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Appeals court temporarily halts Biden’s student debt relief program

Updated October 21, 2022 at 8:30 p.m. EDT|Published October 21, 2022 at 7:05 p.m. EDT
President Biden speaks at the White House on Friday. (Tom Brenner for The Washington Post)
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A federal appeals court on Friday evening blocked the imminent cancellation of federal student loans under President Biden’s debt relief program, days after millions of borrowers began applying for up to $20,000 in forgiveness.

The U.S. Court of Appeals for the 8th Circuit granted an administrative stay while it considers a request for an injunction filed by a coalition of six Republican-led states seeking to block the forgiveness program. While it is unknown when the court will decide the case, it has agreed to an expedited briefing on the motion. In the meantime, the appeals court is instructing the Biden administration to stand down on discharging debt under the relief effort as the administration had prepared to start canceling loans as early as next week.

“We are pleased the temporary stay has been granted,” Nebraska Attorney General Doug Peterson (R), one of the states’ officials who sued the administration, said in a statement. “It’s very important that the legal issues involving presidential power be analyzed by the court before transferring over $400 billion in debt to American taxpayers.”

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The decision arrives a day after U.S. District Judge Henry E. Autrey, a George W. Bush appointee, dismissed the states’ lawsuit for lack of standing. Earlier Thursday, U.S. Supreme Court Justice Amy Coney Barrett denied a separate request by the Wisconsin Institute for Law and Liberty, working on behalf of a taxpayer’s association, to pause the program.

Judge dismisses GOP-led states’ lawsuit to block student-loan forgiveness plan

Biden’s loan relief plan would cancel up to $10,000 in federal student debt for borrowers who earn up to $125,000 annually, or up to $250,000 for married couples. Borrowers who received Pell Grants are eligible for an additional $10,000 in forgiveness. People have until the end of 2023 to apply, but the administration has encouraged borrowers to do so by Nov. 15 in hopes of it being processed before a pause on student loan payments ends Dec. 31.

White House press secretary Karine Jean-Pierre said in a statement that the appellate court’s order does not prevent people from applying for debt relief, and the administration encourages eligible borrowers to continue to do so. It also does not prevent the Education Department from reviewing applications, she said.

After six repayment extensions, pressure from Congress and activists, the White House acts on federal student loans. (Video: Michael Cadenhead/The Washington Post)

Jean-Pierre stressed that “the order does not reverse the trial court’s dismissal of the case, or suggest that the case has merit. We will continue to move full speed ahead in our preparations in compliance with this order.”

Hours earlier, Biden called the forgiveness policy a “game changer” during an appearance at Delaware State University.

“Our student loan plan lowers costs for Americans as they recover from the pandemic to give everybody a little more breathing room,” Biden said. “Republican members of Congress, Republican governors are doing everything they can to deny this relief. Their outrage is wrong and it’s hypocritical.”

Some 22 million people have applied for the program since a soft launch of the website a week ago, the president said Friday. Another 8 million people whose income information is already on file with the Education Department started receiving notifications this week that they are eligible for automatic debt relief.

Now those borrowers will have to wait for a conservative panel of judges on the 8th Circuit to decide the fate of the loan forgiveness program.

“Tens of millions of Americans have already rushed to apply for debt cancellation, an indication that borrowers are struggling, anxious and eager to see this burden lifted,” said Natalia Abrams, founder of the Student Debt Crisis Center, an advocacy group. “The President’s student debt cancellation plan is a bold solution to these challenges and frivolous lawsuits will not stand in the way.”

The Biden administration has maintained that its debt cancellation plan is legal, saying a 2003 law authorizes the secretary of education “to alleviate the hardship that federal student loan recipients may suffer as a result of national emergencies.”

The six states involved in the lawsuit — Arkansas, Iowa, Kansas, Missouri, Nebraska and South Carolina — argue that the administration has no right to take action on this scale without congressional approval. They also say the policy would impose economic harm on state investment entities and student loan companies that own debt from the defunct Federal Family Education Loan program.

Student loans

The impact of student loan repayments: A technical loophole is helping some parents lower their student loan payments. The ending of the student loan payment pause has left some borrowers anxious and confused.

What are my student loan repayment options? Personal finance columnist Michelle Singletary shares what to focus on as student loan payments resume and why she says President Biden’s new SAVE student loan income-driven plan is a game changer.

What’s next for student loan debt relief? Biden is forging ahead on a new path to narrower student loan relief after the Supreme Court rejected his earlier loan forgiveness plan. Meanwhile, conservative groups sued to block Biden’s effort to provide $39 billion in forgiveness to longtime borrowers.