Biden Student Loan Forgiveness Plan Is In Peril: Key Takeaways After Court Rules It’s Illegal

President Joe Biden speaks about student loan

A federal district court judge in Texas has struck down President Biden’s unprecedented student loan forgiveness initiative, dealing a major blow to his plan to provide relief for millions of borrowers.

Biden’s program would allow up to 40 million borrowers to receive $10,000 or more in student loan forgiveness if their earnings fell within the program’s income guidelines in either 2020 or 2021. But no borrower has received loan forgiveness under the initiative due to ongoing legal challenges.

Here’s what the court’s ruling means for borrowers.

Court Ruling Is Serious Blow to Biden’s Student Loan Forgiveness Plan

In the latest suit, a conservative nonprofit organization filed a lawsuit on behalf of two borrowers, challenging the program on the basis that the administration did not follow proper procedures under the Administrative Procedures Act (APA) for establishing new programs and regulations. The Biden administration has disputed those arguments, stating that the HEROES Act of 2003 provides a basis for enacting new emergency regulations without needing to follow APA procedures.

The decision by the U.S. District Court judge in Fort Worth, Texas is different than every other court ruling on Biden’s student loan forgiveness plan so far. Those earlier decisions have turned on whether the party that filed the lawsuit has standing to sue in the first place. To have standing, a party must demonstrate a concrete injury sufficiently tied to the challenged program. But in the latest decision, Judge Mark T. Pittman — a Trump appointee — struck down the program on the merits.

“In this country, we are not ruled by an all-powerful executive with a pen and a phone,” said Pittman in his written decision. “Instead, we are ruled by a Constitution that provides for three distinct and independent branches of government.” Pittman characterized Biden’s plan as “an unconstitutional exercise of Congress’s legislative power and must be vacated.”

Biden Administration Will Appeal the Student Loan Forgiveness Decision

The Biden administration condemned the court’s ruling and vowed to appeal.

“We are disappointed in the decision of the Texas court to block loan relief moving forward,” said U.S. Secretary of Education Miguel Cardona in a statement. “Amidst efforts to block our debt relief program, we are not standing down. The Department of Justice has appealed today’s decision on our behalf, and we will continue to keep borrowers informed about our efforts to deliver targeted relief.”

“We strongly disagree with the District Court’s ruling on our student debt relief program and the Department of Justice has filed an appeal,” said White House Press Secretary Karine Jean-Pierre. “The President and this Administration are determined to help working and middle-class Americans get back on their feet, while our opponents – backed by extreme Republican special interests – sued to block millions of Americans from getting much-needed relief.”

An Appeal of the Student Loan Forgiveness Ruling May Be an Uphill Battle

Student loan legal experts have criticized the District Court’s decision, arguing that the judge erred by failing to address the issue of standing.

The Biden administration’s appeal will bring the case to the 5th Circuit Court of Appeals — one of the most conservative federal appeals courts in the country. That court has issued some recent rulings (such as finding that the Consumer Financial Protection Bureau’s funding structure is unconstitutional) which suggest that the appellate judges may view Biden’s student loan forgiveness program with deep skepticism.

If the Biden administration fails to persuade the 5th Circuit to overturn the Texas court’s decision, the next step would be to appeal to the U.S. Supreme Court. But there are no guarantees that the nation’s highest court would take up the case, let alone rule in the administration’s favor. Notably, an appeal from the 5th Circuit to the Supreme Court may end up before Justice Samuel Alito — the architect of Dobbs v. Jackson Women’s Health Organization, the case that overturned Roe v. Wade and federal constitutional protections for abortion rights.

Other Courts Have Yet to Weigh In

The latest setback is not the only legal challenge impacting Biden’s student loan forgiveness plan. In October, the 8th Circuit Court of Appeals blocked the program in response to an appeal from a separate case. In that suit, a coalition of Republican-led states sued the Biden administration, arguing that the loan forgiveness program was unlawful and would financially harm the states due to reduced revenue associated with borrowers consolidating their loans to qualify.

A federal district court had dismissed that suit on the basis of standing, but the states appealed to the 8th Circuit, which issued a temporary administrative stay. That stay remains in effect while the court considers whether to impose a more significant preliminary injunction. A decision is expected any day.

In the meantime, the application for Biden’s student loan forgiveness program is now offline as of Friday. “Student Loan Debt Relief Is Blocked,” reads a message on the application website.

Student loan borrowers are now waiting indefinitely to see if they’ll receive debt relief under President Joe Biden’s student loan forgiveness program after a federal judge in Texas struck down the program Thursday, declaring it illegal.

The Department of Justice immediately appealed to the 5th US Circuit Court of Appeals. But that case will have to play out before the Biden administration can cancel any federal student loan debt under the program.

While the Biden administration has faced several legal challenges to the student loan forgiveness program since it was announced in August, the ruling on Thursday is the most significant setback thus far – prompting the Department of Education to stop accepting applications for debt relief.

Biden’s program was already on hold due to a separate legal challenge, but the administration had continued accepting applications, having received 26 million to date.

Under the rules of the program, eligible low- and middle-income borrowers can receive up to $10,000 of federal student loan forgiveness and up to $20,000 in cancellation if they also received a Pell grant while enrolled in college.

The legal road ahead is murky, but it could take many months for the issue to be resolved.

The Texas decision “makes it more likely that the issue will ultimately go to the Supreme Court, though it is still too early to say,” said Abby Shafroth, staff attorney at the National Consumer Law Center.

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