Biden’s student loan plan facing obstacles

WASHINGTON, D.C. — Six states led by Republicans have filed a lawsuit against the Biden administration in an effort to stop its proposal to cancel student loan debt for tens of millions of Americans, alleging that it has exceeded its presidential authority.

It is at least the second court challenge this week to the expansive proposal President Joe Biden outlined in late August, in which he stated that his government would forgive up to $20,000 in student debt for a vast number of debtors. After months of internal deliberations and pressure from leftist activists, the revelation became immediate political fodder ahead of the midterm elections in November, fuelling conservative objections over constitutionality.

As the lawsuit was being filed, the Biden administration surreptitiously reduced qualifying requirements for the debt relief, eliminating a very small number of borrowers who are the basis of the lawsuit’s legal dispute. These borrowers, whose loans are secured by the federal government but held by private institutions, are now ineligible for Biden’s debt cancellation, according to the Education Department.

In the lawsuit, which will be filed Thursday in a federal court in Missouri, the Republican states assert that Biden’s cancellation plan is “not even remotely tailored to address the effects of the pandemic on federal student loan borrowers,” as required by the federal law from 2003 that the administration is using as legal justification. They note that Biden declared the end of the COVID-19 pandemic in an appearance with CBS’s “60 Minutes” this month, yet he continues to use the ongoing health emergency to justify the massive debt relief.

In an interview, Arkansas Attorney General Leslie Rutledge, who leads the organization, stated, “It is manifestly unfair to saddle hard-working Americans with the loan debt of individuals who decided to attend college.”

She said, “The Department of Education is obligated by law to recover loan balances. And President Biden lacks the authority to disregard this.”

Along with Arkansas, the states of Iowa, Kansas, Missouri, Nebraska, and South Carolina filed the complaint. The attorney general of Iowa is a Democrat, but the state’s Republican governor, Kim Reynolds, signed on behalf of the state. The states contend that Biden’s decision to cancel loans has caused Missouri’s loan servicer “a number of ongoing financial hardships.” Other states that joined the case contend that Biden’s plan to cancel federal debt will ultimately have a negative impact on state resources.

Specifically, the suit says that Missouri’s loan servicer will lose revenue from loans it owns through the Federal Family Education Loan Program – a program that let private banks to issue and handle federally backed student loans until it was discontinued in 2010.

The Education Department updated its website on Thursday to indicate that borrowers with federal loans owned by private banks, including the FFEL program and Perkins loans, are no longer eligible unless they have already consolidated their loans into the government’s direct lending program prior to Thursday. The adjustment will reverse eligibility for around 770,000 borrowers, according to the government.

The department said in a statement, “Our goal is to provide relief to as many eligible borrowers as quickly and easily as possible, and this will allow us to achieve that objective while we continue to explore additional legally-available options to provide relief to borrowers with privately owned FFEL loans and Perkins loans.”

Nonetheless, the administration has long expressed confidence that the forgiveness program will withstand court challenges.

Thursday, White House spokesman Abdullah Hasan stated, “Republican politicians from these six states are siding with special interests and attempting to prevent assistance for debtors trapped beneath mounds of debt.” “The president and his administration are legally providing breathing room to working and middle class families as they recuperate from the pandemic and prepare to begin loan payments in January.”

Biden’s scheme will eliminate $10,000 in student loan debt for persons with an annual income of less than $125,000 or for households with an annual income of less than $250,000 Recipients of the Pell Grant who demonstrate greater financial need will get an additional $10,000 in debt forgiveness.

The administration also announced that it will prolong the present moratorium on federal student loan repayments, which was put on hold at the beginning of the pandemic more than two years ago, through the end of the year.

Almost immediately, the administration faced threats of legal challenges to its plans, with conservative attorneys, Republican lawmakers, and business-oriented groups claiming that Vice President Biden exceeded his power by taking such wide action without Congress’s approval.

Democratic lawmakers engaged in tough reelection campaigns distanced themselves from the student loan scheme, while Republican officials characterized it as an unjust government handout to relatively wealthy individuals at the expense of those who did not pursue higher education.

In their lawsuit, the Republican attorneys general also allege that the forgiveness program violates the Administrative Procedure Act, which outlines how federal agencies should create regulations to ensure that executive branch policies are well-reasoned and adequately communicated.

In an interview, Rutledge stated, “The president lacks the authority to assume the role of Congress.” “Congress must take these acts, and he cannot veto them.”

To support the legitimacy of the scheme, the Biden administration is relying on a post-9/11/2001 law intended to aid military personnel, which the Justice Department claims permits Biden to cut or eliminate student loan debt during a national emergency. However, Republicans contend that the administration is misinterpreting the law because the pandemic no longer meets the criteria for a national emergency.

This Thursday, the Pacific Legal Foundation, a libertarian legal advocacy group employing a lawyer who claims he would be injured by the loan forgiveness program, filed a second complaint against Biden’s student loan program in an Indiana federal court. The attorney, Frank Garrison, asserts that eliminating his present debt may create a tax liability from the state of Indiana, which is one of at least six jurisdictions that tax forgiven loan amounts.

A federal judge denied Garrison’s attempt to temporarily halt Biden’s proposal on Thursday, stating that there is insufficient evidence that he will suffer “irreparable injury” as a result of its cancellation. Garrison had till 10 October to alter his argument.

The White House dismissed the case as without merit because any borrower who does not wish to get debt relief has the option to opt out. The Education Department is still on pace to release the application for the loan forgiveness program at the beginning of October, and it emailed borrowers Thursday with instructions on how to prepare to apply. The email stated that applicants are not required to submit any further materials.

Republicans have also focused on the price tag and impact of the Biden plan on the national budget deficit. This week, the Congressional Budget Office estimated that the program will cost approximately $400 billion over the next 30 years. The White House replied that the CBO’s assessment of the plan’s cost in its first year, $21 billion, is lower than the administration’s first estimation.

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