With lawsuit dismissed, student loan debt forgiveness begins for 800,000 borrowers
A federal judge on Monday dismissed a lawsuit from two conservative groups seeking to block student loan forgiveness for more than 800,000 borrowers, allowing cancellation of those debts to begin the same day.
The outstanding debt in question, worth about $39 billion, is what borrowers still owe after making 20 to 25 years' worth of payments.
The suit from the Cato Institute and Mackinac Center for Public Policy – filed on their behalf by the New Civil Liberties Alliance in federal court in Michigan – argued the federal government lacks the authority to forgive the debt and was working on an accelerated schedule "to evade judicial review."
The U.S. Education Department said last month that, after adjusting how it calculates student loan payments in a move to correct past errors, about 804,000 people would have the balance of their loans erased over the next few months. The agency had said it would make this course correction more than a year earlier.
Judge Thomas L. Ludington, an appointee of President George W. Bush, dismissed the groups' case and rejected a request that the forgiveness be temporarily blocked. Ludington said the conservative groups did not show that they would be harmed by the plan.
The court "did not rule on the merits of the case and instead said Cato and Mackinac were not the right parties to bring it," the New Civil Liberty Alliance's Sheng Li said in an email. "We disagree with the court’s conclusion regarding legal standing and are reviewing our legal options with our clients."
Late Monday, President Joe Biden chimed in about his administration's efforts on student loan forgiveness and the growing collection of lawsuits challenging those plans.
"On Day One of my administration, I promised to fight for hardworking families and to fix problems in the student loan system that have been failing borrowers for too long," Biden said in a statement. "I’m proud that my administration is delivering on that promise and has already approved over $116 billion in debt cancellation for 3.4 million Americans – no matter how many lawsuits, challenges, or roadblocks Republican elected officials or special interests put in our way."
$39 billion in debt could be erased: New round of student loan debt forgiveness will erase balances for over 800,000 people
Loan forgiveness intended for borrowers' affected by errors in counting payments
The Biden administration said in April 2022 that it would make a one-time adjustment to borrowers’ payment histories to ensure they are getting all the credit they should. The Government Accountability Office had previously flagged a problem tracking borrowers' payments.
"We found thousands of borrowers still in repayment who could be eligible for forgiveness now," the congressional watchdog agency said.
A longstanding option for student loan borrowers has been to enroll in a payment plan that aligns payments with their income – so called income-driven repayment plans. Some people with those plans, however, have struggled to get credit for all of the payments they have made. Others who were eligible never participated. And while the plans cut the size of payments, they don't address interest, which continues to add up, increasing what borrowers owe.
The borrowers involved in the plans targeted for the new forgiveness include those with Direct Loans or Federal Family Education Loans held by the department, including Parent PLUS loans. Many of the borrowers affected are likely 50 or older. About 9.2 million borrowers fall into this category.
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Loan discharges begin
Soon after the judge's order was posted Monday, the Education Department said loan forgiveness for the borrowers in question had begun and will affect people in every state.
“Today, the Biden-Harris Administration is beginning to discharge loans for 804,000 borrowers who never received the forgiveness they rightfully earned through decades of payments,” Education Secretary Miguel Cardona said. “We are standing up for borrowers who did everything right, but whose progress toward forgiveness went uncounted due to past administrative failures that the Biden-Harris team has worked tirelessly to correct."
This article originally appeared on USA TODAY: Lawsuit to block student loan forgiveness for 800,000 people dismissed
