Another Court Blocks Biden’s Second Attempt at Student Loan Forgiveness

A Republican-led legal battle against federal student loan forgiveness has left borrowers in a place that’s become familiar over the past few years: with their financial fates in the hands of judges.

The latest twist came Thursday when a Georgia court ordered a temporary halt to President Joe Biden’s proposal for a second attempt at broad student loan forgiveness while the case is decided. The proposal would cancel at least some of the debts held by 30 million borrowers with federal loans.

Biden and his opponents have battled over the president’s student loan programs for the past several years. Since 2021, the Department of Education under Biden has made numerous rules changes to the federal student loan system aimed at making it easier for borrowers to have their loans forgiven.

The most recent attempt at outright forgiveness targeted certain types of borrowers, including borrowers who owe more than what they did when they started repaying their loans and those who would qualify for forgiveness under existing programs but haven’t applied.

Missouri Attorney General Andrew Bailey this week filed a lawsuit in federal court seeking to block the program, which, according to a notice published by the Department of Education, was set to go into effect as soon as October. 

Student Loans Are Front In Ideological Battle

Biden and other Democrats argue that Americans should be able to benefit from higher education without being financially crushed by student debt for the rest of their lives. The administration has forgiven at least $168.5 billion for 4.8 million borrowers, including public servants, people with disabilities, and borrowers who attended for-profit colleges that were later shut down.

But while some of Biden’s efforts have succeeded, others have been felled in the courts. The biggest blow came in June 2023 when a coalition of Republican-led states, led by Missouri, got the Supreme Court’s conservative majority to strike down a Biden program that would have forgiven up to $20,000 per borrower. 

After that defeat, Biden began efforts to offer student loan relief through other means, including launching the Saving on a Valuable Education (SAVE) Plan. This plan forgives the debts of borrowers who make income-based payments for 10-25 years, depending on how much was borrowed and whether the loans were for graduate school.

The department also gave broad-based student loan forgiveness a second try through an administrative rulemaking process, resulting in the plan blocked on Thursday.

Conservatives have opposed student loan forgiveness, arguing that it’s unfair to people who already paid their loans back and that policy should instead focus on lowering the cost of college. In court, forgiveness opponents have challenged the authority of the administration to cancel loans, arguing that they shouldn’t be allowed to without Congressional legislation.

The Biden administration has argued that Congress has already authorized the Secretary of Education to cancel student debt. In defending the SAVE plan and the latest broad forgiveness program, the administration points to the 1965 Higher Education Act establishing the federal student loan program.

Future Is Uncertain For Borrowers

The lawsuit adds more uncertainty for borrowers, some of which were already affected by a previous court decision that at least temporarily blocked the SAVE repayment plan.

Some 8 million borrowers enrolled in the SAVE plan are in forbearance, with no payments required, while the legal battle plays out. Both the SAVE and forgiveness cases could ultimately be decided by the Supreme Court.

“The best advice I can give borrowers right now is to not make any drastic decisions,” said Betsy Mayotte, president of the Institute of Student Loan Advisors, a nonprofit group that advises borrowers. “This situation is truly uncharted territory and it’s going to take the Department of Education and the courts some time to work this through.”