The fate of President Joe Biden’s student loan forgiveness program and a federal court case against the Education Secretary during a World Bank crisis
The fate of President Joe Biden’s student loan forgiveness program would be in the hands of nine relatively wealthy people who graduated from a short list of elite private schools.
The program will now exclude borrowers whose federal student loans are guaranteed by the government but held by private lenders. According to the administration, the change could affect hundreds of thousands of people.
“Borrowers with privately held federal student loans who applied to consolidate their loans into Direct Loans before September 29, 2022 will obtain one-time debt relief. Only a small percentage of borrowers in the FFEL program have loans. The statement said this is a different program than Direct Loans.
Attorneys general from Missouri, Arkansas, Kansas, Nebraska and South Carolina along with legal representatives from Iowa filed a lawsuit in a federal court in Missouri.
There were two lawsuits that were dismissed by Judge Henry E. Autrey of the Federal District Court in St. Louis. The suit accused Mr. Biden of having overstepped his authority under a 2003 federal law that allowed the education secretary to modify financial assistance programs for students when there was a war or national emergency.
The White House says that Republican officials in six states are standing in the way of relief for borrowers buried under mountains of debt.
“The President and his administration are lawfully giving working and middle class families breathing room as they recover from the pandemic and prepare to resume loan payments in January,” he said.
A Public Interest Lawyer’s Case Against the Biden Administration over the Student Loan Forgiveness Expansion: The Case against the President’s Office of Budget Responsibility
Earlier this week, a public interest lawyer who is also a student loan borrower, sued the Biden administration over the student loan forgiveness plan, arguing that the policy is an abuse of executive power and that it would stick him with a bigger state tax bill.
If a qualifying borrower also received a federal Pell grant while enrolled in college, the individual is eligible for up to $20,000 of debt forgiveness. A family size and income are among factors that determine the amount of money a low-income student can get for college. These borrowers are also more likely to struggle to repay their student debt and end up in default.
Two days after its own analysis was released, the Biden administration argued that the CBO’s cost estimate should be looked at over a 30-year time period. It said the program will cost an average of $30 billion per year over the next decade and $379 billion over the course of the program.
It’s difficult to calculate the amount of student debt forgiveness because loans are paid back over a number of years. The CBO should be looked at over a 30-year time frame according to the White House.
The Heroes Act, which was enacted in the wake of the September 11 terrorist attacks, “provides the Secretary broad authority to grant relief from student loan requirements during specific periods,” including a war, other military operation or national emergency, according to the memo.
A lawsuit was filed in October by a conservative group on behalf of two people who did not qualify for debt relief.
Abby Shafroth, staff attorney at the nonprofit National Consumer Law Center, previously told CNN that she believes the merits of the Biden administration’s legal statutory authority are strong and that it’s unclear who would have legal standing to bring a case and want to do so. It is necessary to cause an injury to a person to justify a lawsuit in order to bring a case.
If the standing hurdle is cleared, a case would be heard by a district court first – which may or may not issue a preliminary injunction to prevent the cancellation from occurring before a final ruling is issued on the merits of the hypothetical case.
A Step in the Right Direction to Combat Fraud in the Biden-Regulated Administratorial State: An Educated, Open-Source Student Loan Counseling Program
At the heart of the case is the Department of Education’s authority to forgive the loans. Several conservative justices have pointed out that agencies with no accountability to the public have become too powerful, upsetting the separation of powers. They have moved to cut back on the so-called administrative state.
The Biden administration is increasing its efforts to fight scams aimed at taking advantage of borrowers applying for its expansive student loan forgiveness plan, senior administration officials announced Wednesday.
“Due to a vendor error, you recently received an email with a subject line indicating your application for the one-time Student Loan Debt Relief Plan had been approved. The subject line was inaccurate,” reads an email sent Tuesday and obtained by CNN.
“This Biden forgiveness thing is Christmas, Thanksgiving and the Fourth of July all rolled into one for the scammers,” says Betsy Mayotte, the president of the Institute of Student Loan Advisors, a nonprofit that offers free counseling to borrowers.
