During the 2020 presidential Democratic primary, several candidates advocated for reducing or eliminating student debt. Soon after President Joe Biden was inaugurated on January 20, 2021, some Democrats claimed he had executive power to cancel up to $50,000. Biden resisted that thinking and said the new administration would look at canceling $10,000 in federal student loan debt, which he said he would do during the campaign.
On August 24, the White House released a fact sheet announcing his plan. In one regard, it was more generous than his campaign promise. Still, not everyone approved of the idea. On Thursday, September 29, six states sued to stop the plan. Their logic was the law the administration used to justify loan forgiveness can’t be applied in such a way. That same day, the Department of Education (DOE) quietly reversed course on the part of the eligibility requirement regarding who can participate in the program.
Administration Changes Who Qualifies
What does the president’s plan forgive? The initial fact sheet announcement said those who hold federal student loans would receive $10,000 in forgiveness or $20,000 if one received a pell grant. In addition, individuals would have to make less than $125,000 per year or $250,000 if married.https://lockerdome.com/lad/14001166036186214?pubid=ld-6064-290&pubo=https%3A%2F%2Fwww.rightwing.org&rid=www.rightwing.org&width=696
How can Biden do this without a specific act of Congress? On August 23, the Department of Justice (DOJ) issued an opinion stating the 2003 HEROES Act gave the Secretary of Education the authority to “reduce or eliminate” a borrower’s “obligation to repay the principal balance” on federal loans due to the COVID-19 pandemic. There are numerous questions about the law’s legality, as Congress intended any forgiveness to be in connection with a military operation, war, or national emergency.
So, does the pandemic, which Biden now says is over, constitute a national emergency?
On September 29, the administration quietly issued a change to the plan. Initially, it allowed borrowers who secured education loans through entities other than the DOE to participate in debt cancellation by rolling them into Direct Loans. The new rule eliminated the option, and those debts will no longer qualify for the president’s relief program.
Six States Sue
On the same day the DOE announced the change, Arkansas, Iowa, Kansas, Missouri, Nebraska, and South Carolina filed a lawsuit in a Missouri federal court. They argued the HEROES Act is “not a hidden source of authority to cancel student debt.” Additionally, they stated the decision provides relief for all borrowers regardless of whether or not they were in a better or worse financial position or endured financial hardship related to their loans during the pandemic and does not tailor relief to the effects of the pandemic on borrowers, which the HEROES Act requires.
The DOE estimated it would cost $379 billion, or $30 billion per year over 10 years. It acknowledged the estimate was based on “highly uncertain assumptions” about economic conditions and interest rates. The Congressional Budget Office (CBO) reported the program could cost more than $400 billion over 30 years.