The court on Monday agreed to a preliminary injunction halting the program in one of several cases challenging the debt relief plan. With the forgiveness program on hold, millions of borrowers are beginning to wonder if they will receive debt relief at all. The fate of the plan will likely ultimately rest with the Supreme Court. Here’s where things stand: HOW THE FORGIVENESS PLAN WORKS The debt relief plan announced in August would cancel $10,000 of student loan debt for those with less than $125,000 or households with incomes of less than $250,000. Recipients of Pell Grants, who typically demonstrate greater financial need, will receive an additional $10,000 in debt forgiveness. Students qualify if their loans were disbursed before July 1. The plan makes 43 million borrowers eligible for some debt relief, with 20 million who could have their debt written off entirely, according to the administration. The Congressional Budget Office said the program would cost about $400 billion over the next three decades. The White House said 26 million people have applied for debt relief and 16 million people had already been approved for debt relief. EXTENSION OF STAY IN THE PLAN The decision was made Monday by a three-judge panel of the 8th U.S. Circuit Court of Appeals in St. Louis, which is hearing an effort by the Republican-led states of Nebraska, Iowa, Kansas, Missouri, Arkansas and South Carolina. block the loan cancellation program. The decision by the panel of three Republican appointees — one appointed by President George W. Bush and two by President Donald Trump — extends the stay until the matter is resolved in court. Previously, the court had temporarily put her on hold. Nebraska Attorney General Doug Peterson, a Republican, said in a statement that the decision “recognizes that this effort to forgive more than $400 billion in student loans threatens serious damage to the economy that cannot be undone.” White House Press Secretary Karin Jean-Pierre said the administration is confident of its legal authority for the student debt relief plan. “The administration will continue to fight these baseless lawsuits by Republican officials and special interests and will never stop fighting to support working and middle-class Americans,” Jean-Pierre said. TEXAS JUDGE FINDS BIDEN DISABLED On Thursday, U.S. District Judge Mark Pittman — an appointee of former President Donald Trump based in Fort Worth, Texas — ruled that the program usurped Congress’s lawmaking power. Management immediately filed a notice of appeal. Pittman said the Higher Education Opportunity for Students Act of 2003, commonly known as the HEROES Act, did not provide the authorization for the loan forgiveness program. The law allows the Secretary of Education to waive or modify the terms of federal student loans in times of war or national emergency. The administration said the COVID-19 pandemic has created a national emergency. But Pittman said such a massive program required clear approval from Congress. The plan has faced other legal challenges. In October, Superior Court Judge Amy Coney Barrett rejected an appeal by a group of Wisconsin taxpayers. A federal judge had earlier dismissed the group’s lawsuit, finding they lacked legal standing or standing to bring the case. THE TEXAS DECISION WAS A MONEY IN THE PLAN Pittman’s ruling demolishes the underlying legal argument used to justify Biden’s plan. Previously, the White House had been able to avoid legal attacks made in lawsuits by changing the details of the program. One lawsuit argued that automatic debt cancellation would leave borrowers paying heavier taxes in states that tax the canceled debt. Management responded by allowing borrowers to opt out. Another lawsuit claimed that Biden’s plan would hurt financial institutions that earn revenue from certain types of federal student loans. The White House responded by taking those loans out of the plan. The Texas decision, however, holds that the HEROES Act does not provide authority for mass debt cancellation. The law gives the Department of Education broad flexibility during national emergencies, but the judge ruled it was unclear whether the debt cancellation was a necessary response to COVID-19, noting that Biden recently declared the pandemic over. IS THE CASE BOUND FOR THE SUPREME COURT? The legal situation is complicated by numerous lawsuits. It is likely that the Texas case and the lawsuit filed by the six states will be appealed to the Supreme Court. Before it gets to that level, the 5th and 8th Circuit Courts of Appeals — dominated by conservative justices — will rule on each case separately. The case before the 8th Circuit could end up at the Supreme Court soon, now that the panel has granted the order sought by the six GOP-led states. Likewise, the administration has signaled it will appeal the Texas decision. If the 5th U.S. Circuit Court of Appeals is asked to block the pending appeal of Pittman’s decision, the losing side could then go to the Supreme Court. In both cases, the appellate courts will not issue a final ruling on the program’s validity, but on whether it can proceed pending appeals. Meanwhile, the Biden administration is no longer accepting applications for student loan forgiveness.