The release today is a step in the right direction. There are only two things the community can do to prevent fraud. One is to educate borrowers and the other is enforcement.”
The administration’s attempts to stop these types of scam are largely made up of borrowers themselves, and much of the announced plans focus on teaching the public how to catch and report them.
“It’s an all-government approach, because what we know is it’s already happening, that there are evil people who will be trying to use a program like this, that’s trying to help people, and run their own frauds and scams to somehow get money or personal information about people,” says Richard Cordray, the chief operating officer of Federal Student Aid, a branch of the Education Department.
“What we’re trying to do here is to get as much relief as possible to the hard working former students who deserve this relief,” Cordray added. We are moving at warp speed to get the application done.
Loan forgiveness for borrowers: a key role of trusted sources in preventing scams and protecting borrowers from the FTC’s era
To be notified when an application is available, borrowers should sign up, as well as to make sure their loan servicers have their contact information, and to report any scams they encounter to the FTC.
One way to avoid scam vulnerability in the first place would be to release more specific information on what the forgiveness application will look like or when to expect it.
The administration said that developing a secure site for borrowers to apply for debt relief and have the most up to date information from trusted sources is one of the most critical ways to prevent scam and protect borrowers.
Senior administration officials gave a brief presentation Wednesday, but didn’t give any more details on the application process or when it will be live.
“In one way, it’ll help,” she says. “But if I know the scam artists, they’ll use that as an opportunity.” You have to act fast. It is not long. We can help you to make sure that you don’t forget about it. So it’s a catch-22.”
Online Application for Federal PLUS Loans Liated to Students and Parents: The U.S. Department of Education, IRS, Tax Foundation, and the Arizona Attorney General
In addition to federal Direct Loans used to pay for an undergraduate degree, federal PLUS loans borrowed by graduate students and parents may also be eligible if the borrower meets the income requirements.
The online application will be short, according to the Department of Education. Borrowers won’t need to upload any supporting documents or use their Federal Student Aid ID to submit the application.
“Once you submit your application, we’ll review it, determine your eligibility for debt relief and work with your loan servicer(s) to process your relief. We’ll contact you if we need any additional information from you,” the department said an email to borrowers last week.
There are a handful of states that may tax the debt discharged under Biden’s plan if state legislative or administrative changes are not made beforehand, according to the Tax Foundation.
Republican states are leading the charge. In addition to the lawsuit filed by six Republican-led states that say they could be damaged financially by the forgiveness plan, the Arizona Attorney General has also filed a lawsuit.
According to the lawsuit, the loan forgiveness policy could have a negative effect on the state’s tax revenue. The complaint also argues that the forgiveness policy will hurt the attorney general office’s ability to recruit employees. Currently its employees may be eligible for the federal Public Service Loan Forgiveness program, but some potential job candidates may not view that as a benefit if their student loan debt is already canceled, the lawsuit argues.
It said in an email that you should only work for the United States Department of Education and our loan servicers.
Those who meet the program’s annual income limits — up to $125,000 per individual or $250,000 per household — can apply online at https://studentaid.gov/debt-relief/application.
The Education Department, which holds $1.6 trillion in student loan debt and will manage the cancellation process, quietly opened the application website for testing on Friday night. Mr. Biden said eight million people had applied by Monday. The form is available in English and Spanish, and is intended to work on desktop computers and mobile devices.
There are also other legal challenges to the program. Justice Amy ConeyBarrett denied two separate requests to challenge the program.
The case will be heard in the Seventh Circuit. A federal district court judge dismissed the lawsuit earlier this month, on ground that the taxpayer group lacked “standing.” In short, the challengers, simply as taxpayers, could not show a personal injury as is required to bring a suit. In 2007, the Supreme Court said, “if every federal taxpayer could sue to challenge any Government expenditure, the federal courts would cease to function as courts of law and would be cast in the role of general complaint bureaus.”
She has the authority to rule on the case because the lower court did so. She didn’t want to send the matter to the full court. Her denial was the only one on the court’s docket.
