Wednesday’s decision is the latest legal setback for Biden, who faces an injunction in a separate lawsuit involving six Republican-led states seeking to overturn the president’s program. The Biden administration has asked the Supreme Court to intervene in this case in the United States Court of Appeals for the 8th Circuit and reinstate the program.
The White House did not immediately comment on the appeals court ruling. But in its Supreme Court filing, the Justice Department said, “If the Fifth Circuit denies a stay, the government intends to seek relief from this Court.”
Biden administration says more than half of borrowers are eligible had asked for forgiveness before the program was discontinued and the Ministry of Education approved some 16 million requests. The ministry recently told borrowers that the administration will discharge the debt if and when it prevails in court.
The legal battles surrounding the debt relief plan led the administration to extend the pause on federal student loan repayments. The pandemic-era freeze, which has been extended several times since it was imposed by the Trump administration, was set to expire on December 31.
Payments will now be resume 60 days after the Department of Education is cleared to implement the program or the dispute is resolved, officials said. If this has not happened by June 30, payments will resume 60 days later or September 1. The administration wants to reduce borrowers’ balances, or wipe out their debt completely, before payments resume.
In the case of Texas, the Job Creators Network Foundation, a conservative group, filed a lawsuit in October on behalf of a borrower who does not qualify for the full $20,000 debt relief and another one which is totally ineligible.
The lawsuit says the administration violated federal procedures by denying borrowers the opportunity to provide public comment before unveiling the program. He also alleges that the Biden administration made arbitrary decisions about who was eligible for debt cancellation and how much of their balance would be forgiven.
Biden’s loan relief plan would forgive up to $10,000 in federal student debt for borrowers who earn up to $125,000 a year or up to $250,000 a year for married couples. Pell Grant Recipients are eligible for an additional rebate of $10,000.
Myra Brown, one of the plaintiffs in the case, is ineligible for Biden’s plan because her federal loans, from the defunct Federal Family Education Loan (FFEL) program, are held by private entities. . Until late September, FFEL commercial borrowers like Brown could consolidate their loans into a direct loan to become eligible for Biden’s plan. But the Department of Education reversed the policy to avoid legal challenges such as the one brought by the six states.
Alexander Taylor, the other plaintiff in the lawsuit, falls below the income threshold and is eligible for a $10,000 reduction on the $35,000 in student loans he holds for an undergraduate degree from the University of Dallas, according to the complaint. Yet because he has never received a Pell grant, a form of federal aid for low-income students, he is not eligible for the additional $10,000 given to Pell recipients.
Justice Department lawyers have argued that the 2003 law that underpins Biden’s plan requires no notice or comment. This law, known as the Heroes Act, authorizes the Secretary of Education “to alleviate hardship that federal student loan recipients may experience due to national emergencies.”