A Texas judge this month halted President Joe Biden’s landmark student loan relief plan, which aims to forgive up to $20,000 in debt for tens of millions of borrowers. Now, the U.S. Department of Justice is asking the U.S. Supreme Court to reverse the judge’s ruling and allow Biden’s debt forgiveness program to move forward.
The relief would be particularly helpful for Black borrowers, who owe a disproportionate amount of the $1.7 trillion in national student loan debt. But as often happens with policies that benefit Black Americans, the plan has attracted a slew of legal challenges. Most have been backed by conservative groups and Republican-led states, alleging racial discrimination, financial harm, or an overreach of presidential powers.
Meanwhile, millions of Americans remain in financial limbo, uncertain when their next student-loan payment will come due and how much they will owe. When Biden announced the loan forgiveness plan in August, he also extended the freeze on loan payments until the end of the year. Now, he has extended the freeze through at least June 30.
The litigation surrounding the debt relief has caused anxiety and confusion for borrowers, said Stanley Tate, student loan attorney with Tate Law.
“There’s an emotional [toll] of ‘I want to move on with my life, and this debt is growing with me,’” Tate said, noting that the uncertainty is particularly taxing for borrowers whose loans could be completely wiped out by the debt relief program. “There’s just anxiety in general, because there’s so many things happening at once.”
So, what’s next? Here’s a breakdown of what borrowers should know.
What’s the lawsuit against student debt relief about?
Under Biden’s plan, borrowers who make $125,000 annually or less would see $10,000 in federal student loan debt wiped clean. Pell Grant recipients — usually students who display extreme financial need — would get $20,000. Those with undergraduate loans would also be able to cap their payments to 5% of their monthly income.
Biden justified his executive action, citing the Higher Education Relief Opportunities for Students Act of 2003. The HEROES Act allows the Secretary of Education to waive or grant relief of student financial aid programs to people who have suffered economic hardship in response to military or national emergencies.
Texas U.S. District Court Judge Mark Pittman, an appointee of former President Donald Trump, ruled on Nov. 10 that Biden’s program is “unlawful” because it circumvents congressional power. In his ruling, Pittman said that the HEROES Act doesn’t give the executive branch clear congressional authorization to create a $400 billion student loan forgiveness program.
The order introduced past examples of federal officials attempting to forgive loans through legislation or through executive action. Similar to Biden, the Trump administration used the HEROES Act as a reason to forgive student loans because of the effects from the pandemic. The Department of Education found that the request lacked such authority under the act.
“There are legitimate concerns about whether or not this is a proper exercise of use of authority by the president when he’s saying he’s using his powers that are related to the [effects from the] pandemic to provide cancellation benefits,” Tate said.
You mentioned that there’s a slew of other lawsuits. What’s going on with those?
Days after Pittman blocked Biden’s program, a three-judge panel — all Republican appointees — from the 8th U.S. Circuit Court of Appeals in St. Louis issued a preliminary injunction preventing the government from relieving any debt. That order came in response to a lawsuit brought by six Republican-led states: Arkansas, Kansas, Iowa, Missouri, Nebraska, and South Carolina.
That lawsuit alleges Biden overstepped his authority and that loan cancellation could cause the states to lose tax revenue in the future. Missouri, one of the states in the case, further argued that the debt cancellation could allow its quasi-state loan servicer to suffer financial losses. A lower court dismissed the case in late October because the plaintiffs failed to show how anyone would be imminently harmed. But an appeals court reversed that decision after determining that the Missouri loan servicer would face ongoing financial harm.
At least four other lawsuits have been filed. The U.S. Supreme Court has rejected two lawsuits for a lack of legal standing. One filed in Indiana was dismissed because a judge ruled that the plaintiff could not be irreparably harmed by the plan. Another case in Wisconsin, filed on behalf of a group of taxpayers, argued that Biden’s plan has an “improper racial motive” because it would help Black borrowers and violates the constitutional rights of equal protection.
So race plays a role in these lawsuits?
In the Wisconsin lawsuit, the Brown County Taxpayers Association alleged that the cost of the loan-relief program would force them to pay higher taxes. The association also argued that the one-time relief was created to “advance racial equity, meaning the purpose is to narrow the racial wealth gap by helping Black students, Black borrowers, and other borrowers of color,” the lawsuit said.
U.S. District Court Judge William Griesbach dismissed the lawsuit in early October. Afterward, the Wisconsin Institute for Law & Liberty, the conservative firm representing the taxpayers, submitted an emergency petition to the U.S. Supreme Court to block the program. The request was denied.
There are several recent examples of white people taking legal action against federal agencies whose policies help Black folks. Last year, a group of white farmers filed a class-action lawsuit against the U.S. Department of Agriculture, arguing that a $4 billion federal loan forgiveness program for farmers of color unfairly excluded them.
The lawsuit halted the program, which was replaced in September by a new iteration that offers assistance to a broader group of “distressed borrowers.”
In another example, white restaurant owners filed multiple lawsuits last year against the federal government, claiming they were “pushed to the back of the line” for receiving COVID-19 relief under the Restaurant Revitalization Fund. The American Rescue Plan allowed a three-week period for people of color who owned businesses to request relief from the fund.
A federal court in Texas and a federal appeals court in Ohio ruled the parts of the law regarding race were unconstitutional.
With all these outstanding lawsuits, will the Biden administration extend the moratorium on the payment freeze?
The pause on student loan payments, instituted at the beginning of the COVID-19 pandemic, was set to expire Dec. 31. White House officials announced on Nov. 22 the pause on payments will be extended through at least June 30. Student loan payments will be due again 60 days after the pause ends.
Should I still apply for loan forgiveness?
The Department of Education is no longer accepting applications for student loan forgiveness as a result of the injunction. For borrowers who applied for relief, the department will hold the applications.
Is student loan forgiveness dead? What are the chances that student debt will be forgiven?
Right now, the U.S. Supreme Court would need to intervene to revive student debt relief. Another option is for Congress to cancel the debt, but that’s unlikely with a Republican-controlled House.
In a statement this month about the roadblocks to student debt relief, the Biden administration said that it “will never stop fighting for hardworking Americans most in need — no matter how many roadblocks our opponents and special interests try to put in our way.”
This story has been updated to reflect the Biden administration’s decision on Nov. 22 to extend the repayment moratorium through at least June 30.