Student Loan Debt Relief Ruled Illegal by Texas Court: What Happens Now?

President Joe Biden’s plan for forgive up to $20,000 in student loan debt for eligible borrowers is now in serious legal danger after a The Texas judge canceled the program Thursday, declaring it “an unconstitutional exercise of the legislative powers of Congress.”

The The Ministry of Education responded on Friday that she will appeal the decision. “The Biden-Harris student debt relief plan is legal and necessary to give borrowers and working families a break as they recover from the pandemic,” he said in a statement.

The application for student loan relief stopped accepting bids. Instead, it displays a simple posts“The courts have issued orders blocking our student debt relief program. Therefore, at this time, we are not accepting applications.” In its message on Friday, the Ministry of Education noted that “more than 26 million borrowers have provided the information needed to process their requests for relief and 16 million requests have been approved.”

Learn about the legal challenges to the one-time student debt relief plan and how they could impact forgiveness for eligible student borrowers. To learn more about student debt relief, check out how debt forgiveness can change your credit score and whether you will have to pay state taxes on discharged loans.

What are the legal arguments against the White House student loan debt relief plan?

Legal arguments against student debt forgiveness so far fall into five main categories: claims for harm to borrowers; allegations of harm to states and state agencies; claims for damages due to the devaluation of Cancellation of civil service loans; claims that the program violates the Administrative Procedure Act; and asserts that the program is unconstitutional. Many lawsuits include multiple claims for damages.

One of the biggest challenges for those who oppose student debt relief in court has been finding plaintiffs with upright who would be directly harmed by the student loan forgiveness program. This was first demonstrated by Garrison v. US Department of Education: Borrower Frank Garrison claimed he was wronged because his automatic student loan debt cancellation would result in a tax burden for the State of Indiana. Garrison’s legal status was badly damaged when the Department of Education announced that borrowers could opt out of debt forgiveness.

Thursday’s decision to declare the student debt relief program illegal was the first court order to directly address the merits of arguments against the plan. In his 26 page reviewJudge Mark Pittman wrote that the executive branch had used the powers of Congress unconstitutionally: “The HEROES Act – an act to provide loan assistance to military personnel defending our nation – does not provide the executive branch with clear authorization from Congress to create a $400 billion student loan forgiveness program, so the program is an unconstitutional exercise of congressional legislative power and must be rescinded.

What are the biggest legal challenges to the student debt relief plan?

After Thursday’s decision, Brown v. US Department of Education is now at the center of the legal battle over student debt forgiveness.

In the case, two Texas borrowers — an applicant with non-federal-held FFEL loans and an applicant who did not receive a Pell grant — say the debt relief plan should be canceled because ‘He failed to hold a “notice-and-comment period” as required by the Administrative Procedure Act. On November 10, Pittman granted their motion for summary judgment and declared the one-time debt relief program illegal.

Prior to Thursday’s court ruling, the largest lawsuit opposing one-time student debt relief was Nebraska vs. Bidenwhere six Republican-led states (Arkansas, Iowa, Kansas, Missouri, Nebraska and South Carolina) say the White House plan will hurt their tax revenues and state-based lending agencies.

Just one day after the case was fired for lack of quality by a judge in the Eastern District of Missouri, a federal circuit court suspended the program indefinitely pending its decision on the appeal. Although the plaintiffs and the Department of Education filed emergency briefs more than two weeks ago, the court took no action.

The other four lawsuits challenging student debt relief were less successful.

As mentioned above, Garrison v. US Department of Education – which asserted that the plaintiff would be harmed by state taxes on automatic debt relief – was rejected by the District Court for the Southern District of Indiana. The decision was appealed to the Seventh Circuit Court of Appeals, but the case seems unlikely to succeed. The libertarian law firm Pacific Legal Foundation filed an emergency petition with the Supreme Court for the case, but it was denied on November 4.

Likewise, in Brown County Taxpayers Association v Biden, a Wisconsin court has dismissed a lawsuit brought by taxpayers who claimed they should pay more taxes because of the student debt relief plan. The the court ruled that there is no such thing as “taxpayer status”.

The taxpayers’ group also claims that the debt cancellation plan is unconstitutional. He filed emergency motions with the Seventh Circuit Court of Appeals and the United States Supreme Court to stop the plan, but both requests were denied without explanation.

Another case brought by a State, Arizona vs. Biden, takes a slightly different approach than the Nebraska trial. Led by Arizona Attorney General Mark Brnovich, the lawsuit makes three allegations of injury. He says the state will lose tax revenue because student debt cancellation cannot be enforced until 2025; the program will increase inflation, which harms the state’s economy; and recruitment for government jobs will be penalized by the devaluation of the civil service loan cancellation program. Arizona has not sought a temporary injunction, and court hearings in the case have yet to begin.

A libertarian think tank also claims that it will be harmed by the one-time weakening of the student loan debt forgiveness program of the civil service loan forgiveness program, which will make it more difficult for it to recruit employees who would be eligible. The defendants in Cato Institute v. US Department of Education were served last week and hearings are expected to begin soon.

How does the White House legally defend the one-time student debt relief program?

The Ministry of Education argues that its one-time student debt relief plan is protected by the Higher Education Student Support Opportunities Act 2003, also known as the HEROES Act. This act authorizes the Secretary of Education to change any regulations relating to any student financial assistance program for Americans who “have suffered direct economic hardship as a direct result of war or other military operation or ‘a national emergency’.

President Joe Biden and Education Secretary Miguel Cardona stand at a podium

Biden announced his unique student debt relief plan with Education Secretary Miguel Cardona in August.

Washington Post/Getty Images

The White House says the COVID-19 public health emergency gives the Department of Education the legal basis for canceling student loan debt under the HEROES Act.

The United States has been in a public health emergency since the Secretary of Health and Human Services declared one due to COVID-19 on January 31, 2020. This declaration of emergency has been extended several times since, most recently October 13, 2022.

When will the student loan debt forgiveness lawsuits be resolved?

Legal experts were divided on the impact of the lawsuits over the $10,000 to $20,000 student debt repayment plan, but Thursday’s ruling throws a big wrench in their predictions.

The call from the Ministry of Education now goes to the United States Court of Appeals for the Fifth Circuitconsidered by some to be the the most conservative of all federal appeal courts. If the department’s appeal fails there, the last resort for the program will be the United States Supreme Court.

According to a Forbes reportan appeal to the Supreme Court could end up before Justice Samuel Alito, who wrote the majority opinion in the ruling. quash Roe v. Wade. Regardless of how appeals are decided, the appeals process will likely take several weeks, greatly reducing the chances of debt relief occurring before federal student loan payments and interest resume on January 1, 2023.

We’ll continue to update this story as lawsuits seeking to prevent one-time student debt relief work their way through the courts.

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