Federal appeals court blocks Biden’s student debt program

by Catherine

A federal appeals court on Monday blocked President Biden’s student-loan forgiveness program, dealing a second serious blow to the plan, which already had been declared unconstitutional by a Texas court.

A three-judge panel for the 8th U.S. Circuit Court of Appeals in St. Louis granted a preliminary injunction at the request of six Republican-led states that argued the program threatens future tax revenues and bucks Congress’ authority to cancel loans.

The six-page ruling did not decide the program’s legal merit but rather imposed a nationwide hold on the program pending an appeal of a lower court ruling that allowed the debt-relief plan to go forward.

In the decision, the judges said they could not limit the injunction to the plaintiff states because that would create widespread uncertainty. The judges concluded the program was too unwieldy to limit to the six states that challenged it.

“The equities strongly favor an injunction considering the irreversible impact [the administration’s] debt forgiveness action would have as compared to the lack of harm an injunction would presently impose,” the judges wrote.

The ruling is a major defeat for the administration and the more than 26 million Americans who applied to cancel billions of dollars in outstanding student loans.

A federal judge originally rejected the challenge brought by the six states — Nebraska, Missouri, Arkansas, Iowa, Kansas and South Carolina — saying they lacked the standing to pursue the case.

But the appeals court concluded Monday that Missouri had shown a likely injury from the program, noting that a major loan servicer headquartered in the state — the Missouri Higher Education Loan Authority — would lose revenue under the Biden administration plan.

The Missouri Treasury Department receives revenue from the loan authority.

“Since at least one party likely has standing, we need not address the standing of the other states,” the 8th Circuit said.

The Biden administration can appeal the injunction to the U.S. Supreme Court.

It’s the second decision by a federal court blocking the program over the past few days.

A U.S. District Court in Texas on Thursday concluded in a different case that the program was unlawful because the authority to vacate student loans lies with Congress. The Biden administration has already appealed that ruling.

Mr. Biden’s plan, which is now on life support following the back-to-back court rulings, would cancel up to $20,000 in federal student debt if a borrower received a Pell Grant. Borrowers without a Pell Grant are eligible for up to $10,000 relief.

It is estimated that more than 30 million could reduce their student debt through the plan.

The average student loan balance is currently more than $30,000.

In its ruling, the 8th Circuit panel said it is aware of the case’s potential impact.

“Whatever the eventual outcome of this case, it will affect the finances of millions of Americans with student loan debt as well as those Americans who pay taxes to finance the government and indeed everyone who is affected by such far-reaching fiscal decisions,” the panel said in its ruling.

Content Published on: 2022-11-14 20:40:00

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