WASHINGTON (AP) — Six Republican-led states are suing the Biden administration to stop its plan to cancel student loan debt for tens of millions of Americans, accusing it of exceeding its executive powers.
It is at least the second legal challenge this week on President Joe Biden’s sweeping proposal in late August when he said his administration would forgive up to $20,000 in educational debt for a large number of borrowers. The announcement, after months of internal deliberations and pressure from liberal activists, became immediate political fodder ahead of the November midterms while fueling Conservative arguments over legality.
When the lawsuit was filed, the Biden administration quietly rolled back eligibility rules for debt relief and eliminated a relatively small group of borrowers who are the subject of legal debates in the lawsuit. Those borrowers whose loans are supported by the federal government but are owned by private banks — a relic of defunct lending programs — are now ineligible for Biden’s debt relief, the Education Department said.
In the lawsuit, which will be filed Thursday in federal court in Missouri, Republican states argue that Biden’s termination plan is “not remotely tailored to address the impact of the pandemic on federal student loan borrowers,” as required by the 2003 federal law Administration used as legal justification. They point out that in an interview with CBS’ 60 Minutes this month, Biden declared the COVID-19 pandemic over but still uses the ongoing public health emergency as justification the far-reaching debt relief.
“It’s obviously unfair to burden hard-working Americans with the credit debt of those who have decided to go to college,” Arkansas Attorney General Leslie Rutledge, who heads the group, said in an interview.
She added: “The Department of Education has a legal obligation to collect the balance due on loans. And President Biden has no authority to override that.”
The states of Iowa, Kansas, Missouri, Nebraska and South Carolina joined Arkansas to file the lawsuit. Iowa has a Democratic attorney general, but the state’s Republican Gov. Kim Reynolds signed on behalf of the state. States argue that Missouri’s loan servicer is facing “a series of ongoing financial damages” as a result of Biden’s decision to foreclose on loans. Other states that have joined the lawsuit argue that Biden’s forgiveness plan will eventually disrupt state coffers.
Specifically, the lawsuit alleges that the Missouri loan servicer will lose revenue from loans it holds through the Federal Family Education Loan Program — a program that allowed private banks to issue and service federally-backed student loans until the program was dissolved in 2010 became.
The Department of Education updated its website on Thursday, saying that borrowers on federal loans owned by private banks, including the FFEL program and Perkins loans, are now ineligible unless they already have their loans consolidated into the government’s direct lending program before Thursday. The change will reverse eligibility for about 770,000 borrowers, the department said.
“Our goal is to bring relief to as many eligible borrowers as quickly and easily as possible, and this will allow us to achieve that goal as we continue to explore additional options available under legislation to help borrowers with private FFEL loans and Perkins Facilitate granting loans,” the department said in a statement.
Still, the government has long said it was confident the forgiveness program would survive court challenges.
“Republican officials from these six states stand with special interests and are fighting to halt relief for borrowers buried under mountains of debt,” White House spokesman Abdullah Hasan said Thursday. “The President and his administration are legitimately giving working-class and middle-class families breathing space as they recover from the pandemic and prepare to resume loan payments in January. ”
Biden’s forgiveness program will forgive $10,000 in student loan debt for those earning less than $125,000 or for households earning less than $250,000. Pell Grant recipientwho are typically more financially needy will have an additional $10,000 in debt forgiven.
The government also said it would extend the current pause in federal student loan repayments – which was suspended more than two years ago just before the pandemic began – until the end of the year.
The administration almost immediately faced legal challenges to its plans, with conservative attorneys, Republican lawmakers and pro-business groups claiming that Biden exceeded his powers by taking such sweeping measures without Congressional approval.
Democratic lawmakers, fighting tough re-election battles, also distanced themselves from the student loan plan, as Republican officials called it an unfair government giveaway to relatively wealthy people at the expense of those not pursuing higher education.
In their lawsuit, Republican attorneys general also allege that the forgiveness program violates the Administrative Procedures Act, which sets out how federal agencies should make regulations to ensure executive branch policies are well reasoned and explained.
“The President has no authority to substitute himself for Congress,” Rutledge said in the interview. “These actions must be taken by Congress and it cannot override that.”
The legality of the plan justifies the Biden administration citing a post-Sept. 11, 2001, law is intended to help military members who, according to the Justice Department, allow Biden to reduce or erase student loan debt during a national emergency. However, Republicans argue that the government is misreading the law because some of the pandemic no longer qualifies as a national emergency.
Another lawsuit against Biden’s student loan program was filed this week in federal court in Indiana by the Pacific Legal Foundation, a libertarian legal entity that employs an attorney who says the forgiveness plan would hurt him. Attorney Frank Garrison says paying off his current debt burden will trigger a tax liability for the state of Indiana, which is one of at least half a dozen states where the forgiven loan amounts are subject to government taxes.
A federal judge on Thursday denied Garrison’s request to temporarily block Biden’s plan, saying there was no evidence he would be “irreparably harmed” by the cancellation. Garrison was given until October 10 to revise his argument.
The White House dismissed the lawsuit as unfounded because any borrower who does not want debt relief can opt out. Still on track to unveil the forgiveness plan application in early October, the Department of Education sent an email to borrowers on Thursday explaining how to prepare to apply. The email noted that applicants are not required to submit supporting documents.
Republicans have also picked up on the price tag of the Biden plan and its impact on the nation’s budget deficit. The Congressional Budget Office said this week the program will Cost about $400 billion over the next three decades. The White House countered that the CBO’s estimate of how much the plan will cost in the first year alone, $21 billion, is lower than originally thought.
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