Lawsuits Threaten Biden’s Debt-Relief Plan

Inside Higher Ed

Katherine Knott

October 6, 2022

A flurry of lawsuits threaten the Biden administration’s plans to forgive up to $20,000 in federal student loans for eligible Americans.

Four lawsuits seeking to block the student loan forgiveness plan have been filed in the last week, but more are expected. This first group highlights the challenges facing plaintiffs—all make similar arguments as to why the plan is unlawful, but the lawsuits are taking different approaches to prove the plaintiffs have been or will be harmed by debt relief and thus have legal standing to sue.

There’s a borrower who said he would face a tax penalty under the plan. In one suit, six states, including Missouri, are alleging financial harm to state agencies. The Arizona attorney general took a broader approach, arguing in his lawsuit that student debt relief would harm the state’s economy by reducing taxes collected and increasing inflation. Most recently, a group of taxpayers in Wisconsin filed suit, saying the plan would result in higher taxes and a less prosperous country.

A hearing on the lawsuit brought by the six states will be held next week. In the meantime, the Biden administration has agreed not to forgive any student loans before Oct. 17.

Still, the administration has stood by its plans since the lawsuits were filed, and President Biden was defiant over the weekend during a Congressional Black Caucus Foundation event.

“It’s a game changer,” Biden said. “And I don’t want to hear a word from those members of Congress, if you notice, whose families got tens of thousands of dollars and several million dollars in pandemic relief loan forgiveness. The same ones criticizing. Give me a break.”

The Plan

The department announced in August that it would forgive up to $10,000 in federal student loans for Americans earning less than $125,000 or $250,000 for couples filing joint tax returns. Pell Grant recipients would be eligible for an additional $10,000 in debt relief.

But the lawsuits have already led to responses from the U.S. Department of Education, which said last week that commercially held Federal Family Education Loans would not be eligible for debt relief—a move that affected a few million people who had loans before 2010. Borrowers who had those privately held federal student loans and consolidated into the Direct Loan program before last Thursday could still have their loans forgiven, though. Department officials haven’t said publicly whether that decision was in response to one of the three lawsuits, but the change was announced the same day as a lawsuit from six states that focused on privately held federal student loans.

Advocates for debt relief are pushing the administration to extend debt relief to all federal student loans.

Continue Reading