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  • Writer's pictureMagdeline Gomes

Student Loan Relief Update

The student loan debt crisis in America impacts the lives of many university students (Mikael Kristenson/Unsplash).

President Joe Biden’s student loan forgiveness plan has been blocked from proceeding by the U.S. Court of Appeals. The plan is one that can impact millions of Americans, as Biden had intended to cancel up to $20,000 in student loan debt for Pell Grant recipients and $10,000 for other borrowers who earn up to $125,000 annually or are part of a household with annual incomes no higher than $250,000.

Student Loan Forgiveness Lawsuits

The main challenge Biden's student loan plan is facing is a suit filed by Republican attorneys across six states (Arkansas, Iowa, Kansas, Missouri, Nebraska, and South Carolina). The basis of their argument is that the plan will inevitably hurt the states’ tax revenues and exceed the President's congressional power. On October 20, a court judge threw out that case, claiming that they lacked the standing to sue. However, the six states appealed the decision to the Eighth Circuit and received a 3-0 decision in their favor.

The Eighth Circuit ruled that there was legal substance for Missouri to challenge due to the state's Higher Education Loan Authority (MOHELA), a quasi-state outfit dedicated to servicing federal student loans. MOHELA funds state scholarships and would lose its revenue, the lawsuit says. The appeals court granted a temporary stay, blocking any loan forgiveness. Solicitor General Elizabeth Prelogar, a representative of the federal government at the Supreme Court, criticized, "The Eighth Circuit’s erroneous injunction leaves millions of economically vulnerable borrowers in limbo, uncertain about the size of their debt and unable to make financial decisions with an accurate understanding of their future repayment obligations." Furthermore, she opposes the MOHELA argument, stating its relationship with the state was too tenuous to convey standing. Additionally, a U.S. district judge in Texas has also halted the program in a separate lawsuit. Due to this order, nobody has received any forgiveness.

Biden’s Request of the Supreme Court

On November 18, Biden's administration filed an emergency appeal to the Supreme Court, asking to end the lower court's injunction to bring the legal dispute one step closer to being revived.

The government won't be able to begin forgiving student debt due to the separate ruling in the Texas case, even if the Supreme Court rejects an emergency appeal about the program for a third time. The administration requested a temporary stay of that decision from the U.S. Court of Appeals for the Fifth Circuit on November 17. Biden implemented the relief plan in accordance with the Health and Economic Recovery Omnibus Emergency Solutions (HEROES) Act. This was passed in the wake of the events of 9/11, leading to the development of an anti-terrorism military offensive led by the United States.

The act grants the administration the authority to forgive student debt in relation to military operations or national emergencies. They insist that this additionally grants them the right to forgive American students' loans due to financial hurdles inflicted upon them by the COVID-19 pandemic. Opponents of Biden's plan argue that the scope of loan cancellation thrusts a heavy economic and political impact; precise congressional authorization is essential for this plan to be deemed valid in Republicans' eyes.

The prospect of moving the case to the merits docket, where it would hear an oral argument, was also brought up by the government on November 18. If this option plays out, the court will most likely take several months to address questions raised by the litigation. In the end, it would make a more rapid choice regarding what to do short term.

Biden's proposal would cost $400 billion, according to a nonpartisan estimate from the Congressional Budget Office. The Education Department guesses around that price range, asserting an assumption of $379 billion.



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