Six Republican-led states have brought that lawsuit to the appeals court. A lower court judge dismissed the lawsuit on October 20, ruling that the states did not have the legal standing to bring the challenge.
The states are going to appeal. The case will go to the 8th Circuit Court of Appeals, where it is likely to face conservative judges.
The Biden administration is facing lawsuits from conservative groups, which include the Job Creators Network Foundation.
Application to the Brown County Taxpayers Association (BCTA) Web Site: How easy is it to register and apply to be a student loan officer?
Justice Amy Coney Barrett, who is assigned to the Seventh Circuit Court of Appeals, was the one who received the emergency application. Her decision was agreed to by the other justices.
Immediately after the Supreme Court action, a challenge by six GOP-led states to the program was thrown out by a federal district court.
The Brown County Taxpayers Association is a group of around 100 taxpaying individuals and business owners that advocate for conservative economic policy.
The plan has been challenged by several other conservative organizations. Those lawsuits are percolating in various lower courts, though they may face similar difficulty showing a specific harm to stay alive.
Some aspects of the situation are more difficult to understand. Student loan forgiveness is subject to intense political disagreement and multiple lawsuits. A temporary stay was issued by a federal appeals court on Friday. The Biden administration made it clear that it would like borrowers to apply. The White House press secretary said that the order didn’t reverse the trial court’s dismissal or suggest that the case has merit.
The first weekend the website was open, there were eight million applications submitted, but six people successfully negotiated the site on the day it was launched. As professors of public policy, we have shared our research on how administrative burdens make vital public services harder to access with the Biden administration, and we spoke with Department of Education officials about how many people might participate in the program (though we played no role in helping design this process or the application itself). Even so, it was astonishing for us to see just how simple it is to apply for debt relief.
The streamlined application shows what is possible if government gives priority to the public in the delivery of public services. In a couple of minutes, you can complete the form. It works on a computer and a phone in both Spanish and English. It’s three simple pages: a welcome page, a form and a confirmation page on which applicants attest that they are eligible. Beneficiaries do not have to create an account with a password, a seemingly small step that can actually discourage people from starting. Applicants need five pieces of information: name, social security number, date of birth, phone number and email address. That’s it.
Student Loan Forfeit Appeals to the High Court: Do Congress Really Need a Major Questions Doctrine? Comment on Pittman’s Case
But the Texas federal judge found that the law does not provide the executive branch clear congressional authorization to create the student loan forgiveness program.
But for Pittman, the central problem with the program is that its sheer economic size required clearer authorization from Congress than that provided by the 2003 statute on which the executive branch is relying. Invoking the Supreme Court’s new and deeply contested “major questions doctrine,” Pittman’s ruling would, if left intact, make it impossible for the program to be rescued without Congress stepping in.
The Justice Department said Thursday that it would appeal the decision, and White House press secretary Karine Jean-Pierre said in a statement that “we strongly disagree with the District Court’s ruling on our student debt relief program.”
Jean-Pierre said the Department of Education would hold onto the information for borrowers who already have been approved for relief so they can be processed quickly.
They argued that they could not object to the program’s rules because the administration didn’t put it through a formal notice and comment rule making process.
Elaine said the ruling protects the rule of law, which she said requires all Americans to be heard by the federal government.
Editor’s Note: Steve Vladeck is a CNN legal analyst and a professor at the University of Texas School of Law. He is the author of the upcoming book “The Shadow Docket:How the Supreme Court uses stealth rulings to Amass power and Undermine the Republic.” The opinions expressed in this commentary are his own. View more opinion at CNN.
The Biden administration has already announced its intent to appeal Pittman’s ruling to the ultra-conservative US Court of Appeals for the Fifth Circuit, and it’s likely that whoever loses there will take the matter to the Supreme Court. So Pittman is unlikely to have the last word. It is still worth remembering that since every other court to date has held it doesn’t exist, it is worth taking a step back to reflect on which lengths Pittman went to find standing.
