July 11, 2024

New Civil Liberties Alliance Files Lawsuit to Block Biden Plan Canceling $39 Billion in Student Loans

Biden’s student loan forgiveness plan faces new lawsuit to block program

Two think tanks, the Mackinac Center for Public Policy and the Cato Institute, have filed a lawsuit in Michigan against the Biden administration’s plan to cancel $39 billion in student loans. They argue that the plan goes beyond the administration’s authority. The Department of Education introduced the debt relief plan for 800,000 borrowers shortly after the Supreme Court rejected President Biden’s student loan forgiveness plan.

The lawsuit seeks to have a federal judge declare the new debt forgiveness plan illegal and prevent the Department of Education from implementing it until the case is resolved. The Department of Education responded by characterizing the lawsuit as an attempt by right-wing special interests to keep borrowers in debt and reiterated its commitment to defending working families.

This legal challenge adds to a series of Republican-led complaints against the Biden administration’s efforts to reduce or eliminate student debt for millions of borrowers. President Biden had indicated that he would explore alternative ways to cancel student debt following the Supreme Court’s rejection of his previous plan.

The administration’s latest plan, announced on July 14, aims to forgive loans for 804,000 borrowers enrolled in income-driven repayment plans. These plans offer cancellation after 20 or 25 years of payments, but administrative errors had previously hindered accurate progress tracking. The new plan retroactively considers specific periods of nonpayment as payment periods, allowing more borrowers to reach the cancellation threshold. This adjustment also addresses the issue of student loan services pushing borrowers into forbearance instead of enrolling them in income-driven repayment plans.

In a statement announcing the administration’s new plan, Secretary of Education Miguel Cardona said, “For far too long, borrowers fell through the cracks of a broken system that failed to keep accurate track of their progress toward forgiveness…By fixing past administrative failures, we are ensuring everyone gets the forgiveness they deserve, just as we have done for public servants, students who were cheated by their colleges, and borrowers with permanent disabilities, including veterans. This Administration will not stop fighting to level the playing field in higher education.”

The lawsuit argues that Biden’s plan undermines the Public Service Loan Forgiveness Program (PSLF), which the think tanks use to employ borrowers working toward loan cancellation. They claim that the plan unlawfully accelerates progress toward loan relief, thereby diminishing the benefit for nonprofit employers who rely on PSLF to attract and retain educated employees.

The Cato Institute had previously sued the Biden administration over a different student debt cancellation plan that the Supreme Court rejected. Additionally, the Mackinac Center is separately challenging Biden’s pause on student loan payments, which is set to end in the fall as payments are scheduled to resume in October.

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