Banking

Biden bid to restore student debt relief rejected by court

The Biden administration’s student loan forgiveness plan remains stalled, after the 5th U.S. Circuit Court of Appeals refused to lift an order blocking the sweeping program.

Wednesday’s ruling by a three-judge panel of the New Orleans-based court is the latest blow to a plan that has been shadowed by legal doubt since Biden announced it in August. The decision left in force a ruling from a federal judge in Texas declaring the program unlawful.

Paras Griffin/Photographer: Paras Griffin/Gett

The debt relief program is facing potentially months of additional uncertainty as action now moves to the Supreme Court. The administration is already asking the conservative-majority court to lift a separate order blocking the program in a suit filed by six Republican-led states.

“We are confident in our legal authority to carry out the student debt relief program and will be taking this fight to the Supreme Court as well,” said White House spokesman Abdullah Hasan.

“Republican officials and special interests are trying to rob middle-class families of the relief they need and deserve, but the president doesn’t back down from a fight, especially one for middle-class families.”

Both sides in that case have suggested the high court might hear arguments on a fast-track basis in February, putting the matter on course for a definitive ruling by June at the latest. The administration has previously said it would also ask the Supreme Court to lift the Texas order if the 5th Circuit declined to intervene, as happened Wednesday.

Court orders across multiple lawsuits have blocked the distribution of any debt relief under the plan since late October. The government has ceased collecting applications for it while the legal battles proceed.
The biggest issue for opponents has been establishing standing to sue — that is, showing they are being directly harmed by the policy.

Wednesday’s order comes in a case brought by the Job Creators Network Foundation, a conservative advocacy group, on behalf of two Texas borrowers who claim that their education debt was unfairly excluded from the program. A federal district judge appointed by former President Donald Trump agreed, saying the borrowers “have a concrete interest in having their debts forgiven to a greater degree.”

In a separate lawsuit, six GOP-led states are asking the Supreme Court to keep the plan on hold while their legal challenge moves through the courts. State officials argue that the president overstepped his authority by authorizing the program without congressional approval and that it will negatively impact local loan servicers.

The 8th U.S. Circuit Court of Appeals said the states had standing because of the impact on a Missouri loan servicer that has financial ties to that state’s treasury.

The plan would forgive as much as $20,000 in federal student loans for eligible borrowers earning less than $125,000 per year or $250,000 for households. About 26 million people had requested forgiveness before the Department of Education stopped accepting applications.

— With assistance from Josh Wingrove and Greg Stohr.

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