• U.S.

Federal Appeals Court Temporarily Halts Student Loan Forgiveness Plan. Here’s What Could Happen Next

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A federal appeals court placed a temporary block on the Biden administration’s student debt relief plan on Friday, just days after applications for up to $20,000 in loan forgiveness opened for borrowers.

The Eighth Circuit Court of Appeals issued a stay, meaning it barred the program while it considers an appeal from six Republican-led states to abandon the program entirely. The court gave the Biden administration until Monday to respond.

Biden’s relief plan—which would cancel billions in federal student debt and was set to begin as early as next week—was always expected to face substantial legal action from its opponents attempting to strike it down.

Here’s what to know:

What prompted the lawsuit?

The states involved in the lawsuit—Nebraska, Missouri, Arkansas, Iowa, Kansas and South Carolina—are contending that the federal government doesn’t have the right to cancel debt on that scale without congressional approval. Additionally, they argue that states would lose tax revenue because the forgiveness would not be considered taxable income.

On Thursday, a federal judge in St. Louis initially rejected the lawsuit, citing a lack of standing, but the state coalition quickly filed an appeal.

How did the Biden administration respond?

White House Press Secretary Karine Jean-Pierre said at a press conference after the ruling that eligible borrowers are encouraged to continue applying for relief. Jean-Pierre said that the temporary order does not bar the Education Department from reviewing applications and preparing to transfer them to loan providers. The department won’t be able to cancel any debt until the court makes a decision confirming that the program is legal, however.

Jean-Pierre also said the order does not reverse the trial court’s initial dismissal of the case or suggest that the case has merit.

“We will continue to move full speed ahead in our preparations in compliance with this order,” Jean-Pierre said. “The Administration will continue to fight Republican officials suing to block our efforts to provide relief to working families.”

At a speaking engagement at Delaware State University before the Friday ruling, Biden commended how smoothly the online application platform had been running, and he announced that 22 million people had already applied for loan forgiveness

What happens next?

The Eighth Circuit court set a Monday deadline for the government’s response to the states’ filing and a Tuesday deadline for the states to counter, but the length of the full case could vary.

In August, when Biden announced the student loan forgiveness program, he also said there would be no more loan payment pause extensions. The relief program was set to begin clearing debt by mid-November, but if the lawsuit progresses, the program faces risks of delay.

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