President Joe Biden’s federal student loan forgiveness plan was thwarted by a federal appeals court on Monday with the court placing an injunction on the program pending further appeals. This is the latest setback for Biden’s loan forgiveness agenda, which was blocked by a federal judge just three days earlier on November 11.
In August, Biden announced a student loan forgiveness plan which would forgive up to $20,000 in student loans for individual borrowers making less than $125,000 annually and married couples making less than $250,000 annually. At the time, Biden also announced sweeping changes to already existing Income-Driven Repayment plans (IDRs), dramatically reducing the amount that individuals would be required to pay back before having their remaining loan balances discharged. Not including the cost of IDRs and other changes, the Congressional Budget Office estimates that Biden’s plan would cost $400 billion.
But the plan continues to face challenges. Last week, a federal judge ruled the program unconstitutional, finding that a 2003 federal law that Biden used to justify the loan forgiveness does not “provide the executive branch clear congressional authorization to create a $400 billion student loan forgiveness program.” The Department of Justice filed an appeal of the decision on Friday, according to White House Press Secretary Karine Jean-Pierre.
Adding to the Biden administration’s issues, the U.S. Court of Appeals for the 8th Circuit placed an injunction on the plan on Monday—agreeing with a request from a group of six Republican-controlled states. The injunction will stay in place and bar the administration from forgiving any student loan debt until an additional ruling from the 8th Circuit or the Supreme Court is brought forth.
In its ruling, the 8th Circuit’s three-judge panel found that Missouri, one of the states bringing the suit, has appropriate standing in the case because, it argues, Biden’s student loan forgiveness plan would lead to decreased revenue for the Missouri Higher Education Loan Authority (MOHELA), a partially state-controlled federal student loan servicer, and, therefore, hurt the state as a whole.
“MOHELA may well be an arm of the State of Missouri under the reasoning of our precedent,” wrote the 8th Circuit in its opinion released on Monday. “Due to MOHELA’s financial obligations to the State treasury, the challenged student loan debt cancellation presents a threatened financial harm to the State of Missouri.”
For this reason, the court argued that an injunction was necessary to prevent harm while legal action against the Biden administration’s plan is ongoing, writing that “the equities strongly favor an injunction considering the irreversible impact the Secretary’s debt forgiveness action would have as compared to the lack of harm an injunction would presently impose.”
While it is still unclear what the ultimate fate of Biden’s student debt relief proposal will be, the mounting legal challenges to the program certainty spell trouble for its supporters—and relief for its detractors.
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