Will student loan debt forgiveness ever happen? Two months after the announcement of President Joe Biden’s plan to discharge up to $20,000 in student loan debt for eligible borrowers, and three weeks after the application was launched, the program sits in legal limbo, waiting for court decisions in multiple lawsuits trying to stop debt cancellation.
On Oct. 21, only two days before borrowers expected actual debt cancellation to begin, a federal appeals court paused the student loan debt relief plan with an “administrative stay” prohibiting payments indefinitely until the court rules on the case. In another lawsuit, two borrowers from Indiana filed an emergency motion for an injunction with the Supreme Court this week. In all, there are six lawsuits currently challenging the legality of the White House plan.
Learn about all the legal challenges to the onetime student loan debt relief plan and how they could affect the timing of forgiveness for eligible student loan borrowers. For more about student loan forgiveness, learn how debt cancellation might change your credit score and whether you’ll have to pay state taxes on your discharged loans.
What are the legal arguments against the White House student loan debt relief plan?
The legal arguments against student debt loan forgiveness have so far fallen into five main buckets: claims of harm to borrowers; claims of harm to states and state agencies; claims of harm due to the devaluation of Public Service Loan Forgiveness; claims that the program violates the Administrative Procedure Act; and claims that the program is unconstitutional. Many of the lawsuits include multiple claims of damage.
One of the biggest challenges for those opposing student loan debt relief in court has been finding plaintiffs with legal standing who would suffer direct harm from the student loan forgiveness program. That was first demonstrated by the case of Garrison v. US Department of Education: Borrower Frank Garrison claimed he was harmed because his automatic student loan debt cancellation would result in a state tax burden in Indiana. Garrison’s legal standing was seriously damaged when the Department of Education announced that borrowers could opt out of debt forgiveness. The case is still under appeal.
What are the biggest court challenges to the student loan debt relief plan?
The biggest lawsuit objecting to onetime student debt relief right now is Nebraska v. Biden, where six Republican-led states (Arkansas, Iowa, Kansas, Missouri, Nebraska and South Carolina) claim that the White House plan will hurt their state tax revenues and state-based loan agencies.
The state-based lawsuit is the first legal challenge so far that’s had a concrete impact on the debt forgiveness plan. Only one day after the case was dismissed for lack of standing by a judge in the Eastern District of Missouri, a federal circuit court paused the program indefinitely pending its decision on the appeal.
Other lawsuits against student loan debt relief haven’t had much luck yet in stopping the plan.
As mentioned above, Garrison v. US Department of Education — which claimed the plaintiff would be injured by state taxes on automatic debt relief — was dismissed by the District Court for the Southern District of Indiana. The decision has been appealed, but the case seems to have little chance of succeeding.
Similarly, in Brown County Taxpayers Association v. Biden, a Wisconsin court dismissed a lawsuit from taxpayers who claimed they would have to pay more taxes because of the student loan debt relief plan. The court ruled that there is no such thing as “taxpayer standing.”
The taxpayers group also claims the debt forgiveness plan is unconstitutional. It filed emergency motions with both the Seventh Circuit Court of Appeals and the US Supreme Court to stop the plan, but both motions were denied without explanation.
Three more legal challenges to the student loan debt relief program are still going through initial court proceedings.
The first, Arizona v. Biden, takes a slightly different tack than the Nebraska lawsuit. Led by Arizona Attorney General Mark Brnovich, the lawsuit makes three claims of injury. It says the state will lose tax revenue because student loan debt forgiveness can’t be taxed until 2025; the program will increase inflation, which hurts the state’s economy; and recruiting for government jobs will be hurt by the devaluation of the Public Service Loan Forgiveness program. Arizona has not filed for a temporary injunction, and court hearings on the case have not yet begun.
A libertarian think tank is also claiming that it will be injured by onetime student loan debt relief’s weakening of the Public Service Loan Forgiveness program, making it harder for it to recruit employees who would qualify. The defendants in Cato Institute v. US Department of Education were served last week, and court hearings should begin soon.
Finally, in Brown v. US Department of Education, two Texas borrowers — a plaintiff with non-federally held FFEL loans and a plaintiff who didn’t receive a Pell Grant — claim that the debt relief plan should be struck down because it didn’t hold a “notice-and-comment period” as required by the Administrative Procedure Act. The case began hearings this week.
How does the White House legally defend the onetime student loan debt relief program?
The Department of Education contends that its onetime student loan debt relief plan is protected by the Higher Education Relief Opportunities for Students Act of 2003, also known as the HEROES Act. That law authorizes the Secretary of Education to change any regulations related to any student financial assistance programs for Americans who “suffered direct economic hardship as a direct result of a war or other military operation or national emergency.”
Biden announced his one-time student loan debt relief plan with Secretary of Education Miguel Cardona on Aug. 24.
Washington Post/Getty Images
The White House says that the COVID-19 public health emergency gives the Department of Education the legal basis to cancel student loan debt under the HEROES Act.
The US has been in a public health emergency ever since the Secretary of Health and Human Services declared one because of COVID-19 on Jan. 31, 2020. That emergency declaration has been extended many times since, most recently on Oct. 13, 2022.
When will the lawsuits against student loan debt forgiveness be resolved?
Legal experts are split about the impact of lawsuits on the plan to discharge $10,000 to $20,000 in student loan debt. Regardless, no student loan debt will be canceled under the current plan until the Eighth Circuit Court of Appeals issues its ruling on the motion for a temporary injunction.
That federal appeals court of 11 judges is dominated 10-1 by Republican appointees. While arguments on the injunction motion were due from the states and the Department of Education the week of Oct. 24, there’s no indication of when the court will issue its ruling.
In an interview with Time NextAdvisor, student financial aid expert Mark Kantrowitz predicts, “there will be a slight delay,” but “the state attorney generals are unlikely to prevail in their appeal.”
On Thursday, Oct. 27, Biden went even further in an interview with NewsNation, saying, “We’re gonna win that case. I think in the next two weeks you’re going to see those checks going out.” In a speech in New Mexico on Nov. 3, Biden said that, “by the end of this week, the Department of Education will have approved the applications of 16 million Americans and sent the necessary paperwork to student loan servicers.”