Wednesday’s ruling is the latest legal setback for Biden, who is contending with an injunction in a separate lawsuit involving six Republican-led states seeking to overturn the president’s program. The Biden administration has asked the Supreme Court to intervene in that case before the U.S. Court of Appeals for the 8th Circuit and reinstate the program.
In its filing to the Supreme Court, the Justice Department said, “If the Fifth Circuit denies a stay, the government intends to seek relief from this Court.”
The Biden administration has said more than half of borrowers eligible had applied for forgiveness before the program was halted, and the Education Department approved some 16 million applications. The department recently told borrowers that the administration will discharge the debt if and when it prevails in court.
The legal battles over the debt relief plan have led the administration to extend the pause on federal student loan payments. The pandemic-era freeze, which has been extended multiple times since it was imposed by the Trump administration, had been set to expire on Dec. 31.
Student loan-payment freeze extended as courts weigh debt relief
Payments will now resume 60 days after the Education Department is allowed to implement the program or the litigation is resolved, officials said. If that hasn’t happened by June 30, payments will resume 60 days later or on Sept. 1. The administration wants to lower borrowers’ balances, or wipe out their debt altogether, before payments resume.
In the Texas case, the Job Creators Network Foundation, a conservative group, filed a lawsuit in October on behalf of a borrower who does not qualify for the full $20,000 in debt relief and another who is ineligible altogether.
The suit claims the administration violated federal procedures by denying borrowers the opportunity to provide public comment before unveiling the program. It also alleges the Biden administration made arbitrary decisions about who would qualify for debt forgiveness and how much of their balance would be canceled.
Biden’s loan relief plan would cancel up to $10,000 in federal student debt for borrowers who earn up to $125,000 annually or up to $250,000 annually for married couples. Pell Grant recipients are eligible for an additional $10,000 in forgiveness.
Myra Brown, one of the plaintiffs in the Texas case, is ineligible for Biden’s plan because her federal loans, originated through the defunct Federal Family Education Loan (FFEL) program, are held by private entities. Until late September, commercial FFEL borrowers like Brown could consolidate their loans into a Direct Loan to become eligible for Biden’s plan. But the Education Department reversed the policy to head off legal challenges such as the one being brought by the six states.
Alexander Taylor, the other plaintiff in the lawsuit, falls under the income threshold and is eligible to have $10,000 knocked off the $35,000 in student loans he holds for an undergraduate degree from the University of Dallas, according to the complaint. Yet because he never received a Pell Grant, a form of federal aid for low-income students, he does not qualify for the additional $10,000 provided to Pell recipients.
Justice Department attorneys have argued that the 2003 statute underpinning Biden’s plan doesn’t require notice and comment. That law, known as the Heroes Act, authorizes the education secretary “to alleviate the hardship that federal student loan recipients may suffer as a result of national emergencies.”