News report

Student loan forgiveness: Judge hears case on whether Biden’s plan can go ahead


Washington
CNN

A U.S. district judge may soon decide to temporarily block President Joe Biden’s student loan forgiveness program from taking effect after hearing a motion for a preliminary injunction on Wednesday.

Six Republican-led states filed a lawsuit last month challenging the legality of the policy and are asking the court to grant a preliminary injunction, which could put student loan forgiveness on hold until the judge make a final decision on the case.

The Department of Education is expected to open an application for the student loan forgiveness program this month. The Biden administration, which released a preview of the request on Tuesday, aims to provide debt relief worth up to $20,000 to millions of borrowers before federal student loan payments resume. in January after a nearly three-year hiatus related to the pandemic.

The motion for a preliminary injunction was heard by District Judge Henry Edward Autrey, appointed by former President George W. Bush.

The lawsuit was filed in federal court in Missouri by state attorneys general from Missouri, Arkansas, Kansas, Nebraska and South Carolina, as well as legal representatives from Iowa.

One of the judge’s first questions during the hearing was whether the states had standing to bring charges against the president. He compared standing, a legal threshold for filing a complaint, to baking a cake.

“You can have all the ingredients for a cake. But it’s hard to make a cake if you don’t have a mold to put the cake in. The mold is the position,” Autrey said.

After hearing from attorneys for both sides, Autrey declared a suspension and told the attorneys they would hear from him soon.

The states argued in court papers that the Biden administration lacked the legal authority to grant broad student loan forgiveness. The states also argue that the policy would hurt them financially, as well as the income of a Missouri-based student loan officer known as MOHELA.

The loan cancellation policy incentivizes borrowers to consolidate federal family education loans held by MOHELA into direct loans held by the government, “depriving them (MOHELA) of the permanent income it derives from servicing these loans,” according to the lawsuit.

On the same day the lawsuit was filed, the Department of Education changed its policy so that borrowers whose federal student loans are government guaranteed but held by private lenders — including those made under the old program federal family education loans – are no longer eligible. for debt relief.

In a court document, government lawyers say Congress gave the Secretary of Education the power to discharge his debt in a 2003 law known as the HEROES Act. They also argue that the plaintiffs do not have standing to seek an injunction.

To win a preliminary injunction, states are required to demonstrate that the student loan forgiveness policy will cause them irreparable harm if the injunction is not enforced.

The last-minute policy change to exclude borrowers from the FFEL could weaken the States’ lawsuit.

“I think the government’s decision to cut off the path to debt relief for people whose student loans aren’t held by the federal government undermined a lot of the quality in this case,” Abby said. Shafroth, an attorney at the National Consumer Law Center.

The losing side could immediately appeal Wednesday’s judge’s ruling on the injunction, sending the case back to the 8th Circuit Court of Appeals, where it would face a panel of conservative judges.

The Biden administration also faces several other lawsuits over the student loan forgiveness policy. Two of the lawsuits have already been dismissed. One pending lawsuit was filed by Arizona Attorney General Mark Brnovich, and another was filed this week by a conservative group, the Job Creators Network Foundation, on behalf of two student borrowers in Texas who are not eligible for the full $20,000 of debt relief under Biden’s program.

This story has been updated with additional developments.