Student loan forgiveness lawsuit transferred, potentially paving the way to relief for 30 million people

The Biden administration scored a surprise victory this week in an ongoing legal battle over a key student loan forgiveness program, the latest twist in a rollercoaster year for borrowers. However, the victory may only be temporary as the legal battle continues.

A group of Republican-led states filed a preemptive lawsuit against the Biden administration in September to stop implementation of a sweeping new student loan forgiveness plan. If implemented, this plan could provide relief to millions of borrowers. Shortly after the lawsuit was filed in federal court in Georgia, the presiding judge issued an injunction blocking the program. But in a new ruling Wednesday, the judge sided with the Biden administration and sent the case to another court, potentially offering a lifeline to the program.

Here’s the latest.

Biden’s latest student loan forgiveness program explained

President Joe Biden first unveiled plans for a new mass student loan forgiveness initiative last summer after the Supreme Court’s landmark ruling struck down his first attempt at mass debt relief. The new so-called “Plan B” option would be a different program implemented through a different process and under separate legal authority.

Earlier this year, the Department of Education released preliminary details of the new student debt relief plan. Unlike Biden’s first program, which would have provided a flat $10,000 in relief to most borrowers, the new plan would provide more targeted student loan forgiveness to four different groups:

• Borrowers who first entered repayment at least 20 or 25 years ago.
• Those who now owe more on their student loans than they originally borrowed due to the effects of interest accrual and capitalization.
• Individuals who attended institutions that lost access to federal financial assistance programs due to noncompliance with federal standards.
• Borrowers who are eligible for student loan forgiveness under other programs but have not enrolled or applied.

The administration established the new program based on the compromise and settlement authority of the Higher Education Act, which borrower advocates have long suspected could provide a stronger legal basis for mass debt relief than the HEROES Act, which the administration is relying on supported the first loan forgiveness plan. The Department of Education has spent the last year developing new regulations for the program through a formal rulemaking process. The final version of the rules is expected to be published sometime in October.

Education Department officials estimated that 25 million borrowers could benefit from the rate increase alone, with millions more borrowers potentially eligible for student loan forgiveness under the program’s other provisions.

Lawsuit challenged Biden’s “Plan B” student loan forgiveness initiative

Seven Republican-led states, led by Missouri — which has been at the forefront of legal challenges to the Biden administration’s attempts to implement sweeping student loan forgiveness — filed suit in September, claiming the government was preparing to implement mass debt forgiveness It only took a few days for the Ministry of Education to even publish the final version of the regulations. If true, this could have been a violation of federal law.

States argued that implementing mass student loan forgiveness would harm state finances, in part because state-affiliated service providers (such as Missouri-based MOHELA) would lose revenue, and that lost revenue would in turn impact state coffers. Missouri and other states made similar arguments in the legal challenge to Biden’s first debt relief plan.

The Biden administration denied the allegations in the lawsuit. Nevertheless, a judge in Georgia (where the lawsuit was filed) issued a preliminary injunction that briefly blocked the program for several weeks while giving the parties an opportunity to make legal arguments.

Georgia judge transfers student loan forgiveness lawsuit, giving borrowers a temporary win

In a surprise ruling, the Georgia court on Wednesday rejected the state’s challengers’ request to implement a longer-term injunction, ending the Georgia litigation. The court concluded that there was no evidence that the state of Georgia would be specifically harmed by the proposed student loan forgiveness initiative.

The court order dismissed the state of Georgia as a party in the lawsuit, concluding that “Georgia lacks standing to sue under the loan forgiveness program because it failed to establish a breach.” The court also declined to extend the injunction that had blocked the program.

However, rather than dismissing the case entirely, the court remanded the case to federal court in Missouri on behalf of the remaining states because Missouri relied on MOHELA to argue that the new student loan forgiveness program would harm it. Missouri has linked MOHELA to several of its legal challenges involving the Biden administration’s student loan forgiveness plans.

“Due to the fact that plaintiffs rely on MOHELA as their primary cause of action, the court concludes that transfer to the United States District Court for the Eastern District of Missouri would be most equitable,” the court wrote.

What the new ruling means for the latest Biden student loan forgiveness plan

The ruling gives the Biden administration a temporary victory and opens the door to the possibility that this new loan forgiveness program could move forward. But now the case is before a federal court in Missouri, so the legal battle is far from over. Still, borrower advocates praised the ruling.

“Today’s court decision is a small victory for democracy,” Persis Yu, deputy executive director and managing attorney of the Student Borrower Protection Center, said in a statement Wednesday. “This case by the Missouri Attorney General is as absurd as it is dangerous. The Biden-Harris administration’s Plan B is both legal and necessary to provide vital relief to over 30 million Americans trapped in a vicious cycle of unpayable debt. The decision to file this case in the Brunswick Division of the Southern District of Georgia – a carefully selected court with a single Republican-appointed judge – was a clear and desperate move to undermine democracy and stack the odds against working families. “

But the legal battle continues. Now a Missouri court will consider the challengers’ arguments. And Missouri has successfully relied on its relationships with MOHELA to challenge several Biden administration programs.

“This case is the Missouri Attorney General’s third attempt to undermine borrower relief and secure maximum profits for federal student loan servicer MOHELA, and demonstrates a clear intent to exploit the system against working families,” Yu said.

Advocates have called on the Biden administration to quickly implement the new student loan forgiveness plan, especially given that another program — the new SAVE plan — remains blocked due to a separate legal challenge. This challenge is also led by Missouri.

In August, the Education Department sent millions of notices to borrowers, giving them the opportunity to opt out of relief under the “Plan B” debt relief program. Since the initiative is now at least temporarily without a court order and the opt-out period has now expired, it remains to be seen how the ministry will proceed from here.