The Courts Are Probably Going to Kill Biden’s Student Loan Forgiveness Plan

Student debt forgiveness for 40 million Americans is on hold indefinitely after another legal setback on Monday—and legal experts are warning that it’s possible the measure will be killed by the courts before anyone sees debt relief.

A federal appeals court issued a preliminary injunction on Monday preventing the program from moving forward, further delaying up to $20,000 per person in debt forgiveness. As the case moves forward, it could make its way to the U.S. Supreme Court.

“It’s entirely possible that judges that are kind of skeptical of executive action or administrative action would strike it down and enjoin it,” says Michael Sant’Ambrogio, a law professor at Michigan State University, who studies administrative law, federal courts and constitutional law. “That’s a very real risk at the moment.”

The preliminary injunction comes days after the Education Department stopped accepting new applications for debt forgiveness because a federal judge in Texas, considering a separate lawsuit, blocked the program, ruling that it was an “an unconstitutional exercise of Congress’s legislative power.”

The new ruling on Monday, by three Republican-appointed judges on the U.S. Court of Appeals for the Eighth Circuit in St. Louis, is the result of a lawsuit by six Republican-led states, who argue that they will be harmed by lost tax revenue as a result of debt cancellation.

The states had appealed a decision by a judge who had dismissed their lawsuit, saying they lacked standing to sue.

But the Eighth Circuit Court of Appeals disagreed. The panel of judges has not yet ruled on the legal arguments in the case, but they concluded that Missouri, one of the six states, “likely has legal standing to bring its claim” and granted a preliminary injunction, noting that the case “will affect the finances of millions of Americans with student loan debt as well as those Americans who pay taxes to finance the government.”

The new ruling means the program will be put on hold “until further order of this court or the Supreme Court of the United States,” the judges wrote.

The decision is a significant setback to Biden’s program, which has faced a slew of legal challenges since the President announced the debt-forgiveness plan in August. Advocates for debt relief have called on the Biden Administration to extend the pandemic-related pause on student loan payments while the legal battle plays out.

While conservatives are racking up legal victories against Biden’s student debt forgiveness plan, the President and other Democrats pointed to the policy as winning with voters. Biden said student debt relief—along with climate change and gun violence—was one of the key issues that drove turnout during the 2022 midterm elections. So did Massachusetts Sen. Elizabeth Warren, who wrote in the New York Times that student debt forgiveness “helped motivate young people to vote in near record numbers.”

Pollsters are still parsing the data on youth voter turnout in 2022, but one thing is clear: Democrats bucked history despite political headwinds including Biden’s low approval rating. Republicans are poised to retake the House, but by the slimmest margin; the Senate will stay in Democratic hands after high-profile victories in Pennsylvania, Arizona, and Nevada.

The White House said 26 million borrowers applied for debt relief before the Education Department stopped accepting applications, and 16 million of those applications have been approved so far. In a statement Monday, White House Press Secretary Karine Jean-Pierre said the administration is “confident in our legal authority” and “will continue to fight these baseless lawsuits by Republican officials and special interests.”

What to know about this lawsuit

Legal experts had been skeptical that any plaintiff would have legal standing—meaning they suffered a concrete, imminent injury—to challenge the student loan forgiveness program. Several judges have rejected other lawsuits due to lack of standing, but these two latest rulings changed that pattern.

The lawsuit before the Eighth Circuit was brought by six Republican-led states—Nebraska, Missouri, Arkansas, Iowa, Kansas and South Carolina—which argue that Biden lacks the authority to broadly cancel student debt, and that they will suffer lost tax revenue due to debt cancellation.

U.S. District Judge Henry Autrey, who dismissed the lawsuit in October, said the states had presented “important and significant challenges to the debt relief plan,” but lacked legal standing because the program’s “effect upon future taxation is uncertain.”

On Monday, the judges’ ruling focused on the Missouri Higher Education Loan Authority (MOHELA), one of the country’s largest student loan servicers, which handle billing and student loan payments on behalf of the government.

The Eighth-Circuit judges concluded that MOHELA “may well be an arm of the State of Missouri” and said its revenue will decrease because of widespread debt cancellation.

“This unanticipated financial downturn will prevent or delay Missouri from funding higher education at its public colleges and universities,” the judges wrote, adding that student-debt cancellation “presents a threatened financial harm” to the state.

The lawsuit challenged Biden’s authority to cancel student debt. The Biden Administration justified the plan under the Higher Education Relief Opportunities for Students (HEROES) Act of 2003, which gives the Education Department the ability to change student financial assistance programs during a “national emergency” — in this case, the COVID-19 pandemic.

But there’s been broad debate about that legal justification. Once plaintiffs are granted standing, Sant’Ambrogio thinks there are “some significant questions” about whether Biden has the authority to roll out the program, and he wouldn’t be surprised if the U.S. Supreme Court eventually strikes it down, given previous rulings by the court against executive actions.

“I think it’s quite possible that they will see this as beyond the administration’s statutory authority,” he says.

Luke Herrine, an assistant law professor at the University of Alabama who is an expert in student loan law and an advocate for student debt cancellation, thinks this case is more likely to be successful than others, but he is still skeptical that the Supreme Court would find that the plaintiffs have standing to sue.

He was initially optimistic that the legal challenges against Biden’s plan would fail. But the latest rulings have made him “increasingly pessimistic” about the fate of the program.

“The Department of Education has not made clear what their escape hatch will be,” he says. “But it’s not clear when or if cancellation is coming in the near future.”