NextGen

Student Debt Forgiveness Program Paused After Appeals Court Ruling

An appeals court has put the brakes on President Joe Biden’s ambitious plan to forgive student loans, The New York Times reported.

The decision, by the U.S. Court of Appeals for the Eighth Circuit, granted a stay in response to an appeal filed by six Republican-led states—Nebraska, Missouri, Arkansas, Iowa, Kansas and South Carolina—after a district court judge dismissed their case on Thursday for lack of standing. The states are arguing that the loan forgiveness plan avoids congressional authority and that it threatens their future tax revenues, as well as earnings by state entities that invest in or service the student loans, according to Reuters.

The decision came less than a week after the president announced the official launch of the federal student loan forgiveness application.

The ruling stays any debt cancellation until the court can rule on the states’ request for an injunction that would prevent the government from discharging debts, according to the Times.

The key elements of the plan are: to provide up to $20,000 in debt cancellation to Pell Grant recipients with loans held by the U.S. Department of Education, and up to $10,000 in debt cancellation to non-Pell Grant recipients. Single borrowers are eligible for this relief if their individual income is less than $125,000; married couples are eligible if their joint income is less than $250,000. The student debt relief program also aims to make the student loan system more manageable for current and future borrowers, and to protect future students and taxpayers by reducing the cost of college and holding schools accountable when they raise prices.

In an attempt to avoid legal challenges, the administration has made changes to its original plans. For example, last month, the Department of Education announced that some Federal Family Education Loans could no longer be consolidated. This change might prevent hundreds of thousands of borrowers from having their debts forgiven, according to the Times.

The Times quoted one student at Delaware State University, a historically Black college (HBCU), who said that graduating debt-free under the president’s plan would be a “lifeline” for him and his friends, allowing them to “think about starting businesses and saving for their first homes.”