Student Loans: New Lawsuit Doubles Down on Ending Student Loan Payment Pause Before June

Mandatory Credit: Photo by Yuri Gripas/ABACA/POOL/EPA-EFE/Shutterstock (13858194b)US President Joe Biden meets with the members of his Council of Advisors on Science and Technology in the State Dining Room at the White House in Washington, DC, USA, 04 April 2023.
Yuri Gripas/ABACA/POOL/EPA-EFE/Shutterstock / Yuri Gripas/ABACA/POOL/EPA-EFE/Shutterstock

The Biden administration’s federal student loan forgiveness program is running into more resistance. The troubled program has just been hit with yet another lawsuit, this one seeking to end a payment pause that has been in effect for more than three years.

On Thursday, the New Civil Liberties Alliance (NCLA) — which bills itself as a nonpartisan, nonprofit civil rights group — filed a lawsuit on behalf of the Mackinac Center, a nonprofit think tank based in Michigan, Business Insider reported.

The lawsuit is asking the federal court in the Eastern District of Michigan to end the current federal student loan payment pause and prevent the Biden administration from issuing another one.

With its suit, the Mackinac Center joins forces with SoFi Bank, which last month filed its own federal lawsuit to end the payment pause, claiming that the moratorium has “substantially injured” the company through the loss of $300 million to $400 million in revenue.

These lawsuits add to problems the Biden administration has faced since unveiling an ambitious federal student loan forgiveness program last summer that aimed to cancel up to $20,000 in debt per borrower. The legality of that plan is currently being reviewed by the U.S. Supreme Court.

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Although the NCLA-Mackinac Center lawsuit challenges the payment pause rather than the loan forgiveness plan, the two are intertwined. The pause went into effect in March 2020 during the early days of the COVID-19 pandemic and has since been extended seven times. It is currently set to expire 60 days after either June 30 or whenever the Supreme Court decides on the loan forgiveness plan.

If the plan is struck down by the court, there’s a chance that the Biden administration might attempt to extend the pause an eighth time. This week’s lawsuit aims to prevent that from happening. Ideally, complainants would like to see the payment pause end even before the current deadline.

“We know that only Congress may suspend student-loan repayment obligations and cancel interest accrued because it took an Act of Congress to provide such debt relief at the outset of the pandemic,” Sheng Li, litigation counsel at the NCLA, said in an Apr. 6 statement. “Congress also enacted a clear six-month deadline for that debt-relief program. The Administrative State lacks the power to extend a debt-relief program beyond its statutory deadline, especially when doing so costs taxpayers over $150 billion.”

Patrick J. Wright, vice president for legal affairs at Mackinac Center, called perpetual deferment of federal student loans “bad policy” because it shifts the burden from those who took out student loans to those who didn’t.

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“More importantly, it is illegal, as it strips congressional powers and unilaterally hands them to executive bureaucrats,” Wright said in a statement. “We have a proud history of making sure that the executive branch acts within their constitutional authority, even during a national emergency.”

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The U.S. Department of Education had not commented on the NCLA-Mackinac Center lawsuit as of early Friday, April 7.

In an email statement following the SoFi lawsuit, an Education Department spokesperson said: “The payment pause is legal, as is our plan to provide one-time debt relief to tens of millions of borrowers most at risk of delinquency and default when they return to repayment… The Department will continue to fight to deliver relief to borrowers, provide a smooth path to repayment, and protect borrowers from industry and special interests.”

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About the Author

Vance Cariaga is a London-based writer, editor and journalist who previously held staff positions at Investor’s Business Daily, The Charlotte Business Journal and The Charlotte Observer. His work also appeared in Charlotte Magazine, Street & Smith’s Sports Business Journal and Business North Carolina magazine. He holds a B.A. in English from Appalachian State University and studied journalism at the University of South Carolina. His reporting earned awards from the North Carolina Press Association, the Green Eyeshade Awards and AlterNet. In addition to journalism, he has worked in banking, accounting and restaurant management. A native of North Carolina who also writes fiction, Vance’s short story, “Saint Christopher,” placed second in the 2019 Writer’s Digest Short Short Story Competition. Two of his short stories appear in With One Eye on the Cows, an anthology published by Ad Hoc Fiction in 2019. His debut novel, Voodoo Hideaway, was published in 2021 by Atmosphere Press.
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