Standing for the Judiciary’s Proper Role in the Laws of the U.S. Constitution, a Critique of Justice Alito
The standing of the case is dependent upon three elements, one of them being that the lawsuit shows an “injury in fact” and that the courts can give them at least some compensation for their injuries.
Standing is an important doctrine and a technical one. Justice Samuel Alito wrote in an opinion that the judiciary has no more important principle than the system of government.
It is not the federal courts job to answer hypothetical questions or resolve policy disputes. Only if a party can show how they’ve been harmed by the challenged policy in a manner that is concrete and particularized – real and discrete – will they (usually) be allowed to challenge it.
If the complaint is just that the government is acting unlawfully in a way that doesn’t affect plaintiffs personally, that’s a matter to be resolved through the political process – not a judicial one. The function of Congress and the Chief Executive is to vindication the public interest in Government compliance with the Constitution and laws.
“As a general matter, it is much harder to challenge a governmental action that does something nice for somebody else than a governmental action that harms you,” Adler observes. So the states have had to be “creative in terms of figuring out how to identify an impact on them from the forgiving of student loans to other people.”
There is a classic kind of grievances that the Supreme Court has held federal courts lack the power to resolve, like when a taxpayer tried to file a suit against the CIA in order to get a public accounting of its activities.
For if Justice Alito was right that “no principle is more fundamental to the judiciary’s proper role in our system of government” than the idea that courts can only decide cases that present actual, justiciable controversies between adverse parties, then that principle ought to prevail even against the most strenuous (if not well-taken) objections to the government policy being challenged. Otherwise, the courts aren’t acting as courts; they’re just taking sides in policy debates that no one elected them to resolve.
The Second Case of State-of-the-Play Action against the Secretary of Education’s Plan to Provide Dept Relief to Students Under the Covid-19 Disaster
As things stand, the payment pause will last until 60 days after the litigation over the loan forgiveness program is resolved. If the program isn’t put in place and litigation isn’t resolved by June 30, payment won’t resume for 60 days.
The administration asked the Supreme Court to review lower court orders blocking the student debt relief program, and Tuesday’s extension will hopefully alleviate uncertainty for borrowers.
The pause on all payments should be over by 2022, according to the Secretary of Education in the Biden administration. Fearing that the resumption of payments would put many lower-income borrowers at heightened risk of loan delinquency, the administration said it would offer relief up to $20,000 to approximately 40 million working and middle-class borrowers.
The US Supreme Court announced on Monday that it will hold arguments in a second case in February concerning President Biden’s student loan forgiveness program, which is currently on hold.
The challenge was brought by two borrowers who were denied an opportunity to comment on the Education Secretary’s decision to give targeted student loan debt relief to some.
The justices have said they will hear arguments in a dispute brought by a group of states. The court was silent on whether the two cases would be consolidated.
The court’s action Monday does not change the state of play as the program has already been frozen while legal challenges play out. New cases are added to the mix.
Elizabeth Prelogar was the Solicitor General and had urged the justices to lift the block on the program and hear oral arguments. They were only willing to accept the latter request.
“This is the second of two cases in which lower courts have entered nationwide orders blocking the Secretary of Education’s plan to use his statutory authority to provide dept relief to student-loan borrowers affected by the Covid-19 pandemic,” Prelogar argued in court papers.
Emails say some approvals were sent in error. The program must clear the courts in order to find out how much debt will be wiped out.
“Communicating clearly and accurately with borrowers is a top priority,” a spokesperson for the Department of Education says. “As they take corrective action to make sure borrowers and those affected have accurate information about debt relief we are in close contact with Accenture Federal Services.”
The Department of Education will review more student loan forgiveness applications if and when the government’s case prevails in court, according to the most recent, accurate emails sent to borrowers.
“The problem for us is that some clients have applied for other relief measures, like [public service loan forgiveness] and think the email they got is related to that versus the Biden-Harris cancellation,” she says.
Many borrowers had received an email in November saying that their application was approved to receive up to $20,000 in loan cancellation. If they win in court, they would discharge the borrowers’ approved debt.
