A federal appeals court has temporarily blocked US president Joe Biden’s plan to cancel billions of dollars in student loans, throwing the programme into limbo just days after people began applying for loan forgiveness.
The Eighth Circuit Court of Appeals issued the administrative stay while it considers a motion from six Republican-led states to block the programme. The stay ordered the Biden administration not to act on the programme while it considers the appeal.
It was unclear what the decision means for the 22 million borrowers who have already applied for the relief. The Biden administration had promised not to clear any debt before October 23rd as it battled the legal challenges, but the soonest it was expected to begin erasing debt was mid-November.
Tonight’s temporary order does not prevent borrowers from applying for student debt relief at https://t.co/t0UTzb1asl – and we encourage eligible borrowers to join the nearly 22 million Americans whose information the Department of Education already has.
— Karine Jean-Pierre (@PressSec) October 22, 2022
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White House press secretary Karine Jean-Pierre encouraged borrowers to continue to apply for the relief, saying the court’s temporary order did not prevent applications or the review of applications.
“We will continue to move full speed ahead in our preparations in compliance with this order,” she said in a statement. “And, the Administration will continue to fight Republican officials suing to block our efforts to provide relief to working families.”
The crucial question now is whether the issue will be resolved before January 1, when payments on federal student loans are expected to restart after being paused during the pandemic. Millions of Americans were expected to get their debt cancelled entirely under Mr Biden’s plan, but they now face uncertainty about whether they will need to start making payments in January.
Nearly 40% of the Biden-Harris Administration’s student debt relief will go to borrowers who didn’t graduate or who only earned a certificate.
And, nearly 90% of the relief for borrowers who are out-of-school will go to those earning less than $75,000 a year.— The White House (@WhiteHouse) October 21, 2022
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Mr Biden has said his previous extension of the payment pause would be the final one, but economists worry that many Americans may not have regained financial footing after the upheaval of the pandemic. If borrowers who were expecting debt cancellation are asked to make payments in January, there is fear that many could fall behind on the bills and default on their loans.
A notice of appeal to the Eighth US Circuit Court of Appeals was filed late on Thursday, hours after US District Judge Henry Autrey in St Louis ruled that since the states of Nebraska, Missouri, Arkansas, Iowa, Kansas and South Carolina failed to establish standing, “the Court lacks jurisdiction to hear this case.”
Separately, the six states also asked the district court for an injunction prohibiting the administration from implementing the debt cancellation plan until the appeals process plays out.
Nebraska Attorney General Doug Peterson, one of the six attorneys general leading the effort to block the debt relief programme, praised the court’s decision.
“We are pleased the temporary stay has been granted,” Mr Peterson said in a statement. “It’s very important that the legal issues involving presidential power be analysed by the court before transferring over $400 billion in debt to American taxpayers.”
Speaking before Friday’s ruling at Delaware State University, a historically Black university where the majority of students receive federal Pell Grants, Mr Biden touted the number of applicants who have applied for the loan relief in the week since his administration made its online application available.
The plan, announced in August, would cancel 10,000 dollars (£8,846) in student loan debt for those making less than $125,000 or households with less than $250,000 in income. Pell Grant recipients, who typically demonstrate more financial need, will get an additional $10,000 dollars in debt forgiven.
The Congressional Budget Office has said the program will cost about 400 billion dollars over the next three decades. James Campbell, an attorney for the Nebraska attorney general’s office, told Autrey at an October 12th hearing that the administration is acting outside its authorities in a way that will cost states millions of dollars.
The cancellation applies to federal student loans used to attend undergraduate and graduate school, along with Parent Plus loans. Current college students qualify if their loans were disbursed before July 1st. The plan makes 43 million borrowers eligible for some debt forgiveness, with 20 million who could get their debt erased entirely, according to the administration.
The announcement immediately became a major political issue ahead of the November midterm elections.
Conservative attorneys, Republican lawmakers and business-oriented groups have asserted that Mr Biden overstepped his authority in taking such sweeping action without the assent of Congress. They called it an unfair government giveaway for relatively affluent people at the expense of taxpayers who did not pursue higher education.
Many Democratic lawmakers facing tough reelection contests have distanced themselves from the plan.
Mr Biden on Friday blasted Republicans who have criticised his relief program, saying “their outrage is wrong and it’s hypocritical”, noting that some Republican officials had debt and pandemic relief loans forgiven.
