new Litigation A lawsuit filed by a Republican-led coalition of states alleges that the Biden administration illegally directed student loan servicing companies to begin forgiving student loans. The lawsuit, filed Tuesday, alleges that Education Secretary Miguel Cardona is trying to force new changes to the federal student loan system that have yet to be finalized. If true, these actions would be a blatant violation of federal law and demonstrate how desperate the Biden administration is to implement mass student loan forgiveness despite legal constraints.
“This is the third time the Secretary has attempted to illegally cancel hundreds of billions of dollars in loans at once,” the complaint reads. “After the Secretary’s first two attempts to publicly cancel, which were blocked by courts, the Secretary is now attempting to cancel in secret.”
Joe Biden has spent much of his presidency pushing for mass student loan forgiveness. He unveiled an ambitious plan to forgive up to $20,000 in student loan debt per borrower in 2022. The plan includes: Struck Down Another key element of Biden’s debt forgiveness policy is something called income-contingent repayment plans. SAVE Plan Many borrowers were supposed to be able to get forgiveness by paying back only a small portion of their loans. Blocked The ruling was made by several federal courts in June and July.
But these setbacks did not seem to deter the Department of Education. release A series of proposed rules that would effectively usher in mass student loan forgiveness. target Specific groups eligible for forgiveness include: borrowers whose balances have increased due to unpaid interest, borrowers who would qualify for forgiveness if they were enrolled in an income-contingent repayment program like SAVE, borrowers who have been making payments for decades, borrowers experiencing “hardship,” and borrowers enrolled in “low financial worthiness” programs.
According to the Committee for a Responsible Federal Budget, these change The cost is estimated at about $150 billion, but if SAVE continues to be blocked, the cost will likely be much higher.
The lawsuit alleges that Cardona has already instructed loan servicing companies to quickly forgive student loans under the new rules. The problem is that the rules have not yet been finalized, and federal law requires that such changes not be implemented for at least 60 days.
The states that filed the lawsuit — Missouri, Georgia, Alabama, Florida, North Dakota, Arkansas and Ohio — “have obtained documents that demonstrate that the Secretary of State has been implementing this plan without announcing it and has been planning it since May,” the complaint states. “These documents instruct the third-party agencies that administer the federal loans to begin canceling hundreds of billions of dollars in loans, possibly beginning this week.”
The complaint theorizes that this approach is due to the particularly weak nature of this latest attempt at student loan forgiveness, given that after a series of legal setbacks, these rules are highly unlikely to withstand legal challenge.
“All of this explains why the Secretary is now rushing to implement this rule so quickly that no one can sue,” the complaint reads, adding that states cannot reverse loan forgiveness once it’s enacted, so “it doesn’t matter how many rules he breaks along the way, so long as he forgives billions of dollars of debt before a court blocks it.”