“Tuesday’s email may not seem like a significant deal but borrowers are trying to figure out how to move on with their lives.” “And so they’re hanging on these words and these words matter.”
Carolina Rodriguez says she’s hearing a similar sentiment when speaking to her clients at the Education Debt Consumer Assistance Program in New York. She says borrowers are confused and have reached out to confirm there isn’t anything they can do during this waiting period.
With the Supreme Court getting set to hear the case early next year and make a decision sometime in the spring, it seems that borrowers will be stuck in limbo for at least another few months.
The pandemic-related pause on student loan payments remains in place. But a restart date is up in the air, dependent on when the Supreme Court rules on the forgiveness program.
The Public Service Loan Forgiveness program allows certain government and nonprofit employees to seek federal student loan forgiveness after making 10 years of qualifying payments – but it has been plagued with implementation problems for years.
There was confusion for borrowers because of the Biden’s forgiveness program. Here are some questions regarding student loans.
A decision on whether the program is legal and can move forward is expected by June. Until then, it is on hold and no debt will be discharged under the program.
For the third consecutive year, Federal student loan borrowers will not have to make payments on their loans during the new year because of a pause related to the swine flu.
The yearslong pause cost the government $155 billion through the end of 2022, according to an estimate from the Committee for a Responsible Federal Budget.
New rules in the Program for Paying Socially Regular Lenders with the Second Order Loans (PLLARS): Application to the Postgraduate Student Loan Program
A yearlong waiver that expanded eligibility for the PSLF program expired on October 31, but some of those temporary changes will be made permanent starting in July.
Under the new rules, borrowers will be able to receive credit toward PSLF on payments that are made late, in installments or in a lump sum. If it was made in full within 15 days of the due date, it would count as eligible.
Also, time spent in certain periods of deferment or forbearance will count toward PSLF. These periods include deferments for cancer treatment, military service, economic hardship and time served in AmeriCorps and the National Guard.
The new rules will make it easier to meet the requirement that a borrowers be a full-time employee in a public sector job. Full-time employment can be considered at 30 hours a week. The change will allow adjunct faculty at public colleges to qualify for the program.
The Biden administration has proposed a new income-driven repayment plan that is intended to make payments more manageable for borrowers, though it’s unclear when it could take effect.
Stocks are going up sharply in the 2023 rally after a long weekend of low interest rate inflation? An overview from CNN Business before the Bell
A version of this story first appeared in CNN Business’ Before the Bell newsletter. Not a subscriber? You can sign up right here. You can listen to an audio version of the newsletter by clicking the same link.
The prospect of a market rally in 2023 ground to a stop last week, after inflation and economic data spooked investors and made them think the Federal Reserve may continue hiking rates for longer than expected.
All major indexes lost money on Friday. The S&P 500 is down by 2.5%. The Dow Jones Industrial Average sank 3%, and the tech-heavy Nasdaq fell 3.3%.
What’s happening: It appears that after months of steady decline, the pace of inflation is going sideways. The Fed favored inflation gauge, the Personal Consumption Expenditures price index, came in hotter than expected.
Prices rose a whopping 5.4% in January from a year earlier, the Commerce Department’s Bureau of Economic Analysis reported. In December, prices went up.
Source: https://www.cnn.com/2023/02/26/investing/stocks-week-ahead/index.html
The End of Inflation and the Prospects for Great Recession in the U.S.: A Conference Report to the Booth School of Business Monetary Policy Forum
A paper presented Friday at the Booth School of Business Monetary Policy Forum in New York argued that disinflation will likely be slower and more painful than markets anticipate.
The paper said that the recessions were associated with the disinflations caused by monetary policy tightening. It would be unprecedented if aculate disinflation were to happen. In this case, it refers to the fact that inflation could fall quickly to the Fed’s 2% goal without hurting the economy.
The Fed presidents, governors and top economists were in attendance at the forum on Friday to discuss the paper. The majority of those speaking expressed deep concern about the stubbornness of inflation and general market reaction.
