Student Loan Forgiveness Lawsuit Casts Doubt on Biden Administration’s Borrower Relief Strategy

Amidst a legal battle, the Biden administration is facing a Student Loan Forgiveness lawsuit after the Supreme Court’s rejection of a larger policy.

Biden administration entangled in new ‘Student Loan Forgiveness lawsuit’ legal clash over $39 billion student loan forgiveness program, challenged by Cato Institute and Mackinac Center after Supreme Court’s rejection of larger policy. (PHOTO: The New York Times)

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Student Loan Forgiveness Lawsuit Adds to Biden Administration’s Legal Struggles Amidst Controversial Relief Efforts

The Biden administration finds itself embroiled in yet another legal battle over its student loan forgiveness initiatives, as a lawsuit has been filed against its recently announced program aimed at aiding 800,000 borrowers with a projected cost of $39 billion. According to Time Magazine, this legal challenge comes in the wake of the Supreme Court’s rejection of the administration’s previous $430 billion student loan cancellation policy. The lawsuit, brought forth by the Cato Institute and the Mackinac Center for Public Policy, asserts that the administration’s “one-time account adjustment” scheme is both procedurally and substantively unlawful. They are demanding that the court deem this forbearance-credit strategy illegal and prevent any loan cancellations based on it.

The report stated that critics argue that the administration’s plan violates legal requirements by sidestepping the mandatory notice and comment period, being introduced solely through a press release. Additionally, it is accused of bypassing Congress, violating the apportionment clause of the Constitution. These criticisms mirror those directed at the initial, larger loan forgiveness program. Neal McCluskey, Director of the Cato Institute’s Center for Education Reform, contends that the President and the Department of Education lack the authority to unilaterally alter student loan terms for the purpose of forgiveness, effectively assuming a legislative role.

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Potential Impact of Student Loan Forgiveness Lawsuit: Smaller Program Halt and Broader Burden on Taxpayers Highlighted

As reported in CNN, the student loan forgiveness lawsuit, if successful, would halt the smaller forgiveness program similar to previous legal actions that quashed the larger endeavor. McCluskey asserts that alterations to federal student loan programs necessitate congressional action. While he acknowledges the necessity of rectifying accounting errors, he argues that the program oversteps this by partially forgiving an extensive number of loans that are unlikely to be repaid. According to the lawsuit, the program could ultimately impact over 3.5 million borrowers, incurring a cost of $175 billion, a burden that taxpayers would bear.

President Biden’s pledge to forgive student loans gained traction during his 2020 campaign and led to a program proposal of up to $20,000 in forgiveness per borrower before the 2022 midterms, as reported in The White House. However, the plan was paused after the election, prompting adoption of a smaller-scale initiative. Despite legal challenges, the administration persists in its commitment, accepting applications. Younger voters, Democrats like Chuck Schumer and Bernie Sanders, and Persis Yu from the Student Borrower Protection Center support the initiative, while legal hurdles remain.

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