Biden administration scales back student loan forgiveness plan as states file lawsuits. CNN Politics


The Biden administration on Thursday reduced eligibility for student loan forgiveness plans the same day six Republican-led states sued. President Joe Biden trying to block him Student loan forgiveness plan. from entry into force.

Borrowers whose federal student loans are guaranteed by the government but held by private lenders are excluded from receiving debt relief. About 770,000 people will be affected by the changes, according to administrative officials.

The Department of Education initially stated that many of these loans were made under the former Federal Home Education Loan Program and the Federal Perkins Loan Program, which would be a one-time forgiveness measure so long as the borrower consolidates the debt into the loan. said to be subject to Federal Direct Loan Program.

On Thursday, the division reversed course.according to it websiteprivately owned federal student loans must be consolidated before September 29 to be eligible for debt relief.

Borrowers of undisclosed federal student loans that have not yet been consolidated are currently out of luck, but the Department of Education said it was “evaluating whether there are alternative channels” to provide relief.

Undisclosed federal student loan borrowers represent a small portion of the 43 million federal student loan borrowers. There are approximately 4 million borrowers taking out federal home education loans, but not everyone is eligible for the Loan Forgiveness Plan, which includes income requirements.

“Our goal is to provide relief to as many eligible borrowers as quickly and simply as possible. We can meet that goal while continuing to explore additional options, including whether FFEL borrowers can receive one-time debt relief without the need for consolidation. ‘, the Department of Education said in an emailed statement.

“Undisclosed federal student loan borrowers who applied to consolidate their loans into direct loans prior to September 29, 2022 are eligible for one-time debt relief. The FFEL program is now discontinued. and only a small percentage of borrowers take advantage of FFEL loans, which are a completely different program than direct loans,” the statement said.

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

“In addition to being economically unwise and inherently unfair, the Biden administration’s mass debt cancellation is another example of a long line of illegal regulatory actions. There is no law that allows a person to unilaterally release a person from paying a loan that he or she voluntarily underwrites,” said the office of Nebraska Attorney General Doug Peterson. news release.

Plaintiffs allege that student loan servicers, including Missouri higher education loan agencies, Mohera –Has been harmed by Biden’s student loan forgiveness plan. According to the lawsuit, the plan creates incentives for borrowers to consolidate their MOHELA-owned federal home education loans into government-owned direct loans, “those loans deprive (MOHELA) of the ongoing income derived from its services.”

But the Department of Education’s move to exclude borrowers with privately owned federal loans from its student loan forgiveness plan could weaken that legal argument, said Luke Herrin, an assistant professor at the University of Alabama. Previously worked on legal strategies to promote debt.cancellation.

The White House continues to insist that the student loan forgiveness plan is legal.

“Republican officials in these six states have special interests and are fighting to block the bailout of debt-ridden borrowers,” White House spokeswoman Abdullah Hassan said in an email. ‘ said.

“The president and his administration are giving working and middle-class families legal breathing space as they recover from the pandemic and prepare to resume loan payments in January.” He said.

Federal student loan payments have been suspended since March 2020, thanks to pandemic-related benefits. The suspension ends on his December 31st.

early this weekA public-interest attorney who is also a student-loan borrower sued the Biden administration over the student-loan forgiveness plan, arguing that the policy was an abuse of executive power and would cost him a larger state tax bill.

Under Biden’s plan, individual borrowers with an annual income of less than $125,000 in 2020 or 2021, and married couples or householders with an annual income of less than $250,000 in that year, will pay up to 1% of federal student loan debt. million dollars will be waived.

If an eligible borrower also received a federal Pell grant while in college, the individual is eligible for debt forgiveness of up to $20,000. Pell grants are awarded to millions of low-income students each year based on factors such as family size, income, and costs charged by the university. These borrowers also have a harder time paying off student debt and are more likely to default.

The administration plans to roll out the first wave of student loan forgiveness in October.

The Congressional Budget Office estimated this week that Biden’s plan was a possibility before the administration ruled out FFEL borrowers. cost the government $400 billion However, he warned that the estimate relied on several assumptions and was “highly uncertain”.

Estimating the cost of debt forgiveness for students is complicated because loans are generally repaid over several years. The White House has argued that the CBO’s estimates require him to consider a timeframe of 30 years or more.

Biden announced a plan of forgiveness in August after facing mounting pressure from Democrats to forgive some student loans. Senate Majority Leader Chuck Schumer and Massachusetts Senator Elizabeth Warren have repeatedly called on the president to cancel student loan debt of up to $50,000 per borrower.

But canceling federal student loan debt on such a broad scale is unprecedented and has never been tried in court. Mr. Biden initially called on Congress to take action to cancel student debt rather than tread into legal murky territory himself, but Democrats are pushing for such legislation. No votes to pass.

in the Faculty of Education memo The Biden administration announced in August that the Higher Education Relief and Opportunities Act (Heroes Act) of 2003 would allow the Secretary of Education to write off student debt to address the economic damage suffered by the Covid-19 pandemic. He claimed he was authorized.

According to the memo, the Heroes Act, enacted in the wake of the September 11 terrorist attacks, provides a wide range of relief from student loan requirements during “certain periods of time, including war, other military operations, or national emergencies. It gives authority to the Chief.” .

A lawsuit filed Thursday argues that the Heroes Act does not give the president such broad powers.

Additional lawsuits challenging Biden’s student loan forgiveness plan could be forthcoming. Arizona Attorney General Mark Brunovich (Republican) Committed to developing the best legal theories sue the administration over the act.

A conservative advocacy group called Job Creators Network is also weighing legal options, and plans to file a lawsuit when the Department of Education officially announces plans to forgive student loans next month.

But some legal experts are skeptical that a legal challenge to Biden’s student loan forgiveness plan could be successful.

Abby Shaffros, staff attorney at the nonprofit National Center for Consumer Law, said: previously told CNN The merits of the Biden administration’s statutory powers are strong, she believes, and it’s unclear who has the legal standing to file lawsuits and who wants to do so. It is the procedural threshold that requires the plaintiff to be harmed in order to justify it.

If the permanent hurdle is cleared, it will first be heard by the district court. A district court may or may not issue a preliminary injunction to prevent revocation from occurring before final judgment is rendered on the merits of a provisional case.

Several recent U.S. Supreme Court decisions touch on executive power. limit federal powers Implement new rules. Although the Supreme Court takes up a handful of cases each year, lower courts may consider what judges have said in those cases when evaluating the Department of Education’s authority.

This story has been updated with additional information.

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