Inflation won’t quit: Cleveland Fed President Loretta Mester said that while price growth has moderated from its recent high, the overall pace of inflation remains too high and could be more persistent than her colleagues currently anticipate.
“I anticipate further rate increases to reach a sufficiently restrictive level, then holding there for some, perhaps extended, time,” echoed Boston Fed President Susan Collins at the conference.
Inflation continues to be baffling economists, as Fed Governor Philip Jefferson observed on Friday. He said that the inflationary forces impinging on the US economy represent a complex mixture of temporary and more long- lasting elements. Parsimonious is a million-dollar word for frugal.
Economists stressed that more pain lies ahead. “It’s important that markets understand that ‘no landing’ is not an option,” said Peter Hooper, vice chair of research at Deutsche Bank, an author of the report.
The data indicates that the US economy is healthy, but we expect some bad news to come by the middle of the year, and the Fed should be aware of that.
The final word: Former Bank of England Governor Lord Mervyn King summed up what many were thinking on Friday: Given the complexity of the current monetary situation, he said, “I wouldn’t want to give advice to any central banks about what we should do.”
Researchers at the Federal Reserve Bank of New York have warned that the country could face another credit crisis if President Joe Biden doesn’t come up with a plan to forgive student loans.
The proposal for forgiveness was halted by the 8th US Circuit Court of Appeals. On Tuesday, The Supreme Court of the United States will hear the case with its decision expected by June 2023.
Source: https://www.cnn.com/2023/02/26/investing/stocks-week-ahead/index.html
Debt Relief and the Economy: The Sotomayor-Sundrum-Jackiw Court and the Solicitor General of the Georgia Bar Association
There has been a sharp increase in new credit card and auto loan delinquents for borrowers with eligible student loans over the past several quarters, growing at a faster rate than those without student loans and those with ineligible loans,” they wrote.
The data may show problems to come, a sign of economic distress that may appear particularly concerning when student loan payments resume.
In addition to their cozy government salaries, some of the justices have been paid handsomely through lucrative book deals or teaching gigs, according to their financial disclosures, which provide limited information about their finances, those of their spouses and various reimbursements for travel. Among that group is Sotomayor, Gorsuch and Barrett, who have all received over six figures in book royalties or publishing deals in recent years.
The court is made of some of the nation’s smartest legal minds who are not from a large number of prestigious schools that could benefit from the debt relief assistance. Most of its current members attended one of two Ivy League law schools: Harvard and Yale.
Some justices received money to help pay for school. Thomas received a scholarship from Holy Cross College to help pay for his undergraduate degree, while Sotomayor was given a scholarship to attend Yale Law School. They have different political views. Thomas, for instance, grew up in poverty in Pin Point, Georgia, and is the court’s leading conservative justice.
The people who benefit from the debt relief program were not represented by the justices. The executive director of the StudentBorrower Protection Center urged the justices to uphold the relief program in a friend since they know the limits of their own life experience.
Pierce said he’ll be looking to both Sotomayor and Jackson to pose “questions trying to tee up the experiences of the people that will benefit to help give the solicitor general the opportunity to really lay out the government’s economic rationale – the emergency that it sees and the reason that it took this big action.”
A Model of the Guaranteed Student Loan Program and the Impact of the Mortgage Program on Student Borrowing and College Costs: The Case of the 1960’s
According to the Federal Reserve Bank of New York, Americans had more than 1.6 trillion dollars in student loan debt at the end of last year.
College graduates make more than those without a degree. Data from the Bureau of Labor Statistics shows that those who have a bachelor’s degree are more likely to be employed in 2021, even if they do not have a high school degree.
The Institute for Higher Education Policy’s president and CEO said college costs have gone up over the past year.
In the 1968-1969 academic year, adjusted for inflation, it cost $1,545 to attend a public, four-year institution, according to data from the National Center for Education Statistics. Tuition, fees, room and board are included. In the 2020-2021 school year $29,033 is what it was.
