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Biden Administration asks Supreme Court to lift student loan forgiveness block

U.S. President Joe Biden speaks about student loan debt at the White House on Aug. 24, 2022 in Washington, DC.

Alex Wong | Getty

The Biden administration on Friday asked the Supreme Court to reinstate its federal student loan program after a federal appeals court issued a nationwide injunction against the plan.

The administration’s request, which was previewed in another court filing Thursday, blasted the U.S. Court of Appeals for the 8th Circuit for blocking the debt relief plan. That injunction was issued earlier in response to a lawsuit by a group of Republican-controlled states.

“The Eighth Circuit’s erroneous injunction leaves millions of economically vulnerable borrowers in limbo, uncertain about the size of their debt and unable to make financial decisions with an accurate understanding of their future repayment obligations,” Solicitor General Elizabeth Prelogar wrote in Friday’s filing with the Supreme Court.

Prelogar also wrote that if the Supreme Court declines to vacate the injunction, it could consider the filing as a petition to the high court to hear the Biden’s administration appeal of the decision by the lower court.

And if the Supreme Court accepts the administration’s appeal, if could “set this case for expedited briefing and argument this Term,” she wrote. Keeping President Joe Biden‘s plan on hold while the appeal unfolds, Prelogar said, could keep borrowers in uncertainty about their debts until “sometime in 2024.”

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Monday’s injunction by the 8th Circuit panel of three judges in St. Louis was the latest in a series of legal challenges to Biden’s plan to cancel up to $20,000 in student debt for millions of Americans.

The Biden administration stopped accepting applications for its relief earlier in the month after a federal district judge in Texas struck down its plan last week, calling it “unconstitutional.”

In the case at issue in the 8th Circuit, another federal judge rejected the challenge to the debt relief program brought by the six states — Nebraska, Missouri, Arkansas, Iowa, Kansas and South Carolina.

The judge ruled that while the states raised “important and significant challenges to the debt relief plan,” they ultimately lacked legal standing to pursue the case.

Biden administrations stops taking applications for student loan debt forgiveness

Standing refers to the idea that a person or entity will be affected by the action they seek to challenge in court.

The GOP-led states appealed after their lawsuit was denied.

The appeals panel ruled Monday that Missouri had shown a likely injury from the administration’s program, pointing out that a major loan servicer headquartered in the state, the Missouri Higher Education Loan Authority, or MOHELA, would lose revenue under the plan. Missouri’s state Treasury Department receives money from MOHELA.

Borrower defaults could rise amid ‘ongoing confusion’

A top official at the U.S. Department of Education recently warned that there could be a historic rise in student loan defaults if its forgiveness plan is not allowed to go through.

“These student loan borrowers had the reasonable expectation and belief that they would not have to make additional payments on their federal student loans,” U.S. Department of Education Undersecretary James Kvaal wrote in a court filing. “This belief may well stop them from making payments even if the Department is prevented from effectuating debt relief,” he wrote.

“Unless the Department is allowed to provide one-time student loan debt relief,” he went on, “we expect this group of borrowers to have higher loan default rates due to the ongoing confusion about what they owe.”

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