Charlotte Tyler
August 7, 2023
11:45 pm

Biden's proposal to cancel student loans for misled borrowers is blocked by the federal appeals court

Monday, a federal appeals court prevented President Biden's administration from enforcing regulations that would have provided debt relief to student loan borrowers who were misled by their institutions.

The ruling from the 5th Circuit Court of Appeals is the latest setback for Biden's nationwide efforts to forgive student loans. A Texas for-profit college's request for an injunction against the administration's rule change was granted by the court, as Fox Business reported.

This is a temporary hold, and the three-judge panel will hear the case in its entirety later this year.

The rule adjustments proposed by the Biden administration would have increased the number of student loan borrowers eligible for debt relief and streamlined the application process.

Since assuming office in 2021, Biden has made multiple efforts to forgive student loans, in addition to significantly extending a moratorium on payments to lenders. In June, the Supreme Court rejected his effort to provide nationwide relief.

Biden's initial proposal was anticipated to cost more than $400 billion. In July, he released a version that was estimated to cost taxpayers approximately $39 billion.

Biden's administration claimed the HEROES Act gave the secretary of education the authority to  "waive or modify any statutory or regulatory provision applicable to the student financial assistance programs… as the secretary deems necessary in connection with a war or other military national emergency."

This argument, however, was rejected by the majority of the court, which stated, "The authority to ‘modify’ statutes and regulations allows the Secretary to make modest adjustments and additions to existing regulations, not transform them."

Just days ago a conservative group filed a lawsuit to stop Biden's new $39 billion student loan repayment plan.

The New Civil Liberties Alliance (NCLA) filed the complaint in the U.S. District Court for the Eastern District of Michigan on behalf of the Cato Institute and Mackinac Center for Public Policy.

In a statement it released, NCLA calls the plan a “scheme” that “would immediately wipe out $39 billion of student loan debt owed to the U.S. Treasury by more than 800,000 people under the Income-Driven Repayment (IDR) program by crediting non-payments during periods of forbearance as monthly payments. The plan would cancel even more debt prematurely at taxpayer expense for another 2.8 million IDR borrowers in the future."

NCLA says that the administration “has no lawful authority to do this” and that the plan violates the “Constitution’s Appropriations Clause, which grants Congress near-exclusive authority to cancel debt owed to the Treasury.”

NCLA contends that the debt cancellation provisions included in SAVE are detrimental to charitable organizations such as the Mackinac Center for Public Policy and the Cato Institute because they remove the incentive for borrowers to participate in the Public Service Loan Forgiveness (PLSF) program.

This is a program through which borrowers' debt is discharged if they work for a qualified non-profit organization for a total of ten years while making their monthly loan payments.

Written By:
Charlotte Tyler

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