Group Sues to Block Biden’s Plan to Cancel $39 Billion in Student Loans

Group Sues to Block Biden’s Plan to Cancel $39 Billion in Student Loans
President Joe Biden speaks in the Oval Office of the White House on July 27, 2023. (Win McNamee/Getty Images)

A leading constitutional rights organization filed a lawsuit on Aug. 4 in a federal court to block the activation of the Biden administration’s new student loan income-driven repayment plan.

The New Civil Liberties Alliance (NCLA) filed the complaint on behalf of the Cato Institute and Mackinac Center for Public Policy in the U.S. District Court for the Eastern District of Michigan.

The administration announced the Saving on Valuable Education (SAVE) Plan on June 30, on the same day that the Supreme Court ruled, in Nebraska v. Biden, that the Biden program to cancel student loan debt for millions of Americans was unconstitutional.

Student Loan Borrowers Gather To Tell President Biden To Cancel Student Debt
Student loan borrowers gather near the White House to tell President Biden to cancel student debt in Washington on May 12, 2020. (Paul Morigi/Getty Images for We, The 45 Million)

Among the main provisions of the SAVE Plan—administered under the Department of Education (DOE)—is making more student loan borrowers eligible to have a minimum monthly loan payment of zero than under the present loan income-driven repayment program and shortening the length of time a borrower’s loan can be forgiven.

In a statement it released, NCLA calls the plan a “scheme” that “would immediately wipe out $39 billion of student loan debt owed to the U.S. Treasury by more than 800,000 people under the Income-Driven Repayment (IDR) program by crediting non-payments during periods of forbearance as monthly payments. The plan would cancel even more debt prematurely at taxpayer expense for another 2.8 million IDR borrowers in the future.”

NCLA says that the administration “has no lawful authority to do this” and that the plan violates the “Constitution’s Appropriations Clause, which grants Congress near-exclusive authority to cancel debt owed to the Treasury.”

NCLA also argues that the debt-canceling provided for in SAVE hurts non-profit organizations—like the Mackinac Center for Public Policy and Cato Institute—by eliminating borrowers’ incentive to take part in the Public Service Loan Forgiveness (PLSF) program under which debt is forgiven for borrowers who, while making monthly loan payments, complete 10 years of work for a qualified non-profit.

A New Income-Driven Repayment Plan

SAVE, which will be phased in, modifies a Department of Education (DOE) income-driven repayment plan that had been in place and makes it more attractive for borrowers.

Starting this summer, millions of people with student loans will be able to enroll in SAVE. On July 30, the administration announced the launch of a beta website that borrowers can use for that purpose.

And, right away, under the plan, more people will be eligible for $0 payments. The new plan won’t require borrowers to make payments if they earn less than 225 percent of the federal poverty line — $32,800 a year for a single person. The cutoff for current plans, by contrast, is 150 percent of the poverty line, or $22,000 a year for a single person,

Starting in July 2024, the minimum monthly student loan payment under a DOE income-driven arrangement will be reduced from the present cap of 10 percent of a borrower’ discretionary income to five percent.

As well, beginning next July, the track to loan forgiveness speeds up, with borrowers whose initial balance was $12,000 or less getting their full loan repayment debt canceled after 10 years.

Borrowers who make their monthly payments will not see their balance increase. Once they cover their adjusted monthly payment—even if it’s $0—any remaining interest will be waived.

Sheng Li, Litigation Counsel for NCLA, considers SAVE to be wrong and illegal.

“In the Nebraska case, the Supreme Court struck down the Department of Education’s brazen attempt to pull a billion-dollar ‘elephant’ out of a statutory ‘mousehole,” said Mr. Li in a statement that NCLA issued.

“This time, the Department’s loan-cancellation scheme does not even pretend to have a statutory ‘mousehole.’ The PSLF and IDR statutes require borrowers to make a certain number of monthly payments before earning forgiveness. By trying to count non-payments as payments, the strategy seems to be to cancel $39 billion faster than a court can review and stop this blatantly unlawful act.”

The Associated Press contributed to this report.

 From The Epoch Times

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