A federal judge on Thursday granted a temporary restraining order to prevent President Joe Biden from discharging student loan debt for more than 25 million Americans, the latest action in the GOP-led fight against the president’s forgiveness program.
In his order, Hall said the states show a “substantial likelihood of success” with their argument that the Education Department lacks the authority to proceed with the rule and has sidestepped the appropriate timeline to implement it.
The order is the most recent upset for the Biden administration’s ongoing effort to alleviate federal student loan debt. A week ago, the Supreme Court refused to intervene in an injunction that halts the administration’s new student loan repayment plan, Saving on a Valuable Education, while litigation continues. That lawsuit over the repayment plan involves many of the same states, including Missouri, Georgia, North Dakota and Ohio, that are now taking aim at Biden’s new loan forgiveness plan.
The new lawsuit even repeats some of the same arguments used against the Save plan and Biden’s first attempt at sweeping debt forgiveness that was struck down by the Supreme Court in 2023.
Chief among them is the harm the new debt relief program would cause the Missouri Higher Education Loan Authority. In the latest lawsuit, Bailey argues the quasi-state agency that services federal student loans and funds state scholarships would lose revenue from servicing direct loans — those made and owned by the federal government — when the loans are reduced or eliminated. Judge Hall agreed the new debt relief program would harm Missouri by harming MOHELA’s bottom line.
“If the Rule goes into effect, defendants will unlawfully cancel billions of dollars in student loans, causing MOHELA and others similarly situated to lose administrative servicing fees they would have received from accounts being closed or balances being reduced,” Hall wrote. The judge has scheduled a hearing for Sept. 18.
“Today is a huge victory for every working American who won’t have to foot the bill for someone else’s Ivy League debt,” Bailey said in a statement Thursday. “I paid for my education in blood, sweat, and tears in service to my country, so this fight is personal for me. We will continue to lead the way for working Americans who are being preyed upon by unelected federal bureaucrats in Washington D.C.”
It is unclear how many borrowers living within the seven states that are suing would miss out on loan forgiveness; that information is not yet available, according to the Education Department.
“We strongly disagree with today’s ruling by the Georgia district court, which is an overreach based on false claims fueled by Republican elected officials who will stop at nothing to prevent their own constituents from getting just a little bit of breathing room in their daily lives,” White House spokesman Angelo Fernández Hernández said in a statement. “Our Administration will continue to vigorously defend the Department’s student debt relief efforts, no matter how many times Republican elected officials side with special interests and try to block millions of hardworking Americans from receiving student debt relief.”
Hernández went on to say the Education Department has been following the negotiated rulemaking process and has made clear its intentions for nearly a year. The department, he said, held multiple public negotiation sessions last fall, published proposed rules in April and received public comments.
The Education Department said it is reviewing the ruling and is “committed to supporting borrowers and fighting for relief for those who qualify.”
The department began working on the new debt relief rule after the Supreme Court shut down Biden’s attempt to forgive up to $20,000 in federal student loans for more than 40 million borrowers. The alternative program is far more targeted and relies on a different authority than its failed predecessor.
The proposed plan offers partial or full debt relief to borrowers in four circumstances: those who owe far more than they originally borrowed because of interest; those who have been paying for at least 20 or 25 years; those who attended career training programs that led to high debt loads or low earnings; and those who are eligible for existing forgiveness programs but never applied.
A key feature of the plan, which was introduced in April, is the elimination of up to $20,000 in accrued interest for borrowers, regardless of their income. Single borrowers earning less than $120,000 or married couples earning less than $240,000 could qualify to have all of their accrued interest forgiven if they are enrolled in an income-driven repayment plan. The White House estimates that more than 25 million people could benefit from that component alone, which will take effect this fall when the proposal is finalized. Other features will debut next year. The Biden administration estimates the plan will cost $147 billion over a decade.
The proposed plan is slated to be finalized this fall and remains under review at the Office of Management and Budget. In the meantime, the department gave borrowers until Aug. 31 to opt out of loan forgiveness. The federal agency has also prepared its loan servicers to quickly discharge debt once the rule goes into effect.
The states — Missouri, Georgia, Alabama, Arkansas, Florida, North Dakota and Ohio — say some of that preparation skirts the law. Although federal law says major rules may not take effect until 60 days after publication, the attorneys general claim the Education Department intends to immediately begin forgiving loans once the rule is published, according to the complaint.
In a confidential document obtained by the states and was not made public, the department allegedly asked servicers to report the balances of borrowers and fix any errors by Sept 6. “At that point, the Department will submit ‘forgiveness files’ to the contractors, which the contractors are instructed to process ‘immediately upon receipt,’” according to the complaint.
