By SEUNG MIN KIM - Associated Press
WASHINGTON (AP) — Six Republican-led states are suing the Biden administration in an effort to halt its plan to forgive student loan debt for tens of millions of Americans, accusing it of overstepping its executive powers.
It’s at least the second legal challenge this week to the sweeping proposal laid out by President Joe Biden in late August, when he said his administration would cancel up to $20,000 in education debt for huge numbers of borrowers. The announcement, after months of internal deliberations and pressure from liberal activists, became immediate political fodder ahead of the November midterms while fueling arguments from conservatives about legality.
As the lawsuit was being filed, the Biden administration quietly scaled back eligibility rules for the debt relief, eliminating a relatively small group of borrowers who are the subject of legal debate in the suit. Those borrowers, whose loans are backed by the federal government but owned by private banks — a relic of defunct lending programs — are now ineligible for Biden's debt cancellation, the Education Department said.
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In the lawsuit, being filed Thursday in a federal court in Missouri, the Republican states argue that Biden's cancellation plan is “not remotely tailored to address the effects of the pandemic on federal student loan borrowers,” as required by the 2003 federal law that the administration is using as legal justification. They point out that Biden, in an interview with CBS' "60 Minutes” this month, declared the COVID-19 pandemic over, yet is still using the ongoing health emergency to justify the wide-scale debt relief.
“It’s patently unfair to saddle hard-working Americans with the loan debt of those who chose to go to college,” Arkansas Attorney General Leslie Rutledge, who is leading the group, said in an interview.
She added: “The Department of Education is required, under the law, to collect the balance due on loans. And President Biden does not have the authority to override that.”
The states of Iowa, Kansas, Missouri, Nebraska and South Carolina joined Arkansas in filing the lawsuit. Iowa has a Democratic attorney general, but the state's Republican governor, Kim Reynolds, signed on the state's behalf. The states argue that Missouri's loan servicer is facing a “number of ongoing financial harms” because of Biden's decision to cancel loans. Other states that joined the lawsuit argue that Biden's forgiveness plan will ultimately disrupt revenue to state coffers.
In particular, the suit alleges that Missouri's loan servicer will lose revenue from loans it owns through the Federal Family Education Loan Program — a program that allowed private banks to issue and manage federally backed student loans until the program was disbanded in 2010.
The Education Department updated its website Thursday saying borrowers with federal loans that are owned by private banks, including the FFEL program and Perkins loans, will now be ineligible unless they already consolidated their loans into the government's direct lending program before Thursday. The change will reverse eligibility for about 770,000 borrowers, the department said.
“Our goal is to provide relief to as many eligible borrowers as quickly and easily as possible, and this will allow us to achieve that goal while we continue to explore additional legally-available options to provide relief to borrowers with privately owned FFEL loans and Perkins loans,” the department said in a statement.
Still, the administration has long said it was confident the forgiveness program would survive court challenges.
“Republican officials from these six states are standing with special interests, and fighting to stop relief for borrowers buried under mountains of debt,” White House spokesman Abdullah Hasan said Thursday. “The president and his administration are lawfully giving working and middle class families breathing room as they recover from the pandemic and prepare to resume loan payments in January. ”
Biden’s forgiveness program will cancel $10,000 in student loan debt for those making less than $125,000 or households with less than $250,000 in income. Pell Grant recipients, who typically demonstrate more financial need, will get an additional $10,000 in debt forgiven.
The administration also said it would extend the current pause on federal student loan repayments — put on hold near the start of the pandemic more than two years ago — once more through the end of the year.
The administration faced threats of legal challenges to its plans almost immediately, with conservative attorneys, Republican lawmakers and business-oriented groups asserting that Biden was overstepping his authority in taking such sweeping action without the assent of Congress.
Democratic lawmakers battling in tough reelection contests also distanced themselves from the student loan plan, as Republican officials called it an unfair government giveaway for relatively affluent people at the expense of those who didn’t pursue higher education.
In their lawsuit, the Republican attorneys general also contend that the forgiveness program violates the Administrative Procedure Act, which lays out how federal agencies should make regulations in order to ensure executive branch policies are well-reasoned and explained.
“The president does not have the authority to put himself in the place of Congress,” Rutledge said in the interview. “These actions must be taken by Congress and he can’t override that.”
To justify the plan’s legality, the Biden administration is relying on a post-Sept. 11, 2001, law meant to help members of the military that the Justice Department says allows Biden to reduce or erase student loan debt during a national emergency. But Republicans argue the administration is misinterpreting the law because, in part, the pandemic no longer qualifies as a national emergency.
Another lawsuit against Biden’s student loan program was filed this week in an Indiana federal court by the Pacific Legal Foundation, a libertarian legal advocacy group that employs a lawyer who says he would be harmed by the forgiveness plan. The lawyer, Frank Garrison, says erasing his current debt load will trigger a tax liability from the state of Indiana, which is among at least a half dozen states where the forgiven loan amounts will be subject to state taxes.
A federal judge on Thursday rejected Garrison's request to temporarily block Biden's plan, saying there's no evidence he will be “irreparably harmed" by the cancellation. Garrison was given until Oct. 10 to revise his argument.
