Biden’s latest debt forgiveness plan under attack – what a lawsuit could mean

Here’s something that will sound familiar if you’ve been following the federal student loan forgiveness drama over the past year: Conservative groups are trying to block President Joe Biden’s latest attempt at debt relief, just weeks away after the United States Supreme Court overturned it. a previous plan to provide loan forgiveness.

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Last week, the right-wing Cato Institute and the Mackinac Center for Public Policy filed a lawsuit challenging the Biden administration’s plan to cancel $39 billion in federal student loans, the Washington Post reported. Both organizations are asking the court to stop the program, which they say violates federal law because the administration did not follow the proper regulatory process or allow the public to intervene.

As previously reported by GOBankingRates, the Biden administration announced in July that it would cancel $39 billion in debt for 804,000 student loan borrowers. The U.S. Department of Education said in a statement that the releases are the result of “fixes” designed to ensure that all borrowers have an accurate count of the number of monthly payments eligible for forgiveness under the plans Income-Driven Repayment (IDR).

Borrowers are eligible for forgiveness if they have accumulated the equivalent of 20 or 25 years of base months.

In a legal brief dated August 4, 2023, the Cato Institute and the Mackinac Center for Public Policy said the $39 billion cancellation is “part of an even broader plan to erase the federal debt owed by more of 3.6 million student loan borrowers. Under a so-called single account adjustment, the Department (of Education) credits borrowers with at least three years of “forbearance” from making monthly payments on their loans as monthly payments eligible requirements to obtain loan forgiveness under the Public Service Loan Forgiveness Program. (PSLF) and Income Driven Repayment (IDR) programs.

The lawsuit challenges the Department of Education’s process for determining the exemption under the $39 billion plan. It also alleges that “in addition to illegally accelerating the cancellation of PSLF and IDR by three years, the ‘Single Account Adjustment’ program will outright cancel a massive amount of debt owed to the Treasury.” By canceling their loans three years early, 3.6 million borrowers will each make 36 fewer monthly payments, which will result in the cancellation of 130 million monthly payments.

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The lawsuit targets both Education Secretary Miguel Cardona and Richard Cordray, head of the federal student aid office. The suit was filed just days before the pardon plan took effect, USA Today reported. Borrowers involved in the plan include those receiving Direct Loans or Federal Family Education Loans held by the Department of Education, including Parent PLUS Loans. Most of the affected borrowers are likely age 50 or older, according to USA Today.

“A pardon program of this magnitude should have been subject to rules. The administration cannot impose such a policy without going through the proper channels,” Sheng Li, an attorney at the New Civil Liberties Alliance (NCLA), told the Washington Post. NCLA represents the groups in the lawsuit.

However, an anonymous Department of Education spokesperson told the Post that the lawsuit is “a desperate attempt by right-wing special interests to keep hundreds of thousands of borrowers in debt, even though these borrowers earned the promised forgiveness through income. Determined repayment plans. We will not back down or give an inch when it comes to standing up for working families.

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This article originally appeared on GOBankingRates.com: Student Loan Forgiveness: Biden’s Latest Debt Cancellation Plan Under Attack – What a Lawsuit Could Mean