A federal appeals court has blocked President Joe Biden’s student loan forgiveness program, further dashing the hopes of more than 26 million Americans who applied for the relief, discouraging millions more who were eligible using, and potentially kill the president’s signature program.
The Eighth Circuit Court of Appeals granted an injunction sought by six Republican-led states that argued Biden exceeded his presidential authority when he cited COVID-19 as a national emergency to write off loan debt student of millions of borrowers. The states have also said they will lose future tax revenue under Biden’s plan.
This is the second federal court ruling blocking the program in days. A US District Court blocked the program on Thursday in a different case.
There’s a chance the program could be revived: the administration can appeal the decision to the Supreme Court, though it’s unclear how the court’s conservative majority would rule.
Appeals court overturned lower federal court ruling which governed the six plaintiff states — Arkansas, Iowa, Kansas, Missouri, Nebraska and South Carolina — failed to establish standing to challenge. The 11-judge panel includes 10 Republican appointees, four of whom were nominated by former President Donald Trump.
Can I still apply for the President’s Student Debt Cancellation Plan?
Court of Appeal ordered a temporary halt from rolling out Biden’s debt cancellation plan to a final decision. The White House has urged student borrowers to seek relief even amid uncertainty.
The department has since stopped taking applications following the outcome of the Texas case.
Other ways to clear debt: With student loan forgiveness stuck in court
Biden signed an executive order in August to grant debt cancellation, fulfilling a campaign promise sought after by young voters and progressives.
Biden created the debt relief plan under the HEROES Act, which was passed after 9/11 sparked a US-led military campaign against terrorism. The law gave the administration the power to cancel student loan debt in association with military operations or national emergencies. The White House has cited the COVID-19 pandemic as the national emergency.
Under the president’s plan, borrowers would be eligible for debt relief of up to $10,000 or $20,000, depending on their income and whether they received a Pell grant while in college. Borrowers must earn less than $125,000 per year or reside in households that earn no more than $250,000. As many as 40 million people would be eligible for Biden’s plan, and some would have their entire balance wiped out.
‘Debts and no diploma’: Biden forgives up to $20,000 in student loan debt
What the court said
States have questioned this authority and argued that they will lose money in future tax revenues and through quasi-state agencies that deal with student loans.
The Eighth Circuit specifically upheld the states’ legal status. The district judge in the case previously dismissed the case on those grounds, and legal critics said proving quality would be the biggest hurdle for those seeking to block the president’s debt relief plan.
The judges accepted the state’s argument that the quasi-state student loan service, MOHELA, would suffer from the president’s plan to forgive billions in debt and it would affect the state of Missouri.
“This unforeseen financial downturn will prevent or delay Missouri from funding higher education at its public colleges and universities,” the judges wrote. “Because of MOHELA’s financial obligations to the state treasury, the contested student loan debt forgiveness presents threatened financial harm to the State of Missouri.”
The federal government had sought a limited injunction in its response to the appeals court. The judges also rejected this request.
“Given MOHELA’s national role in servicing accounts, we see no workable path in this emergency posture to reduce the scope of relief,” they wrote. “And beyond Missouri, tailoring an injunction to remedy alleged harms to the remaining states would involve delving into complex issues and disputed facts that would make any limit uncertain in its application and effectiveness.”
In an October letter to Missouri Rep. Cori Bush, a Democrat, MOHELA wrote that its leaders were “not involved in the Missouri Attorney General’s Office’s decision to file a preliminary injunction petition in court. Federal on September 29, 2022”. They added that the repairer was “faithfully performing its obligations under its Federal Loan Service Agreement.”
“As a government entity, it has no shareholders and does not exist to make a profit,” the loan manager wrote. “All available funds beyond operating needs and reasonable reserves are dedicated by MOHELA for student financial aid.”
What might happen if the Biden administration appeals?
It is difficult to predict how the highest court in the land would react if the Justice Department appealed. Conservative justices outnumber liberals 6-3.
But the Supreme Court has twice beaten further lawsuits to stop debt forgiveness.
This article originally appeared on USA TODAY: Biden student loan forgiveness update: Another court blocks plan