Dive Brief:
- Two conservative think tanks on Tuesday appealed a federal district court ruling dismissing their lawsuit against the U.S. Department of Education’s decision to forgive more than 804,000 borrowers’ student loans.
- In July, the Education Department announced it would automatically discharge $39 billion in federal student loans as a result of fixes to the way the agency counted payments toward income-driven repayment plans. Under IDR plans, loans should be forgiven after borrowers make enough qualifying payments, but the agency said that it failed to properly track them due to past administrative failures.
- The Cato Institute and the Mackinac Center for Public Policy are contending the agency overstepped its authority and only Congress can authorize the spending necessary to pay for debt cancellation.
Dive Insight:
The Biden administration’s plans to enact widespread student loan debt forgiveness have continually been met with conservative opposition and legal challenges.
Its biggest proposal — to erase up to $20,000 in student loan debt for individuals earning under $125,000 a year — relied on its interpretation of the 2003 Heroes Act, which gives the education secretary the ability to modify the federal student loan program in emergencies.
But the Supreme Court ruled against the Education Department’s plan in June, with Chief Justice Roberts writing that this authority only allows the secretary to make “modest adjustments and additions to existing provisions, not transform them.”
Biden has since tried to make inroads on student loan forgiveness in different ways, like addressing how payments are counted for IDR plans.
A federal judge dismissed the conservative groups’ legal challenge against the $39 billion in loan forgiveness in August, saying the think tanks hadn’t shown they had standing to sue.
The plaintiffs maintain in their appeal that the debt forgiveness was unlawful.
“The Administration aims to cancel student loan debt — no matter how unlawful its actions — on the apparent theory that courts cannot move fast enough to stop it or else will decide no one has standing to oppose its will,” Mark Chenoweth, president and general counsel for the New Civil Liberties Alliance, said in a statement Tuesday.
NCLA, a law firm focused on upholding the Constitution, is representing Cato and Mackinac.
“The Department of Education’s ongoing campaign to cancel billions of dollars of student loans by rewriting statutes is disgraceful and despotic,” Chenoweth said.
Education Department officials dismissed this stance Wednesday.
“This lawsuit is nothing but a desperate attempt from right wing special interests to keep hundreds of thousands of borrowers in debt, even though these borrowers have earned the forgiveness that is promised through income-driven repayment plans,” an Education Department spokesperson said.
The agency said it has already processed discharges for over 800,000 borrowers with income-driven repayment plans who were eligible for the forgiveness.
“These borrowers are getting forgiveness based on their long period in repayment and IDR program rules,” the spokesperson said.
The loan relief has also drawn ire from conservative lawmakers.
Last month, Republican lawmakers questioned Education Secretary Miguel Cardona on his department’s ability to forgive IDR balances.
Cato and Mackinac filed their appeal the same day that the Education Department began its second attempt at widespread debt forgiveness — a lengthy regulatory process that could outlast Biden’s term in office.