The higher education act of 1965 paved the way for people from all over to attend college, but it also led to a new type of relationship with the government, banks and colleges through the guaranteed student loan program.
The Guaranteed Student Loan program is an original program, and it was modeled after the mortgage program, according to Elizabeth Shermer, who has researched and written about student loans.
It solved for the government the challenge of how to get lenders involved with such a risky financial investment: The loan did not come from the federal government, but instead, the government assured repayment to bankers willing to give loans, Shermer said.
Using the federal mortgage program as a guide allowed the government to avoid direct investment into colleges, she said, but mortgages and student loans are not the same. In the same way a bank can repossess your house, the federal government can not take away your degree.
It’s an assumption that is un American to have a free ride so we will use the lending that turned a country of renters into a nation of homeowners. She said the same thing happened with the student loan programs too as we now know how the mortgage program exacerbated racial and gender inequality.
The model of Fannie Mae was created in the Great Depression during which it became easier to buy and sell mortgage debt in order to create more reliable funding for housing.
This was the “most important” moment in the history of loans, she said, as the availability of financial aid products to both for-profit and nonprofit companies allowed for the rise of private student loans.
In the 70’s, students needed more money to continue their education due to the rising cost of tuition. Private loans were used as a supplement since students were limited to a certain amount of federal loans.
It really is going to be this expectation that you will need to borrow something to get through college. “It’s like that perfect storm,” she added.
Colleges and universities can charge more if the appropriations are cut, as every legislature knows. Just increase tuition,” Shermer said.
It was discovered how poorly managed this thing was and after one of the student lender went bankrupt, they had the idea that the federal government could lend directly to students and parents.
In the intervening years, several initiatives were launched aimed at reducing the rate of default. The Income-Contingent Repayment Plan, or ICR, of 1993 capped payments for qualified borrowers at 20% of their discretionary income or 12 years of fixed payments, whichever was lower, according to the Institute for Higher Education Policy and the Lumina Foundation.
Many borrowers still use Pay As You earn guidelines, which include caps on 10% of discretionary income and cancellation of loans after 20 years, despite the program launching in 2010.
Source: https://www.cnn.com/2023/02/27/politics/us-student-loan-debt-timeline/index.html
Judiciary challenges to the repayment plan of a student loan debt under the guise of pandemic: A critical analysis of the case of Biden v. Nebraska and Department of Education
The repayment plan is less likely to face legal challenges if the one-time loan forgiveness program is rejected by the Supreme Court.
The plan would cap the amount of money the borrowers are able to pay at 5% of discretionary income, create a shorter time to forgiveness and cover monthly interest when the balances are low.
Republican-led states and conservatives challenging the program say it amounts to an unlawful attempt to erase an estimated $430 billion of federal student loan debt under the guise of the pandemic.
In 2021, for instance, the court invalidated the Biden administration’s Covid-19-related eviction moratorium issued by the US Centers for Disease Control and Prevention holding that such a program needs to be specifically authorized by Congress. The court blocked a nationwide vaccine mandate for large businesses because the OSHA had overstepped its authority.
Tuesday’s cases will also highlight an important threshold question that could block the court from reaching the merits of the dispute: whether the parties behind the challenge have the legal right, or “standing,” necessary to bring suit.
The initiative was immediately attacked. A district court blocked the program citing the so-called major questions doctrine. Federal agencies cannot regulate matters of “vast economic and political significance” without congressional approval.
The doctrine was used by the court in a 6-3 ruling last June that stopped the EPA from regulating carbon emissions from existing power plants.
The justices declined to do so, but they agreed to hear two cases on an expedited basis. The first dispute, Biden v. Nebraska, pits the administration against a group of Republican-led states. The second, Department of Education v. Brown, was initially brought by Myra Brown and Alexander Taylor, two individuals who did not qualify for the program and argue the government failed to follow proper rulemaking process when putting it in place.
The case against the Biden administration for student loan forgiveness in the HEROES ACT and the Nebraska Attorney General Michael T. Hilgers
The president gave an extension because his loan forgiveness program was stopped in court.
