Student loan forgiveness: Is student loan forgiveness canceled?

WASHINGTON — President Joe Biden’s plan to provide millions of borrowers with up to $20,000 each in federal student loan forgiveness has been blocked by a second federal court, leaving millions Borrowers wonder if they can get their debt forgiven.

On Thursday, U.S. District Judge Mark Pittman ruled that the program usurped Congress’s legislative power. The authorities immediately sent notice to appeal.

That’s not the only challenge the plan faces. Last month, the 8th US Circuit Court of Appeals in St. Louis paused the loan forgiveness while considering a challenge from six Republican-led states.

The plan’s fate may eventually end up in the Supreme Court, meaning the final decision is a shortcut.

Here’s where things currently stand:

The debt forgiveness plan announced in August will write off $10,000 worth of student loan debt for people earning less than $125,000 or households earning less than $250,000. Pell Grant recipients, who typically demonstrate greater financial need, will receive an additional $10,000 in debt forgiveness.

According to the administration, current college students are eligible if their loans are disbursed by July 1. The plan helps 43 million borrowers qualify for loan forgiveness, with 20 million potentially eligible for loan forgiveness. write off debt completely.

The Congressional Budget Office says the program will cost about $400 billion over the next three decades.

The White House says 26 million people have applied for forgiveness and 16 million have been approved for forgiveness.

Pittman – an appointee of former President Donald Trump based in Fort Worth, Texas – has made it clear that he feels Biden has exceeded his authority. He said the Higher Education Relief Opportunities for Students Act of 2003, commonly known as the HEROES Act, did not authorize the loan forgiveness program the administration had claimed.

The law allows the secretary of education to waive or modify the terms of federal student loans during times of war or national emergency. The authorities declared the COVID-19 pandemic to have created a national emergency.

But Pittman said such a large program requires explicit congressional authorization.

In September, the Republican-led states of Nebraska, Iowa, Kansas, Missouri, Arkansas and South Carolina filed lawsuits to halt the program, arguing that the pandemic no longer quals as a national emergency. . But Justice Department attorney Brian Netter told U.S. District Judge Henry Autrey in October that student defaults have skyrocketed over the past two and a half years.

Autrey ruled on October 20 that the states lacked a foothold, allowing the pardon plan to proceed. But the 8th Circuit temporarily halted it the next day while considering a permanent block. That decision is still pending.

The White House encouraged borrowers to continue applying for relief, saying the court order did not prevent applications or review of applications.

The plan has faced a number of other legal challenges. In October, Supreme Court Justice Amy Coney Barrett dismissed an appeal by a group of Wisconsin taxpayers. A federal judge previously dismissed the group’s lawsuit, arguing that they had no legal right or legal standing to bring the case.

Pittman’s decision rejects the underlying legal argument used to justify Biden’s plan. In the past, the White House has been able to avoid legal attacks in lawsuits by tweaking the details of the program.

One lawsuit argues that automatic debt forgiveness will cause borrowers to pay heavier taxes in states that impose taxes on the already forgiven debt. The authorities responded by allowing borrowers to opt out. Another lawsuit alleges that Biden’s plan would harm financial institutions that earn revenue from certain types of federal student loans. The White House responded by removing those loans from the plan.

However, the new ruling argues that the HEROES Act does not give the power to write off mass debt. The law gives the Department of Education broad flexibility during national emergencies, but the judge ruled that it was unclear whether debt forgiveness was a necessary response to COVID-19, noting that Biden recently declared the pandemic over.

The legal situation is complicated because there are many lawsuits. It is likely that the Texas case and the case of the six states will be appealed to the Supreme Court. Before that is reached, the 5th and 8th Circuit appellate courts — both dominated by conservative judges — will rule separately on a case-by-case basis.

The pre-Round 8 case could soon end up in the Supreme Court, as six Republican-led states have asked the appeals court to continue halting the program while the case goes on. If the appeals court accepts that request, the administration will likely ask the Supreme Court to intervene. States can also sue the supreme court if their request is denied.

Likewise, the administration has signaled that it will appeal the Texas ruling. If the U.S. Fifth Circuit Court of Appeals is asked to block the ruling pending Pittman’s appeal, the losing party could move to the Supreme Court.

In either case, the appellate courts will not make a final judgment on the eligibility of the program, but on whether the program can continue while the challenges continue.

At the same time, emergency orders can signal how the courts will ultimately decide a case. In January, the Supreme Court upheld challenges to the administration’s authority to impose testing or vaccine requirements on the nation’s major employers. Days after hearing the arguments, the court split the odds 6-3 to block the claim, saying challengers were likely to prevail in the end. A separate vaccine mandate for most healthcare workers was allowed to proceed when the court concluded that a challenge to it was likely to fail.

Confused borrowers don’t know if their debt will be canceled or if they will have to resume payments on January 1, when the COVID-19 pandemic-imposed pause will expire.

Following the Texas judge’s ruling on Thursday night, borrowers took to the internet, asking Google: “Is student loan forgiveness cancelled?” according to Google Trends. According to Google Trends data, overall search traffic for “student loan forgiveness” quadrupled on Thursday night and was up nearly tenfold on Friday morning.

Some borrowers said they doubted they would ever get relief.

Brenna Zimmerman, who graduated from Kansas State University in 2021 with about $30,000 in debt, called the debt forgiveness “a little too good to be true.” And though the show would benefit her, Zimmerman, 24, now a graphics coordinator at a packaging company, wonders if that’s a good idea.

“I thought I was stupid not to apply,” she said, adding, “I don’t think it’s necessarily fair, especially for people who have chosen not to go to school.”

Lauren Pete, a 20-year-old student at Louisiana State University, has $10,000 in student debt and is hoping to go to graduate school. She calls the benefits of the loan forgiveness program a “dream come true” that eases the financial burden on her and her parents, who didn’t go to college and worked hard to pay off. help her pay for her school fees.

“All I want to do is make them proud and make the process so much easier for them, especially since I have a younger brother who is going to start (college) next fall, ‘ said Pete.

When 25-year-old Hofstra University graduate Sarah Puckett heard about the plan, she couldn’t believe she could get a partial write-off of her $26,000 debt.

“I was frantically calling my dad, frantically saying, what does this mean?” Puckett, now a TV show producer for the true crime network, said. “Is this for real? I feel like they’re going to take it away from us. I do not believe that.”

Now, she worries that that’s actually too good to be true.

“I’m glad I signed up, but you know what, I’m not going to take it to the bank until I see that it actually happens,” Puckett said.

Frederick Bell, 30, of New Orleans, has $23,000 worth of student loan debt and is hoping to be exempt from all but $3,000 of that amount. The University of Washington graduate in 2014 said not being in debt would allow him to consider continuing his education or buying a home.

“This (Texas) ruling has certainly shattered a lot of people’s dreams of financial freedom after this bailout,” Bell said.

AP journalists Mark Sherman and Collin Binkley in Washington; Gene Johnson in Seattle; Heather Hollingsworth of Mission, Kansas; Chrissie Thompson of Spokane, Washington; and Cheyanne Mumphrey of Phoenix contributed to this report.