The Biden administration has enacted sweeping student loan initiatives over the last two years, including a mass student loan forgiveness plan and multiple extensions of the ongoing student loan pause. But these plans are under attack in both Congress and the courts as challengers seek to halt this student debt relief. And the attacks are escalating.
Here’s the latest.
Republicans In Congress Will Try To Repeal Student Loan Forgiveness And Extension Of Student Loan Pause
Congressional Republicans have introduced a resolution under the Congressional Review Act (CRA) to repeal President Biden’s student loan forgiveness initiative, which would cancel up to $20,000 in federal student loan debt for tens of millions of borrowers. That initiative’s future is already in question as the Supreme Court considers two legal challenges. But with a ruling not expected until June, Republicans hope to use the CRA’s expedited legislative process to repeal the plan as soon as possible. The resolution would also end Biden’s latest extension of the student loan pause, which is expected to continue until later this summer.
The Student Borrower Protection Center (SBPC), a national advocacy organization for student loan borrowers, warned last week that the repeal effort would “sow chaos” for borrowers because of how intertwined the student loan pause is with other Biden administration student debt relief initiatives, such as the Limited PSLF Waiver for public service borrowers. And the repeal of Biden’s signature student loan forgiveness plan would result in “cascading economic consequences” for millions of borrowers who may not be able to afford their payments this fall when the student loan pause ends.
The repeal effort has a reasonable chance of passing in the House of Representatives, where Republicans hold a majority. Its fate in the Democratic-controlled Senate is more uncertain. However, at least some moderate Democratic senators have expressed openness to the GOP effort, and it would take only two Democratic senators to join Republicans for the measure to pass (CRA resolutions are not subject to a senate filibuster).
President Biden is highly likely to veto the measure if it does wind up passing Congress.
New Lawsuits Target The Student Loan Pause
Last week, a new lawsuit was filed against the Biden administration over the ongoing student loan pause. The pause, which was first enacted by the Trump administration in 2020 in response to the pandemic, has suspended most federal student loan payments and frozen interest rates for over three years.
The latest lawsuit filed by the New Civil Liberties Alliance (NCLA) argues that all payment pause extensions beyond the initial six months authorized by Congress in the CARES Act — including the extensions implemented by the Trump administration before Biden took office — are illegal. Congress “enacted a clear six-month deadline for that debt-relief program,” said Sheng Li, Litigation Counsel for NCLA, in a statement. “The Administrative State lacks the power to extend a debt-relief program beyond its statutory deadline, especially when doing so costs taxpayers over $150 billion.”
NCLA’s argument is that the payment pause harms nonprofit organizations because it reduces their ability to “attract employees with a debt-relief incentive keyed to working ten years for nonprofits” — namely, the Public Service Loan Forgiveness (PSLF) program. Notably, however, the months of suspended payments count towards PSLF for borrowers meeting all other eligibility criteria, according to the Education Department. So it is unclear if a court would agree that this purported injury is concrete enough to confer “standing” on the challenger — a requirement for a party bringing a civil suit in federal court.
Furthermore, during February’s Supreme Court hearing on Biden’s student loan forgiveness plan (which relies on the same legal authority as the extensions of the student loan pause), even some of the more conservative justices on the court appeared to concede that implementing and even extending the payment pause in response to a national emergency was likely allowable under federal statute. However, it was less clear how amenable the justices would be to repeated extensions.
NCLA’s suit follows another legal challenge filed last month by SoFi, a national private student loan refinancing company, which is also seeking an end to the student loan pause. In that suit, SoFi argues that the payment pause has hurt its bottom line, as borrowers are less likely to refinance their federal student loans into a private student loan when federal student loan interest rates are effectively at zero percent.
Schools Appeal Student Debt Relief Settlement To Supreme Court
The Biden administration is facing yet another legal challenge as it tries to implement broad settlement relief under an agreement to end Sweet v. Cardona, a long-running class action lawsuit over stalled or denied Borrower Defense to Repayment applications. The Borrower Defense program can provide debt relief — including student loan forgiveness and refunds of past payments — for borrowers who were duped into enrolling at schools based on misrepresentations or false promises.
The settlement agreement, which a federal court approved last fall, would provide $6 billion in student debt cancellation and other relief to over 200,000 borrowers who attended one of dozens of institutions. But three of these schools are trying to halt the settlement relief. After their request for a stay was denied at the district court and at the appeals court level, the three schools — American National University, Everglades College, Inc., and Lincoln Educational Services — are now appealing to the Supreme Court.
The schools’ argument is that the Biden administration exceeded its legal authority in entering into the settlement agreement. The administration relied on compromise authority in the Higher Education Act, a sprawling federal statute governing much of the federal student aid system. Borrower advocates have pointed to the Higher Education Act’s compromise provision as a fallback if the Supreme Court rules against the Biden administration’s separate one-time student loan forgiveness plan, which was issued under a different legal authority. If the Supreme Court takes up the Sweet challenge, it could jeopardize this potential back-up option.
For now, the challengers’ request for a stay of settlement relief is before Justice Elena Kagan, an Obama appointee who has so far expressed general agreement with the Biden administration’s legal arguments on student loan forgiveness.
Further Student Loan Forgiveness Reading
Student Loan Forgiveness Timeline And Deadlines Change Again In New Updates To One-Time Adjustment
What Happens If The Supreme Court Strikes Down Biden’s Student Loan Forgiveness Plan?
Another Student Loan Forgiveness Challenge Heads To Supreme Court — Key Updates
453,000 Borrowers Approved For Student Loan Forgiveness Under Waiver As Processing Continues
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