A look inside the legal battle to stop Biden’s student loan relief
The antipathy many conservatives feel toward President Bidens student debt relief plan, which the nonpartisan Congressional Budget Office recently estimated will cost roughly $400 billion, is as vivid as many borrowers enthusiasm for it.
“The president isnt a king. Hes not an emperor. And I will hold him accountable if he does anything that is unconstitutional, attorney general of Arizona Mark Brnovich said in an interview with NPR. Brnovich delivered on that pledge on Thursday by filing a lawsuit to thwart Biden’s plan.
“I can assure you that my Republican colleagues and I will fight to the bitter end against this illegal, abusive use of the executive pen,” Rep. Virginia Foxx, R-N.C., said in a recent speech.
To put it briefly, fighting Biden’s debt relief plan in court has become a team effort. Brnovichs lawsuit is just the third this week. And it’s likely that in the near future, more lawsuits will be filed by conservative politicians, interest groups, and lawyers.
The Biden administration’s legal defense of student debt relief
In a memo defending Bidens plan, the U.S. Justice Department cited the Higher Education Relief Opportunities For Students Act, or HEROES Act, which President George W. Bush signed after the attacks of Sept. 11, 2001, as U.S. soldiers fought in Iraq and Afghanistan.
The act gave an incredible power to the U.S. secretary of education: the authority “to alleviate the hardship that federal student loan recipients may suffer as a result of national emergencies,” according to the Justice Departments memo.
A completely different national emergency—the COVID-19 pandemic—occurs after two decades.
Early in the pandemic, the Trump administration used the same HEROES Act authority to stop federal student loan payments and interest accrual. This helped a lot of borrowers who otherwise might not have been able to make ends meet due to COVID’s crippling effect on the economy.
In addition to extending the payment freeze through December, President Biden announced he would go above and beyond by waiving up to $10,000 in student loan debt for borrowers making less than $125,000 annually, and up to $20,000 for borrowers who meet that income threshold and received a Pell Grant to attend college. He did this by citing the same authority.
In the Biden administration’s view, Republicans should have objected to President Trump’s use of the same authority in 2020 if they believed that the debt relief was an abuse of power.
“That has not been challenged in court. It has not been found improper by a court,” Bharat Ramamurti, deputy director of the National Economic Council, said of the Trump-initiated payment pause after Bidens announcement. “Its the same statute that the previous administration used and that weve used, that we are now using, for this action.”
The case against student debt relief
Biden’s debt relief plan’s opponents have made it plain that they believe it to be an unlawful abuse of power.
They contend that Congress has the authority to control government spending and that the president cannot just pay off hundreds of billions of dollars’ worth of student loan debt without consulting Congress first.
“If Joe Biden or the Biden administration implement a policy that is unconstitutional, we will sue him,” Arizonas Mark Brnovich told NPR before he did just that.
The courts can only get involved . when a person files a lawsuit after being directly harmed by that action
One word sums up the issue for Brnovich and anybody else attempting to legally thwart Biden’s plan: standing.
“The courts can only get involved . when a person who has been directly harmed by that action brings a lawsuit,” states Abby Shafroth, the National Consumer Law Center’s director of the Student Loan Borrower Assistance Project.
Who might be harmed by Biden’s plan, which is intended to assist up to 40 million borrowers?
“Standing is really the major hurdle,” Brnovich conceded. Though its a hurdle, not a wall.
A very specific borrower could have standing to sue
Several types of plaintiffs could potentially clear that standing hurdle.
First, a borrower – though not just any borrower. The majority of borrowers who are eligible for debt relief must apply for it; the harm must be automatic. Thats not automatic.
However, about 8 million borrowers have sufficient income data on file with the U S. Education Department that they would be eligible for automatic debt relief. Of those, borrowers in as many as seven states (though probably fewer) might have to pay state income tax on their debt relief, which could be as much as $500 to $1,000 and be beyond their means.
In a lawsuit filed Tuesday, borrower Frank Garrison, an attorney based in Indiana, argued he would be harmed by the presidents plan. The suit was filed by the conservative Pacific Legal Foundation, which also employs Garrison.
Garrison claims that under Biden’s plan, he should be eligible for automatic debt relief of up to $20,000. However, Indiana is among the states that would impose income taxes on that relief. Garrison expects that all of his debts will be forgiven through the Public Service Loan Forgiveness program in four years, so he does not want the relief now or the tax hit. This is relief that Indiana will not tax.
When the lawsuit was submitted on Tuesday, Garrison appeared to be directly harmed. However, a few hours later, NPR was informed by White House spokesperson Abdullah Hasan in a statement:
“For one basic reason, the claim is unfounded: No one will be compelled to receive debt relief. Anyone can choose to opt out if they do not want debt relief. Since opponents of the debt relief plan are doing everything in their power to prevent this program that will give working families much-needed relief, why would this group bring up such a baseless claim? “.
Prior to now, neither the Department of Education nor the White House had stated that debtors would have the option to refuse debt relief.
Shafroth says, “That undercuts the whole theory that courts need to intervene here.”
And it seems that the judge in Garrison’s case concurs with Shafroth.
He wrote, “in view of the fact the Department of Education exempted Plaintiff from receiving debt relief, [the court] finds Plaintiff cannot be irreparably harmed,” in response to Garrison’s request on Thursday for the court to halt Biden’s debt relief plan. “.
Banks and loan servicers could also have standing to sue
While Thursdays denial appeared to close the door on one legal strategy, another opened. Six states sued the Biden administration on behalf of a handful of state-based loan servicers and investment entities that manage old, privately-held federal loans, known as FFEL loans.
Although FFEL loans are issued, held, and managed by third parties, such as private banks and these state-based organizations like Missouri’s MOHELA, they are guaranteed by the federal government.