The White House dismissed the lawsuit as baseless because any borrower who does not want the debt relief can opt out. The Education Department is still on track to unveil the application for the forgiveness plan in early October, and it sent an email to borrowers Thursday explaining how to prepare to apply. The email noted that applicants do not have to submit any supporting documents.
Republicans have also seized on the Biden plan’s price tag and its impact on the nation’s budget deficit. The Congressional Budget Office said this week that the program will cost about $400 billion over the next three decades. The White House countered that the CBO’s estimate of how much the plan will cost just in its first year, $21 billion, is lower than what the administration initially believed.
Associated Press writer Collin Binkley contributed to this report.
Copyright 2022 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed without permission.
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Navient student loan forgiveness is available for FFEL Loans if you work in public service or have been in student loan repayment for at least two decades. Due to a lawsuit filed in Missouri, Navient loans are no longer available for Biden's student loan forgiveness plan.How long will Biden extend student loan payment pause? ›
The Education Department announced that it is extending the ongoing student loan pause into 2023 in response to legal challenges over President Biden's student loan forgiveness program. Payments and interest accrual were halted for all government-held federal student loans in March 2020 as a result of the pandemic.Is Biden postponing student loans again? ›
President Joe Biden on Tuesday announced an extension of the pause on federal student loan payments and interest into the first half of 2023 as his plan to cancel student debt for tens of millions of Americans remains blocked in court.Do student loans get forgiven? ›
To be eligible for forgiveness, you must have federal student loans and earn less than $125,000 annually (or $250,000 per household). Borrowers who meet that criteria can get up to $10,000 in debt cancellation. If you also received a Pell Grant during your education, you can qualify for up to $20,000 in forgiveness.How will I know if I qualify for Navient settlement? ›
Here are the eligibility criteria: You must have borrowed a private student loan from Navient or its predecessor, Sallie Mae, between 2002 and 2014 while attending certain for-profit schools like the Art Institute, ITT Technical Institute, and others. You can see a full list of schools at navientagsettlement.com.Who qualifies for Navient loan cancellation? ›
Only loans held by the Department of Education are eligible for the loan cancellation program. As of September 29, 2022, ED issued a FAQ announcing that borrowers with federal student loans not held by ED cannot obtain one-time debt relief by consolidating those loans into Direct Loans.Will student loans be paused again after August 2022? ›
The student loan payment pause now ends on Dec. 31, 2022. Borrowers should prepare to resume making their scheduled payments in January or consider alternative repayment options.Will student loans be paused again in 2023? ›
Students may be off the hook for payments until summer 2023, the Department of Education said Nov. 22. But forbearance could end sooner if the Supreme Court decides the fate of Biden's plan to cancel up to $20,000 in student debt per borrower.Did Biden extend the no interest on student loans? ›
The Biden administration on Tuesday extended the student loan payment pause until no later than June 30, 2023. Interest rates on federal students will also remain set at 0% during this time.Will student loans be paused in 2022? ›
Federal student loan borrowers — and the courts — have more time to figure out what's going on with debt forgiveness before payments resume. The payment pause has been extended through June 30, 2023.
The pause on federal student loan payments is slated to expire on Dec. 31, 2022, with payments expected to resume on Jan. 1, 2023. In his announcement about onetime student loan debt relief, Biden said he was extending the moratorium "one final time" to the end of the year.Will student loan forgiveness apply to current students? ›
Current students and borrowers who have federally held undergraduate, graduate and Parent PLUS loans that were distributed on or before June 30, 2022 are eligible for the relief, says Megan Walter, a policy analyst for the National Association of Student Financial Aid Administrators.At what age is student loans forgiven? ›
Revised Pay As You Earn (REPAYE) works much the same way as Pay As You Earn. Under this plan, your payments will be capped at 10% of your discretionary income. Undergraduate loans are forgiven after 20 years, while graduate school loans are forgiven after 25 years.How many years after student loans are forgiven? ›
Any outstanding balance on your loan will be forgiven if you haven't repaid your loan in full after 20 years (if all loans were taken out for undergraduate study) or 25 years (if any loans were taken out for graduate or professional study).What student loans are not eligible for forgiveness? ›
What student loans are not eligible for forgiveness? Private student loans, by definition, are private and are not eligible to be forgiven. These are loans the borrower owes to student loan providers and not the federal government.Which states will Navient cancel student loans? ›
Qualifying residents of the following states will be covered under the restitution agreement: Arizona, California, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Minnesota, Missouri, Nebraska, Nevada, New Jersey, New Mexico, New ...Will my student loans be forgiven by this Navient settlement? ›
The Navient settlement does not provide for any student loan forgiveness or cancellation for federal student loans. However, federal student loan borrowers may be able to request forgiveness of their federal student loans through the Borrower Defense to Repayment program.What states are involved in Navient suit? ›
- A multistate AG investigation;
- Lawsuits filed by California, Illinois, Mississippi, New Jersey, Pennsylvania, and Washington;
Certain private loan borrowers will receive a notice from Navient that their qualifying private loan has been cancelled, and that the credit bureaus will be alerted to remove the loan's tradeline. (A tradeline is information about a consumer account that is sent to credit bureaus.Will student loans be paused forever? ›
Could A Student Loan Forbearance Last Forever? The only way to permanently extend the payment pause and interest waiver would be for the declaration of a national emergency to be in effect forever.
