Biden’s Student Loan Forgiveness Plan Suffers a Legal Setback

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On Thursday, a federal judge in Texas ruled against President Biden’s plan to forgive student loans, handing a victory to a conservative advocacy group that had sued to block the plan.

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US President Joe Biden delivers remarks regarding student loan debt forgiveness in the Roosevelt Room of the White House on Wednesday August 24, 2022. Education Secretary Miguel Cardona joined. [Demetrius Freeman/The Washington Post/Getty Images]

Biden’s student loan forgiveness plan has suffered a legal setback

In October, the Job Creators Network Foundation filed a lawsuit on behalf of a borrower who is ineligible for any of the $20,000 in debt relief and is ineligible altogether. The suit alleges that the administration broke federal rules by not allowing borrowers to comment on the program before it launched.

In an order on Thursday, U.S. District Judge Mark T. Pittman, who Donald Trump picked, said the policy was against the law.

“In this country, we are not ruled by an all-powerful executive with a pen and a phone,” Pittman declared in his order. “Instead, we are ruled by a Constitution that sets up three separate branches of government.”

The Biden administration did not respond immediately to the ruling, but officials have said before that they would fight any order that obstructed the program.

In a different lawsuit brought by six Republican-led states last month, the US Court of Appeals for the Eighth Circuit put a hold on the loan forgiveness program. Pittman’s order comes after that. There are increasing cases in which Biden’s program is being challenged in court. Some of these lawsuits, like ones filed in Indiana and Wisconsin, have been thrown out because the people who filed them didn’t have the standing to do so, but others are still going on.

Since Biden announced his plan in August, top Republican politicians, Republican attorneys general, and conservative groups have discussed how to legally stop it. A week after Biden announced the policy, the president of the Job Creators Network, funded by Bernie Marcus, a Republican donor who co-founded Home Depot, told Fox News that the group was putting together a legal team and working with outside counsel to prepare a lawsuit.

Elaine Parker, president of the Job Creators Network Foundation, praised the ruling on Thursday, saying that it “protects the rule of law, which requires all Americans to have their voices heard by their federal government.”

“This proposed illegal student loan bailout would have done nothing to fix the main reason tuition is so expensive: greedy, bloated universities that raise tuition far more than inflation year after year while sitting on $700 billion in endowments,” Parker said in a statement. “We hope that the court’s decision today will lay the groundwork for real solutions to the problem of student loans.”

The plaintiffs in the Texas case said, among other things, that the Biden administration made arbitrary decisions about who was eligible for debt forgiveness and how much of their debt would be wiped out. Under Biden’s plan, federal student loans of up to $10,000 would be forgiven for people who earn up to $125,000 per year or up to $250,000 for married couples who earn up to $125,000 per year. Borrowers who were given

Pell Grants are eligible for an additional $10,000 in forgiveness.

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Plaintiffs’ Arguments

According to the complaint, one of the plaintiffs in the case, Alexander Taylor, does not meet the income requirements and is therefore eligible to have $10,000 taken off his $35,000 in student loans for an undergraduate degree from the University of Dallas. But because he never got a Pell Grant, a type of federal aid for low-income students, he is ineligible for the extra $10,000 that Pell Grant recipients get.

Myra Brown, the other plaintiff in the lawsuit, is not ineligible for Biden’s plan because her federal loans, which started under the now-defunct Federal Family Education Loan (FFEL) program, are held by private organizations. Until the end of September, commercial FFEL borrowers like Brown can consolidate their debts into a Direct Loan and become eligible for Biden’s plan. But the Education Department changed the policy to keep it from being challenged in court as the six states did.

Brown was not allowed to join the program because he owed $17,000 in student loans to Southern Methodist University in Dallas.

In response to the complaint, the Justice Department said in a court filing that the law from 2003 that Biden’s plan is based on does not require notice and comment. Instead, the Heroes Act gives the Secretary of Education the power to “ease the hardship that federal student loan recipients may face as a result of national emergencies.”

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Students from George Washington University wear their graduation gowns outside of the White House in Washington, DC, on May 18, 2022. [STEFANI REYNOLDS/AFP/Getty Images]

Attorneys for the Department of Justice say that the program’s rules were set based on research showing that low-income borrowers and Pell recipients are more likely to miss payments or go bankrupt. Also, they said that Brown and Taylor don’t deserve any loan forgiveness and that their complaints don’t amount to an actual injury.

Pittman said the Heroes Act shouldn’t be used because “it doesn’t give Congress permission for the program proposed by the Secretary.”

“The Court is not blind to the fact that our country is politically divided right now,” he said. But the separation of powers outlined in our Constitution must be kept for our Republic to stay alive. “

Student advocates were worried about the lawsuit’s outcome after Pittman told the parties that he planned to rule on the case’s merits instead of deciding if the borrowers had the standing to bring the lawsuit.

“It meant he never really thought about the government’s arguments, never bothered to make a record based on facts, and instead gave an opinion that was poorly thought out and based on ideology,” Mike Pierce, executive director of the Student Borrowers Protection Center, an advocacy group, said Thursday.

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