Student Loan Forgiveness: Federal Court Upholds Ruling That Biden’s Plan is Unlawful

Mandatory Credit: Photo by Shutterstock (13429790p)United States President Joe Biden speaks during a press conference after being briefed on the impact of Hurricane Ian and ongoing federal government response efforts at the FEMA Headquarters in Washington, DC on Thursday, September 29, 2022.
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In another blow to millions of borrowers, a federal court declined to reverse a ruling blocking President Joe Biden’s student debt relief program on Nov. 30.

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The three-judge panel of the United States Court of Appeals for the 5th Circuit unanimously rejected the administration’s request to reverse a Texas judge’s ruling that is blocking the student debt relief program, according to court filings.

Bloomberg reports that the administration will now turn to the U.S. Supreme Court to seek a reversal of the 5th Circuit’s decision.

On Nov. 10, a federal judge in Texas struck down the Biden administration’s student loan forgiveness program, saying that the law “does not provide the executive branch clear congressional authorization to create a $400 billion student loan forgiveness program,” according to court documents.

“Courts have issued orders blocking our student debt relief program. As a result, at this time, we are not accepting applications. We are seeking to overturn those orders,” a notice on Studentaid.gov now reads.

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And in another hurdle for the program, on Oct. 21, the U.S. Court of Appeals for the 8th Circuit issued a pause on debt relief while it reviews a lawsuit filed by six Republican-leaning states, as GOBankingRates previously reported.

Judge Mark. T. Pittman, of the U.S. District Court for the Northern District of Texas, argued in his Nov. 10 decision that the HEROES Act — enacted in the wake of the Sept. 11 attacks and providing authority to grant relief from student loan requirements during specific periods — does not allow the administration to implement the student loan program.

In turn, the administration announced on Nov. 22 that the student loan pause — which was set to end Dec. 31, 2022 — will be extended to the end of June 2023, while the administration awaits the Supreme Court’s review of its student debt relief program, as GOBankingRates previously reported.

“The Administration is extending the pause on federal student loan repayments to allow for the Supreme Court to rule in the case on the student debt relief program. The pause will end no later than June 30, 2023. Payments will resume 60 days after the pause ends,” the White House tweeted.

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The department reiterated that 26 million people have applied for debt relief, and 16 million borrowers have been approved.

“But court orders are blocking the Department from discharging student loan debt and accepting additional applications,” it said.

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Under the Biden plan, up to $10,000 in federal student debt relief may be offered to borrowers whose income in 2020 or 2021 was less than $125,000 (or $250,000 for households). That figure rises to up to $20,000 in student loan cancellation for Pell Grant recipients. If you are a dependent student, your eligibility is based on your parental income. Most federal loans are eligible, including undergraduate and graduate direct loans, parent PLUS and grad PLUS loans, and consolidation loans. Federal family education loan (FFEL) program loans held by ED, Perkins loans held by ED, and defaulted loans, according to studentaid.gov.

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About the Author

Yaël Bizouati-Kennedy is a full-time financial journalist and has written for several publications, including Dow Jones, The Financial Times Group, Bloomberg and Business Insider. She also worked as a vice president/senior content writer for major NYC-based financial companies, including New York Life and MSCI. Yaël is now freelancing and most recently, she co-authored  the book “Blockchain for Medical Research: Accelerating Trust in Healthcare,” with Dr. Sean Manion. (CRC Press, April 2020) She holds two master’s degrees, including one in Journalism from New York University and one in Russian Studies from Université Toulouse-Jean Jaurès, France.
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