Biden admin asks high court to tackle student debt program

WASHINGTON (AP) — The Biden administration plans to ask the Supreme Court to reinstate the president’s student debt cancellation planwarned Americans would face financial stress if the program remains stalled in court when it plans to restart loan payments in January, according to a legal filing on Thursday.

The Justice Department is working to keep Biden’s plan alive after it was blocked by two federal courts in recent weeks. The agency called for swift action to block both rulings and allow the plan to take effect even if it plays out in state courts.

In a legal filing Thursday, the administration announced plans to appeal one of the rulings in the St. Louis federal appeals court. Lewis, to the State Supreme Court. It said it was prepared to appeal other cases if needed.

The White House says it will win, but even some supporters of the plan worry about its chances before the conservative Supreme Court, which has curtailed Biden’s powers in other ways, including a decision in June to limit the Environmental Protection Agency’s ability to curb power. Planned capacity emissions.

Biden’s plan promises to forgive $10,000 of federal student debt for families making less than $125,000 or less than $250,000. Recipients of Pell Grants typically demonstrate additional financial need and are eligible for an additional $10,000 in relief.

In its submission, the government argued that suspending debt relief would expose the government to “unnecessarily dangerous choices”. If it restarts student loan payments as planned in January. 1. Millions of Americans will be billed for debt they promised to cancel. But if the government extends the moratorium on payments, it will cost billions of dollars in lost revenue.

It builds on arguments the administration made in other documents this week, warning that many Americans will not be able to pay their student debt bills in January if the cancellation program remains halted.

For a typical borrower, monthly payments would be $200 to $300 higher than if Biden’s plan passed, the Education Department said. This stress can lead to a spike in default rates, which have increased by an average of 20 times in the wake of other natural disasters.

“We anticipate that the number of federal student loan delinquencies and defaults may experience a historic and substantial increase as a result of the COVID-19 pandemic,” Deputy Education Secretary James Kvaal said in a Tuesday filing. “This could lead to one of the harms that the one-time student loan debt relief program was designed to avoid.”

In the latest filing, the Justice Department asked the appeals court to reverse the judgment of U.S. District Judge Mark Pittman Biden’s plan. Pittman, appointed by former President Donald Trump and based in Fort Worth, Texas, ruled last week that Biden’s plan overrides his presidential powers and usurps Congress’ power to make laws.

It stems from a lawsuit filed by two borrowers who would not have been eligible for relief under the parameters of the Biden plan.The program is stopped individually at St. The St. Louis court opened after six Republican-led states said it would harm financial institutions.

Nearly 26 million people have applied for aid and 16 million have been approved, but the Ministry of Education has stopped accepting and processing applications The scheme came after it was ruled illegal last week.

Biden’s plan has sparked a series of legal challenges with mixed results. Opponents of the debt forgiveness have asked the Supreme Court to intervene at least twice after their cases lost in lower courts. The Supreme Court rejected both requests.

The barrage of lawsuits has put in jeopardy Biden’s plans to deliver on major campaign promises. It is uncertain whether the 40 million borrowers who have pledged to forgive debt will have to start repaying those debts in January.

The biggest risk is that 18 million borrowers are told their entire loan balances will be canceled. Even with repayments restarting, those borrowers may think they’re fine and ignore their bills, the Department of Education has warned.

Borrowers who default on their payments could face serious consequences, including damaged credit scores and wage garnishment and tax refunds.

Advocates in Congress and some Democrats are pressing Biden to extend the payment moratorium Until all legal challenges are resolved, despite his previous assurances that the freeze would end after Dec. 12. 31.

In a document on Tuesday, the Department of Education said it was “examining all available options”. But it warned that extending the moratorium could cost the federal government “billions of dollars in lost uncollected loan revenue each month”.

The freeze has already cost the federal government more than $100 billion in lost revenue, according to a July report by the Government Accountability Office. Critics have warned that another delay could fuel inflation and increase the risk of recession.

In another move against student debt, the Departments of Education and Justice announced a new policy designed to make it easier for borrowers to cancel student loans in bankruptcy court.

When bankrupt borrowers try to cancel their federal student loans, the government’s lawyers typically move to stop it.

Advocates have long complained that only a small percentage of bankrupt borrowers successfully cancel their student loans, and that many lawyers won’t even take on those cases. As a presidential candidate, Biden pledged to address the issue.

The Justice Department on Thursday sent new guidance to its attorneys on when they can support borrowers’ requests for student debt relief. Judges still have the final say, but the department said its guidance would lead to “a fairer and more consistent outcome”.

Separately, a federal judge on Wednesday approved an Education Department settlement that would cancel $6 billion in student debt For borrowers who say they were scammed by for-profit colleges. The deal was proposed in June but was delayed due to challenges from several schools.

A federal judge in San Francisco concluded the settlement was fair. Supporters and the Biden administration welcomed the approval, while a for-profit college industry group has pledged to appeal the decision.

Under the settlement, the Education Department agreed to cancel the loans of about 200,000 borrowers who attended one of more than 150 for-profit colleges and later filed for cancellation because of school misconduct.

It stems from a 2019 lawsuit accusing the Trump administration of deliberately delaying the loan forgiveness program as it rewrote the rules.


The Associated Press Education team is supported by the Carnegie Corporation of New York. The Associated Press is solely responsible for all content.

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