Lawsuit Threatens Major Controversial Student Loan Forgiveness Plan

A contentious new lawsuit challenges the Biden Administration’s plan to forgive $147 billion in student loans, raising concerns about executive overreach and taxpayer burden.

At a Glance

President Biden’s plan seeks to cancel $147 billion in federally held student loans.
Seven Republican-led states have filed a lawsuit against the plan.
The lawsuit alleges the plan would unlawfully cancel $73 billion “overnight”.
This is the third attempt by the Education Secretary to cancel large sums of student loans.

Lawsuit Filed Against Loan Forgiveness Plan

President Biden’s Executive Branch faces a significant legal challenge as seven Republican-led states have filed a lawsuit against his Administration’s $147 billion student loan forgiveness plan. Filed by attorneys general from Alabama, Arkansas, Florida, Georgia, Missouri, North Dakota, and Ohio, the lawsuit asserts that this executive action exceeds the limits of presidential authority and imposes an unjust financial liability on American taxpayers.

The legal complaint highlights that the Biden Administration’s rapid cancellation approach could annul $73 billion “overnight”. This total of $146.9 billion without the due process that the legislative or judicial branches typically provide has raised eyebrows in legal circles. Earlier this year, attempts to enact similar measures were blocked by the courts, showing a persistent effort by the Administration.

NEWS: The Biden-Harris Administration has announced ~$1.2 billion in additional student loan relief for 35,000 borrowers who work in public service – the result of significant fixes by the Administration to Public Service Loan Forgiveness (PSLF). https://t.co/eIsWvOmL82 pic.twitter.com/awuUtoTbo3

— U.S. Department of Education (@usedgov) July 18, 2024

Historical Context and Legal Arguments

This lawsuit marks the third effort by Secretary of Education Miguel Cardona to push through mass student debt cancellations. Previous attempts faced judicial roadblocks, rendering this latest action particularly contentious. Critics, including Missouri Attorney General Andrew Bailey, suggest that bypassing the statutory 60-day notice period laid down for reviewing such orders is unlawful and indicates a blatant disregard for established protocols.

“This is the third time the Secretary has unlawfully tried to mass-cancel hundreds of billions of dollars in loans,” the complaint states. “Courts stopped him the first two times when he tried to do so openly. So now he is trying to do so through cloak and dagger,” states the complaint.

The lawsuit also claims that the plan includes an automatic forgiveness mechanism for at least one federally held student loan unless borrowers opt-out. This portion has drawn sharp criticism, accentuating the perceived overreach by the executive branch and its disregard for democratic processes.

New: A group of Republican-led states asked a federal court to block a Biden administration plan to cancel billions in student debt that the states say is imminent. https://t.co/TvyTasOiWi

— Bloomberg Law (@BLaw) September 4, 2024

Broad Implications and Future Proceedings

The Biden Administration’s broader efforts, including interest forgiveness for student loans and specific plans like the SAVE Plan, are under intense scrutiny. With accusations of political maneuvering and legal overreach, the administration faces an uphill battle. Congressional Republicans and several commentators argue that Biden’s strategy aims to ease the financial struggle for 28 million Americans, though critics allege this is a ploy to garner votes ahead of the 2024 election.

“Make no mistake, this is a clear abuse of power designed to buy votes before the November election,” Sen. Bill Cassidy (R-La.) told The Post. “The Biden-Harris administration knows it doesn’t have the legal authority to unilaterally cancel student loans. That is why it is subverting the rulemaking process to take student debt from those who willingly took it on and transfer it to taxpayers who chose not to go to college or already worked to pay their loans off.”

The US Supreme Court has struck down previous attempts to cancel up to $430 billion in student debt. As this latest legal battle unfolds, Republican-led states have requested a federal judge in Georgia to impose a temporary restraining order against the plan. The Education Department, however, remains steadfast in its resolve.

“The US Department of Education declines to comment on pending litigation, but we will continue to fight for borrowers across the country who are struggling to repay their federal student loans,” according to a spokesperson.