Federal Judge Calls Student Loan Facilitation Illegal, Exacerbating Uncertainty for Borrowers

Now the department cannot cancel these loans without going to court.

The case at the center of Thursday’s decision was brought by the conservative Job Creators Network Foundation on behalf of two federal student loan borrowers who believe they have been unfairly excluded from aid.

Single Borrower Federal Loans are owned by a commercial lender, not the US Department of Education, and are not eligible for relief. Another borrower is eligible for $10,000 assistance, but believes that because he is currently on a low income, he should receive the same $20,000 assistance as borrowers who were low-income at the time of admission. college.

Plaintiffs argued, among other things, that the Biden administration did not follow federal rules and should have allowed borrowers and the general public to voice their concerns about program eligibility before the program was rolled out, although the administration countered that the HEROES Act specifically allows it refuse such a process.

“This ruling upholds the rule of law, which requires the federal government to hear the voice of all Americans…,” Elaine Parker, president of the Job Creators Network Foundation, said in a statement Thursday. “We hope that today’s court ruling will set the stage for real solutions to the student loan crisis.”

But defenders of the borrowers and some lawyers were quick to blame the judge’s decision.

“My first answer was that this is a motivated reasoning of a judge who wants to come to such a result. The legal analysis is wrong.says Luke Herrin, associate professor of law at the University of Alabama.

Persis Yu, managing counsel for the Student Borrower Advocacy Center, says there is an important discrepancy between the damages claimed by the plaintiffs – not getting the debt relief they thought they should have received – and the remedy: the refusal to write off all federal student loan borrowers.

“I like to think of this lawsuit as a toddler issue. If I can’t, then you can’t,” says Yu. “And that’s not how the law works. And that’s not how the courts should apply the law.”

Pittman’s decision puts this case at the top of a string of debt relief cases in federal court.

In late October, a federal appeals court temporarily blocked Biden’s relief plan before it could go into effect, so the court could hear another lawsuit filed by six states—Nebraska, Missouri, Arkansas, Iowa, Kansas, and South Carolina.

The states argued that the handful of public lending institutions that manage old private federal loans would suffer financially if borrowers were allowed to consolidate those loans and claim debt relief.

The lawsuit was dismissed by a US District Court judge in Missouri before the plaintiffs filed an appeal with the 8th Circuit, which has yet to hear the case.

How did we get here

In the 2020 presidential election, Biden pledged to write off college debt at least $10,000 per person.

Biden finally announced his loan relief plan in August, promising to cancel up to $10,000 for borrowers who did not receive Pell grants and $20,000 for those who did.

Twenty-two Republican governors wrote to Biden in September challenging his authority to advance the forgiveness plan, and the Congressional Budget Office later estimated that the initiative would cost $400 billion over the next 30 years.

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