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Federal Court Temporarily Bars Student Loan Forgiveness

One day after a federal judge dismissed a GOP-led lawsuit by six states challenging the debt forgiveness program, a US appeals court temporarily blocked Biden's bill to wipe out billions of dollars in student loan debt.

The US Federal Court Temporarily Bans Student Loan Forgiveness

A federal appeals court ruled on Friday night that President Joe Biden’s plan to temporarily ban forgiving millions of dollars in federal student loans effectively halts the program just a few days after it was opened for accepting applications. Six Republican-led states filed a motion with the Eighth Circuit Court of Appeals to block the initiative. The Court issued the stay pending the outcome of its motion review. During the appeal process, the Biden administration was told not to take any action regarding the program.

Karine Jean-Pierre, a White House spokesperson, expressed the hope that borrowers would continue to seek relief, saying that the Court’s temporary order would not prevent the applications from being filed or reviewed. She stated, “We will proceed with our preparations at full speed in compliance with this order.”. “We will continue to fight Republican officials trying to prevent working families from receiving relief.”

At this point, it remains to be seen whether the issue will be resolved before January 1, when student loan payments will resume after being paused during the pandemic. Under Biden’s plan, millions of Americans were expected to be able to cancel their debt completely, but now they must decide whether to begin making payments in January or not.

Why Biden announced Student Loan Forgiveness?

In response to the pandemic, Biden has announced that the last extension of the payment pause will be the last, but economists worry that many Americans may not be able to regain their financial footing after the upheaval of the epidemic. Borrowers receiving debt cancellations may find difficulty if asked to make payments in January. Many may fall behind on their payments and default on their loans if asked to make payments in January.

On Thursday, U.S. District Judge Henry Autrey filed an appeal with the Eighth United States Circuit Court of Appeals following his appeal in St. Louis. The Court ruled that it lacks jurisdiction to hear the case because Nebraska, Missouri, Arkansas, South Carolina, Kansas, and Iowa did not establish standing in this case.” Additionally, the six states moved for a preliminary injunction preventing the administration from implementing the debt cancellation plan pending the outcome of the appeals process.

Among the six attorneys general who led the effort to block the debt relief program, Nebraska Attorney General Doug Peterson applauded the Court’s decision. It is our pleasure that a temporary stay has been granted,” Peterson said. However, before transferring over $400 billion in debt to American taxpayers, the Court must analyze the legal issues involved with presidential power.

How much will the program cost?

Biden highlighted the number of applicants who have applied for loan relief since the administration made its online application available at Delaware State University a week ago. At this historically Black university, most students receive federal Pell Grants. According to the Congressional Budget Office, the program is expected to cost approximately $400 billion during the next three decades.

At an October 12 hearing, James Campbell, an attorney for the Nebraska Attorney General’s office, testified that the administration is acting outside its authority and causing millions to be lost to states. As a result, a cancellation of federal student loans for undergraduate and graduate school and Parent Plus loans will be effective on July 1, 2015.

The program is open to current college students whose loans have been disbursed before July 1. There are 43 million borrowers who will be eligible for some form of debt forgiveness under this plan, including 20 million who will be eligible for full debt forgiveness. Before the November midterm elections, the announcement immediately became a major political topic.

Federal Court Temporarily Bars Student Loan Forgiveness
The US Federal Court Temporarily Bans Student Loan Forgiveness
Source: Web

Biden has been accused of exceeding his authority in sweeping actions without the assent of Congress by conservative attorneys, Republican lawmakers, and business-oriented groups. In their view, this was an unfair government giveaway to relatively wealthy individuals at the expense of taxpayers who were not interested in pursuing higher education.

President Biden Criticized GOP Leaders who Slammed his Relief Plan

Several Democratic lawmakers facing tough reelection campaigns have disavowed the proposal. During his remarks on Friday, President Biden lashed out at Republicans who have criticized his relief program, stating that “their outrage is wrong, and it is hypocritical.” He also noted that some GOP officials had debts forgiven and Coronavirus pandemic relief loans were forgiven.

In September, the six states filed their lawsuit. Administration lawyers argued that the Department of Education has “sweeping authority to administer federal student aid programs.” A court document asserts that the Higher Education Relief Opportunities for Students Act of 2003, also called the HEROES Act, authorizes the secretary of education to waive or modify the terms of federal student loans during a national emergency or war.

The HEROES Act was passed following the September 11, 2001, terrorist attacks to assist military personnel. According to the Justice Department, Biden will have the option of reducing or eliminating his student loan debt during a national emergency. However, there is a perception among GOP that the administration has misinterpreted the law, partly because the pandemic is no longer considered a national emergency.

During the hearing on October 12, Justice Department attorney Brian Netter stated that the ramifications of the COVID-19 epidemic continue to be felt. Since the start of the recession two and a half years ago, student loan defaults have skyrocketed. The program has been challenged in other lawsuits as well. For example, a Wisconsin taxpayers’ group filed an appeal to stop the debt cancellation program earlier on Thursday, but Supreme Court Justice Amy Coney Barrett rejected the request.

rEAD aLSO: Biden’s Student Loan Action Sparks Political Conflict