President Biden’s student loan debt forgiveness program suffered another setback in court Monday when a federal appeals panel slapped a preliminary injunction on the $400 billion plan affecting millions of borrowers.
The ruling by the three-judge panel from the St. Louis-based Eighth US Circuit Court of Appeals came four days after a federal judge in Texas ruled that Biden overstepped his executive authority in announcing the plan under the federal HEROES Act of 2003.
The Texas case was appealed and the Biden administration is now likely to appeal the 8th Circuit ruling as well.
Biden’s plan would cancel up to $10,000 in student loan debt for those making less than $125,000 per year or households making under $250,000 per year in income. Pell Grant recipients, who typically demonstrate more financial need, would get up to $20,000 in debt forgiven.
The cancellation applies to federal student loans used to attend undergraduate and graduate school, along with Parent Plus loans.
A federal judge on Oct. 20 allowed the program to go forward, but the Eighth Circuit put it on hold the next day while it considered an appeal by Nebraska, Missouri, Iowa, Kansas, Arkansas and South Carolina.
A key part of the states’ argument centered around the financial harm the debt cancellation would cause the Missouri Higher Education Loan Authority, which services loans held by the federal government to students across the country.
“This unanticipated financial downturn will prevent or delay Missouri from funding higher education at its public colleges and universities,” stated the ruling from the panel extending the hold until the issue is resolved in court, a process which could take several months.
“”[T]he equities strongly favor an injunction considering the irreversible impact the Secretary’s [of Education] debt forgiveness action would have as compared to the lack of harm an injunction would presently impose,” the judges added. “Among the considerations is the fact that collection of student loan payments as well as accrual of interest on student loans have both been suspended [through the end of this year].”
The order was issued by US Circuit Judges Bobby E. Shepherd, Ralph R. Erickson, and L. Steven Grasz. Shepherd was nominated to the bench by former President George W. Bush, while Erickson and Grasz were nominated by former President Donald Trump.
White House Press Secretary Karine Jean-Pierre said last week that so far, 26 million people had applied for debt relief, while 16 million people had already had their relief approved.
The Department of Education would “quickly process their relief once we prevail in court,” she said after the order in the Texas case came down.
In that case, US District Judge Mark Pittman — another Trump appointee — said that Biden did not have “clear congressional authorization to create a $400 billion student loan forgiveness program.”
“In this country, we are not ruled by an all-powerful executive with a pen and a phone. Instead, we are ruled by a Constitution that provides for three distinct and independent branches of government,” Pittman wrote.
The legal challenges have created confusion about whether borrowers who expected to have their debt wiped out will have to resume making payments come Jan. 1, when the moratorium is set to expire.
The Education Department stopped accepting new applications for student loan forgiveness last week, saying it would hold onto existing requests.
With Post wires