Up to the 2010 termination of the FFEL program, these federal loans served as a mainstay. More than 4 million borrowers still have commercially held FFEL loans as of right now, according to federal data. The department’s website informed FFEL borrowers that they could combine these loans into federal Direct Loans and be eligible for relief up until Thursday.
The six states contend in Thursday’s lawsuit that allowing borrowers under the FFEL program to consolidate their previous loans in order to be eligible for cancellation could be detrimental to these state-based lending organizations.
The complaint claims that “the entity is harmed by the consolidation of MOHELA’s FFELP loans because it is deprived of an asset (the FFELP loans themselves) that it currently owns.” “The entity is harmed by the consolidation of MOHELA’s FFELP loans because it will no longer receive the regular interest payments that those loans produce.” “.
The department responded by discreetly changing its advice for FFEL borrowers on Thursday morning, probably out of concern for the policy’s legal susceptibility. According to a government official who spoke with NPR, the action may prevent about 800,000 FFEL borrowers from receiving the relief that was promised.
Not only did the abrupt shift enrage borrowers, but advocates who have long been ardent proponents of debt relief
According to Aaron Ament, president of the nonprofit organization Student Defense, which advocates for borrowers, “the Biden plan would provide life-changing relief to 40 million Americans.” “I believe that whatever they do, they will be the target of politically motivated lawsuits. However, it would be fantastic to see the administration firmly defend their plan rather than playing whack-a-mole by removing relief for some borrowers. “.
It’s unclear yet whether the department’s Thursday policy change, which reduces the amount of FFEL borrowers eligible for debt relief, will undermine these states’ claims or lessen the likelihood that other organizations that oversee and profit from FFEL loans will take legal action to oppose relief.
And then there’s Arizona
Also on Thursday, Arizona Attorney General Mark Brnovich filed his lawsuit to stop debt cancellation, and he took a slightly different tack from the previous suits.
Similar to the six-state case, he contends that debt relief will cause Arizona to lose significant future tax income. Additionally, he claims that relief will harm Arizona’s economy by escalating inflation, raising the cost of borrowing for the state, and raising the expense of law enforcement efforts to combat debt relief scammers.
However, the most intriguing damage mentioned in Brnovich’s complaint might be the first one. He basically claims that the Public Service Loan Forgiveness program, which dozens of attorneys in his office are qualified for, will have no effect if widespread debt relief is implemented.
“Harmed [the Office of the Attorney Generals] ability to recruit legal talent, and directly makes it less lucrative for lawyers to work for the OAG,” he writes, merely clearing these attorneys’ debts. “.
It’s too early to tell how those arguments will be received by the judge.
These are only the lawsuits that have been submitted thus far.
Job Creators Network (JCN) president and CEO Alfredo Ortiz told NPR that his organization “absolutely” plans to file a lawsuit, though he wasn’t comfortable sharing specifics.
“I believe the case has very clear merits, and we feel very comfortable that our legal strategy is sound and will be found to have standing.” “.
According to Ortiz, they are holding off on filing until the department makes its relief application available in early October.
What a lawsuit could mean for borrowers
Brnovich and other opponents state that if the lawsuit is permitted to move forward, their top goal would be to obtain an injunction. That would entail requesting that the court prevent the Biden administration from waiving any outstanding student loan balances.
Uncertainty surrounds whether an injunction could be issued prior to some borrowers having their debts discharged, confusing the remaining borrowers who will then have to wait for the lawsuit to conclude.
“We do not want to put a number of people in a precarious situation regarding this,” Brnovich stated to NPR. “And so I think its incumbent on all of us . to file a lawsuit as quickly as possible. So that way there isnt any uncertainty. Naturally, that would entail obtaining an injunction to prevent the president from “.
We do not wish to put a number of people in a precarious situation regarding this. And so I think its incumbent on all of us . to file a lawsuit as quickly as possible.
Plaintiff Frank Garrison requested in his filing on Tuesday that the department not be allowed to cancel any loans under the new Biden plan. The judge swiftly rejected this request.
Important to note, according to Shafroth, is that “the government would still be able to proceed with offering debt relief to the majority of people even if a court granted a preliminary injunction. “.
At this point, a few things are clear:
Notes are being taken by conservative legal groups in order to fortify the next lawsuit. Garrison’s case was undermined by the department’s addition of an opt-out, so that legal avenue may be closed.
We’ll soon find out how the court rules on the department’s recent change to its FFEL regulations and whether or not the abrupt action undermines the six-state lawsuit opposing debt relief.
As for the Education Department, it is evident that it is prepared to adjust quickly in order to preserve the President’s debt relief plan for the majority of borrowers.
If Brnovich, Ortiz, or other opponents of debt relief are successful in filing a lawsuit—or lawsuits—in federal court, there’s a chance that this legal battle will reach the U.S. S. Supreme Court.
FAQ
Why don’t people want student loan forgiveness?
One-time student loan forgiveness, according to opponents, is a stopgap measure for a much more serious issue that hasn’t been addressed: the rising expense of a college education. College tuition is only getting more expensive.
Why did the Supreme Court strike down student loan forgiveness?
The court declared that “the ‘economic and political significance’ of the Secretary’s action is staggering by any measure,” rejecting the government’s argument that the education secretary would have such authority to rewrite the statute and erase $430 billion in student debt. ” The court reasoned that the Congress that enacted the .
Who benefits from forgiving student loans?
Federal student debt forgiveness would be available to borrowers with undergraduate loans that are more than 20 years old and those whose loan balances have increased as a result of interest under Department of Education-proposed regulations.
Read More :
https://www.conahec.org/news/case-against-student-loan-cancellation
https://www.npr.org/2022/09/30/1126083883/bidens-plan-to-cancel-some-student-debt-turns-into-a-legal-fight