On Thursday, U.S. District Judge Mark Pittman ruled that the program usurped Congress’s lawmaking power. Management immediately filed a notice of appeal. It is not the only challenge facing the plan. Last month, the 8th U.S. Circuit Court of Appeals in St. Louis temporarily put the loan cancellation on hold while it hears a challenge by six Republican-led states. The plan’s fate will likely end up in the Supreme Court, meaning a final decision is a long way off. 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. THE TEXAS CASE Pittman — a Fort Worth, Texas-based appointee of former President Donald Trump — made it clear he felt Biden overstepped his authority. He said the 2003 Higher Education Opportunity for Students Act, 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 FACES MANY OTHER LEGAL CHALLENGES In September, the states of Nebraska, Iowa, Kansas, Missouri, Arkansas and South Carolina filed a lawsuit to end the program, arguing that the pandemic no longer qualifies as a national emergency. Justice Department attorney Brian Netter disagreed, telling U.S. District Judge Henry Autrey in October that student loan defaults have skyrocketed over the past 2 1/2 years. Autrey ruled on October 20 that the states lacked standing, allowing the amnesty plan to go forward. But the 8th Circuit temporarily halted it the next day while considering a permanent block. This decision is still pending. The White House encouraged borrowers to continue applying for relief, saying the court order did not stop applications or the review of applications. 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 BIGGER BLOW TO 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 new ruling, however, argues 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. 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 soon end up at the Supreme Court, as the six Republican-led states asked the appeals court to put the program on hold while the case plays out. If the appeals court grants that request, the administration will likely ask the Supreme Court to intervene. States could also appeal to the high court if their request is rejected. 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. At the same time, emergency orders can signal how courts will ultimately decide a case. In January, the Supreme Court consolidated challenges to the administration’s power to impose a vaccine or testing requirement on the nation’s largest employers. Days after hearing arguments, the court split 6-3 to strike out the claim, saying the challengers were likely to prevail in the end. A separate vaccine mandate for most health care workers was allowed to go forward when the court concluded that a challenge was likely to fail. COMMON SEARCH: ‘CANCELLING STUDENT LOAN FORGIVENESS?’ Borrowers are confused about whether their debt will be canceled or whether they will have to resume payments on Jan. 1, when a pause caused by the COVID-19 pandemic is set to end. After the Texas decision, many took to the internet, asking Google: “Student loan forgiveness overturned?” Total search traffic for “student loan forgiveness” quadrupled Thursday night and had nearly increased tenfold by Friday morning, according to Google Trends data. Some borrowers said they were skeptical they would ever see the relief, anyway. Brenna Zimmerman, who graduated from the University of Kansas in 2021 with about $30,000 in debt, called the debt cancellation “a little too good to be true.” And though the program would benefit her, Zimmerman, 24, now a graphics coordinator at a packaging company, questions whether it’s a good idea. “I think I’d be foolish not to apply,” he said, adding, “I don’t think it’s necessarily fair, especially for people who chose not to go to school.” Lauren Pete, a 20-year-old junior at Louisiana State University, has $10,000 in student debt and hopes to go to graduate school. She called the benefits of the loan forgiveness program “a dream come true” that would ease the financial burden on her and her parents, who didn’t go to college and worked hard to help pay for her tuition. “All I want to do is make them proud and make this process a lot easier for them, especially since I have a younger brother who is going to start (college) next fall,” Pete said. When 25-year-old Hofstra University graduate Sarah Puckett heard about the plan, she couldn’t believe she might have some of her $26,000 in debt forgiven. “I was frantically calling my dad, frantically saying, what does this mean?” Puckett, now a television producer for a true crime network, said. “Is it real? I feel like they’re going to take it from us. I don’t believe it.” Now, he worries that it really was too good to be true. “I’m so excited that I applied, but you know, I’m not going to take it to the bank until I see it actually happen,” Puckett said. Frederick Bell, 30, of New Orleans, has $23,000 in student loan debt and was hoping to have all but $3,000 of that amount forgiven. The 2014 University of Washington graduate said being debt-free would allow him to consider furthering his education or buying a home. “That decision (Texas) certainly blew away a lot of people’s dreams when it came to financial freedom after that relief,” Bell said.
AP reporters Mark Sherman and Collin Binkley in Washington. Gene Johnson in Seattle. Heather Hollingsworth on the Kansas mission. Chrissie Thompson in Spokane, Washington. Cheyanne Mumphrey in Phoenix. and Sara Cline in Baton Rouge, Louisiana, contributed to this report.
