Biden Student Loan Forgiveness Program Clears Legal Hurdle—Here’s Who Could Benefit

Topline

A federal judge on Wednesday ruled that the Biden administration can resume its student loan forgiveness program—paving the way for the administration to finalize the program that would ultimately forgive student loan debt for more than 25 million Americans three months before he leaves office.

Key Facts

U.S. District Judge Randal Hall issued the ruling Wednesday, determining that Georgia was an improper venue for the case, because the state failed to prove it would suffer sufficient harm from the program, and it would be better suited for Missouri.

Hall’s ruling allows a restraining order he had previously imposed on the program while the case made its way through the court system—preventing the Biden administration from finalizing the rule—to expire.

The program would partially or fully forgive the debt of borrowers whose debt exceeds the amount they initially borrowed after interest; those with loans older than 20 or 25 years; those who attended career-training programs that resulted in high debt or low earnings; and those who are eligible for forgiveness programs but never applied.

Approximately 25 million borrowers with up to $20,000 in interest, single borrowers earning less than $120,000 and married couples with a combined income under $240,000 and who are enrolled in income-driven payment plans could also have all of their interest forgiven through the program.

Big Number

$147 billion. That’s how much the Biden administration estimates the program will cost over the next decade.

What To Watch For

The states on Thursday asked a federal court in Missouri to impose an injunction on the program while they continue to pursue the lawsuit.

Key Background

Seven GOP-led states—Alabama, Arkansas, Florida, Georgia, Missouri, North Dakota and Ohio—filed the lawsuit in Georgia, arguing the administration illegally instructed loan servicers to begin eliminating debt before the rule was slated to be finalized this fall. The suit also claims the Biden administration planned to immediately begin forgiving loans once the rule took effect, even though federal law requires a 60-day buffer period after implementation. Missouri also argued that the quasi-public state agency that administers federal student loans and state scholarships would lose revenue under the program. The program was the second iteration of Biden’s student loan forgiveness program after an earlier plan to forgive up to $20,000 to more than 40 million borrowers was struck down by the Supreme Court last year.

Chief Critic

“Today’s legal decision is a small victory for democracy. This case by the Missouri AG is as absurd as it is dangerous. The Biden-Harris Administration’s Plan B is both legal and necessary to bring vital relief to over 30 million Americans trapped in a cycle of unaffordable debt,” the Student Borrower Protection Center nonprofit said in a statement, warning legal challenges were likely to continue.

Further Reading

Biden Cancels Another $1.2 Billion In Student Loan Debt: Here’s Who Qualifies (Forbes)

Biden Cancels $1.2 Billion In Student Loan Debt—Here’s Who Will Benefit (Forbes)

Biden Unveils New Details On Plan B For Student Loan Forgiveness (Forbes)