At the Supreme Court, the Biden administration argues that the secretary of education had the clear authority to provide the relief to borrowers making less than $125,000 per year ($250,000 for households) in 2020 or 2021 in order to protect them from financial harms brought on by the pandemic such as the inability to buy food or make rent or mortgage payments.
She warned that the justices that ending the paused payments without giving additional relief for the lower income would cause delinquency and default rates to spike.
“This is not a case where the agency relied on statutory language that is vague, cryptic, ancillary, or modest,” she said, noting that the grant of authority is “central” to the HEROES ACT.
In addition, she said that neither the states nor the two individual plaintiffs behind the challenges have the standing to file suit. She warned that if the justices held against it, there could be consequences.
“Virtually all federal actions – from prosecuting crime to imposing taxes to managing property – have some incidental effects on state finances,” she said.
The Nebraska Attorney General, Michael T. Hilgers, is representing several states in a lawsuit against the Biden administration, saying they exceeded their authority by using the swine flu as a ruse to mask their true goal of eliminating student loans.
“Canceling hundreds of billions of dollars in student loans – through a decree that extends to nearly all borrowers – is a breathtaking assertion of power and a matter of great economic and political significance,” triggering the major questions doctrine, Hilgers told the court. The cancellation power is the sort of major question that courts assume Congress reserves for itself.
Hilgers rejected the government’s contention that the states can’t show the harm necessary to get into court. In court papers he put forward multiple theories of standing that mostly revolve around the theory that the states will lose tax revenue.
MOHELA, a state-created entity that is not involved in the state’s lawsuit against student loan repayment under Biden’s plan
MOHELA is an independent corporation that has explicitly said it is not involved in the state’s challenge. A state-created entity is one of the largest holders and servicers of student loans in the country. The agency may not be able to make its required payments to the state because it will no longer have servicing fees on federal loans.
Some former government officials like former Trump Attorney General William Barr and former White House chief of staff Mick Mulvaney say that Vice President Joe Biden shouldn’t forgive billions of dollars in student loan debt.
The president was under pressure to announce the program when it was available, but he didn’t until August of 2022, despite the Biden administration’s aggressive defense in court.
The Biden plan, however, has not yet paid out any money because two lower courts have put the program on hold, sending the case to the Supreme Court. The Biden plan has been challenged by six states and the justices will hear expedited arguments on Tuesday.
Stephen said that he consulted informally with the White House on the case. The words of the statute are clear, he says.
“This is a stunningly broad grant of authority from Congress to the secretary of education,” Vladeck says. The plain text of the statute talks about the secretary’s power to waive or modify any statutory provision applicable to programs like federal student aid.
Lowering the requirement to pay back loans is not the same as canceling the obligation to pay back loans according to Jonathan Adler.
State Litigation and the Post-Biden Pandemic Emergence: Why the Case for Student Loan Relief is a Problem for the Supreme Court
That said, the case could have an even greater impact if the justices decide that the states don’t have the right to sue at all because they can’t show they have suffered any concrete harm.
In recent years, Republicans have repeatedly parlayed state lawsuits into a forceful tool to get the conservative court to block the Biden administration’s policies. Democrats used the tactic, but it wasn’t very successful.
The Supreme Court might want to see less of these lawsuits since the number is increasing. The doctrine of legal standing has recently been interpreted in a way that would make it hard for them to do that.
Professor Vladeck thinks that won’t fly because it it purely speculative. He points to what the Supreme Court has said for a decade — that a “future injury can’t be the basis to sue unless it is, in the words of Justice Samuel Alito, ‘certainly impending.'”
At Tuesday’s argument, the timing for student loan forgiveness is expected to come up. After all, the premise of the loan program is that younger people with loans, in particular, have suffered economically during the pandemic, and are in desperate need of some loan relief. But Biden has announced that the pandemic emergency will end May 11. The administration claims that the “downstream effects” of the pandemic will nonetheless continue for quite some time after the end of the emergency. The Supreme Court might have some problems with that argument.