Sunday, September 24, 2023

US court blocks Biden’s temporary student loan forgiveness plan

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By Associated Press: A federal appeals court issued an administrative suspension late Friday that temporarily blocks President Joe Biden’s plan to cancel billions of dollars in federal student loans, leaving the program in limbo just days after people began seeking forgiveness of loans.

The Eighth Circuit Court of Appeals issued the suspension as it considers a motion by six Republican-led states to block the program. The suspension ordered the Biden administration not to act on the program while it considers the appeal.

It’s unclear what the decision means for the 22 million borrowers who have already applied for the waiver. The Biden administration had promised not to clear debts before October 23 as it took on the legal challenges, but it was first expected to begin clearing debts in mid-November.

White House press secretary Karine Jean-Pierre encouraged borrowers to continue applying for the waiver, saying the court’s temporary injunction did not prevent applications or review applications.

“We will continue at full speed with our preparations in accordance with this order,” she said in a statement. “And the administration will continue to fight Republican officials who are blocking our efforts to provide emergency aid to working families.”

The crucial question now is whether the problem will be resolved before January 1, when payments on federal student loans are expected to restart after being interrupted during the pandemic. Millions of Americans were expected to get their debt forgiven in full under Biden’s plan, but they now face uncertainty as to whether to start paying in January.

Biden has said his previous payment pause extension would be the last, but economists worry that many Americans may not have regained their financial position after the pandemic has turned. If borrowers expecting debt cancellation are asked to pay in January, there are fears that many will fall behind on bills and default on their loans.

An appeal to the U.S. Eighth Circuit Court of Appeals was filed late Thursday, hours after U.S. District Judge Henry Autrey in St. Louis ruled that since the states of Nebraska, Missouri, Arkansas, Iowa, Kansas and South Carolina, “The Court lacks jurisdiction.” to take cognizance of this matter.”

Separately, the six states have also asked the district court for an injunction prohibiting the administration from executing the debt forgiveness plan until the appeals process is completed.

Nebraska Attorney General Doug Peterson, one of six attorneys general who led the effort to block the debt relief program, praised the court’s decision.

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“We are pleased that the temporary stay has been allowed,” Peterson said in a statement. β€œIt is very important that the legal issues related to presidential power are analyzed by the court before transferring more than $400 billion in debt to US taxpayers.”

Speaking ahead of Friday’s ruling at Delaware State University, a historically black university where the majority of students receive federal Pell grants, Biden praised the number of applicants who have applied for the loan relief in the week since his administration made its online application available. .

The plan, announced in August, would waive $10,000 in student loans for those earning less than $125,000 or households with less than $250,000 in income. Pell Grant recipients, who typically have more financial need, are forgiven an additional $10,000 in debt.

The Congressional Budget Office has said the program will cost about $400 billion over the next three decades. James Campbell, an attorney for the Nebraska Attorney General’s office, told Autrey in an Oct. 12 hearing that the government is acting outside its authorities in a way that will cost states millions of dollars.

The cancellation applies to federal student loans used to attend undergraduate and graduate school, along with Parent Plus loans. Current students are eligible if their loans are paid before July 1. Under the plan, 43 million borrowers will be eligible for some debt forgiveness, with 20 million who could have their debt completely erased, the government said.

The announcement immediately became a major political issue in the run-up to the midterm elections in November.

Conservative lawyers, Republican lawmakers and business-oriented groups have argued that Biden overstepped his authority by taking such sweeping measures without Congressional approval. They called it an unfair government giveaway for relatively wealthy people at the expense of taxpayers who were not pursuing higher education.

Many Democratic lawmakers faced with tough reelection contests have distanced themselves from the plan.

Biden on Friday criticized Republicans who criticized his aid program, saying “their outrage is wrong and it’s hypocritical.” He noted that some Republican officials had forgiven debt and pandemic loans.

The six states sued in September. Attorneys for the administration objected that the Department of Education “has broad powers to administer federal student financial aid programs.” A court filing stated that the 2003 Higher Education Relief Opportunities for Students Act, or HEROES Act, allows the Secretary of Education to waive or change the terms of federal student loans in times of war or national emergencies.

“COVID-19 is such an emergency,” the filing said.

The HEROES Act was enacted after the terrorist attacks of September 11, 2001 to help members of the military. The Justice Department says the law allows Biden to reduce or clear student loan debt during a national emergency. Republicans argue that the government is misinterpreting the law, in part because the pandemic no longer qualifies as a national emergency.

Justice Department attorney Brian Netter told Autrey at the October 12 hearing that the effects of the COVID-19 pandemic are still rippling. He said student loan defaults have been rising over the past 2 1/2 years.

Other lawsuits have also tried to stop the program. Earlier Thursday, Supreme Court Justice Amy Comey Barrett dismissed an appeal by a Wisconsin taxpayer group seeking to halt the debt cancellation program.

Barrett, who oversees emergency calls from Wisconsin and neighboring states, did not comment on the Brown County Taxpayers Association’s rejection of the appeal. The group wrote in the Supreme Court’s file that it needed an emergency injunction because the administration could begin canceling outstanding student debt as early as Sunday.

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