Biden administration rolls out one-time student loan forgiveness waiver, and other current student loan news for the week of April 25, 2022.Will student loan payments resume in 2022? ›
Today, the U.S. Department of Education (Department) announced a final extension of the pause on student loan repayment, interest, and collections through December 31, 2022. Borrowers should plan to resume payments in January 2023.How do I know if I qualify for student loan forgiveness? ›
Federal student loan borrowers who earned less than $125,000 in either the 2020 or 2021 tax years are eligible. For those who filed taxes jointly or as a head of household, the income limit is $250,000.Who blocked student debt relief? ›
The administration's move on Friday comes after a unanimous three-judge panel on the 8th Circuit halted Biden's massive debt relief plan, which had already been blocked nationwide by a separate court ruling.What if I just paid off my student loans? ›
You're Eligible for the New Loan Forgiveness Program
If you made payments and paid off your federal student loans during the federal payment freeze—or reduced your balance to less than the forgiveness amount—you can get a refund of your payments to maximize the value of this forgiveness opportunity.
You can get your federal student loans forgiven after 25 years — but only if you pay your loans under an income-driven repayment plan. You can request entry into one of the four IDR plans by applying online, but contact your federal loan servicer if you need help. This forgiveness program was broken for many years.What type of student loan forgiveness is available? ›
Public Service Loan Forgiveness
PSLF forgives the remaining balance on your Direct Loans after you have made 120 qualifying monthly payments under a qualifying repayment plan while working full-time for a qualifying employer.
Send the completed form with your employer's certification to MOHELA, the federal loan servicer for the PSLF Program. You may also fax your PSLF form to MOHELA at 866-222-7060. If MOHELA is already your servicer, you may upload your PSLF form on the MOHELA website.Can you collect Social Security if you owe student loans? ›
By law, Social Security can take retirement and disability benefits to repay student loans in default. Social Security can take up to 15% of a person"s benefits. However, the benefits cannot be reduced below $750 a month or $9,000 a year. Supplemental Security Income (SSI) cannot be offset to repay these debts.Do student loans go away at 65? ›
Are student loans forgiven when you retire? The federal government doesn't forgive student loans at age 50, 65, or when borrowers retire and start drawing Social Security benefits. So, for example, you'll still owe Parent PLUS Loans, FFEL Loans, and Direct Loans after you retire.
Discharge of your federal student loan will not affect the benefits you receive.Do student loans drop after 7 years? ›
Do student loans go away after 7 years? Student loans don't go away after seven years. There is no program for loan forgiveness or cancellation after seven years. But if you recently checked your credit report and are wondering, “why did my student loans disappear?” The answer is that you have defaulted student loans.Do federal student loans fall off after 7 years? ›
If the loan is paid in full, the default will remain on your credit report for seven years following the final payment date, but your report will reflect a zero balance. If you rehabilitate your loan, the default will be removed from your credit report.Do student loans erase after 20 years? ›
Are federal student loans forgiven after 20 years? The U.S. Department of Education forgives student loan debt after 20 years of qualifying payments under an eligible income-driven repayment plan. In most cases, federal student loans go away only when you make payments.Who is eligible for student loan forgiveness after 10 years? ›
but borrowers who work in public service can still apply for forgiveness. If you have worked in public service (federal, state, local, tribal government or a non-profit organization) for 10 years or more (even if not consecutively), you may be eligible to have all your student debt canceled.Will Biden forgive private student loans? ›
Private student loan forgiveness isn't impossible but it's unlikely. After all, Mr. Biden's action is tied to the federal government. Loans owed to private lenders are different.What states will Navient cancel loans? ›
Qualifying residents of the following states will be covered under the restitution agreement: Arizona, California, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Minnesota, Missouri, Nebraska, Nevada, New Jersey, New Mexico, New ...What states were involved in the Navient lawsuit? ›
The attorneys general of Illinois, Washington, Pennsylvania, California, Mississippi, and New Jersey all sued Navient for violating borrowers' rights.What states are included in the Navient settlement? ›
The settlement was led by Pennsylvania, Washington, Illinois, Massachusetts, and California, and was joined by attorneys general in Arizona, Arkansas, Colorado, Connecticut, the District of Columbia, Delaware, Florida, Georgia, Hawaii, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Michigan, Minnesota, ...Who gets Navient settlement money? ›
The private loan debt relief will primarily go to borrowers who took out private subprime student loans (made to borrowers with low credit scores) through Navient's predecessor, Sallie Mae, between 2003 and 2014, and then had more than seven consecutive months of delinquent payments prior to June 30, 2021.
Certain private loan borrowers will receive a notice from Navient that their qualifying private loan has been cancelled, and that the credit bureaus will be alerted to remove the loan's tradeline. (A tradeline is information about a consumer account that is sent to credit bureaus.