing the relief funds to roll out to borrowers would “irreparably harm” the states by affecting their tax revenue and state programs that service loans.

A district judge previously ruled against the states, finding they didn’t have standing to bring the case, and the Biden Administration had argued that order should stand, alleging the appeals court blocking the White House from discharging funds would “harm the public interest.”

Surprising Fact

The Biden Administration stopped taking applications Friday for the federal student loan forgiveness program after a federal judge in Texas struck down the measure as “unlawful.”

Key Background

The White House announced its sweeping student loan forgiveness plan in August. Republicans have heavily decried the policy, and legal experts cited by the Washington Post have suggested the states’ lawsuit was likely the party’s best chance at successfully opposing the policy in court. The same day it was filed, the lawsuit already resulted in the Biden administration walking back a part of its forgiveness plan involving federal loans held by private companies, after that complaint took issues with those loans specifically. Other plaintiffs challenging the student loan forgiveness have been unsuccessful in court, with the Supreme Court rebuffing a request by Wisconsin taxpayers to block the policy and the conservative Pacific Legal Foundation’s lawsuit against the debt relief failing in court multiple times. (The group has appealed its case.)

Big Number

22 million. That’s the number of Americans who signed up for student loan forgiveness in the first week applications were available, President Joe Biden said last month—more than half of the 43 million borrowers in total who are eligible for relief. The program offers to relieve $10,000 in federal student loan debt for people earning less than $125,000 ($250,000 for a household), or $20,000 in debt for federal Pell Grant recipients.

What To Watch For

The White House has not yet specified what the court’s ruling means for student loan forgiveness, and if borrowers will still be allowed to apply for the program even if the court has barred funds from being dispersed. The appeals court’s order is a temporary injunction while the litigation plays out, so it’s still possible a future court ruling will uphold the student debt policy and allow borrowers to receive their relief.