The White House policy would forgive up to $10,000 in federal student loan debt for borrowers who earn less than $125,000 a year, or less than $250,000 for married couples, or up to $20,000 for those who have received Federal Pell Grants. The Biden administration has been adamant that it has the legal power to cancel student debt, citing a 2003 law giving the executive branch broad power to overhaul student loan programs.
GOP lawmakers and conservative advocacy groups have pushed back on that claim, arguing that Biden’s move represents an illegal overreach of the executive branch because the 2003 law was created to give the president authority after a disaster like the terrorist attacks of September 11, 2001. Instead, Republicans such as Sen. stands” before the court or the grounds for taking legal action.
The Indiana lawyer pursuing the policy said he has standing because canceling the debt could drive up his state tax bill, since Indiana plans to impose the relief federal debt as a form of income. White House press secretary Karine Jean-Pierre dismissed that claim on Tuesday, telling reporters that “anyone who doesn’t want debt relief can walk away.”
The states’ lawsuit takes a different approach, arguing that canceling the debt will hurt them in many ways. The lawsuit points out that Missouri’s student loan manager, which is part of its state government, could see its revenue decline as borrowers are likely to consolidate their loans under the federal Family Education Loans program.
On Thursday, however, the administration announced that it would exclude FFEL from the loan cancellation scheme, a move first reported by Politico. The change could help stave off lawsuits against the policy, although it will mean around 2 million of the 44 million otherwise eligible borrowers will not be eligible for relief.
Anyone who applied before Thursday to consolidate their FFEL commercial debt into the direct lending program — where loans are made and held directly by the federal government — will be eligible for a forgiveness, according to the department. But everyone with these loans will be excluded for the time being.
“Our goal is to provide relief to as many eligible borrowers as quickly and easily as possible, which will enable us to achieve this goal while continuing to explore other legally available options to provide relief to borrowers with private FFEL loans. and Perkins. loans, including whether FFEL borrowers could qualify for one-time debt relief without the need to consolidate,” the Department of Education said in a statement.
Dozens of FFEL commercial borrowers consolidated their loans to qualify for Biden’s debt relief plan after he was announced in August. But earlier this month, the department told borrowers there was no need to take immediate action as the agency would find a way forward.
That assurance led Christopher Martin, 50, to delay his request to consolidate his $29,341 in student loans. Martin, who lives in Jersey City, was pleased with the low interest rate on his student loan debt, which would have increased had he consolidated. Had he known the administration would impose a consolidation deadline, Martin said he would have applied already.
Martin accused the White House of lying, adding some swear words. “Telling people they don’t necessarily need to consolidate and saying one day you had to consolidate yesterday is just despicable,” he said.
Missouri Attorney General Eric Schmitt (R), who is leading the litigation, also said in a statement that the policy would worsen inflation for Americans who do not benefit from student debt forgiveness. Arkansas, Iowa, Kansas, Nebraska and South Carolina joined Missouri in filing the lawsuit. Schmitt is also the Republican nominee for the U.S. Senate seat from Missouri in this fall’s election.
“No law authorizes President Biden to unilaterally release millions of individuals from their obligation to repay loans they have voluntarily taken out,” the lawsuit states.
