A federal judge in Texas has blocked President Joe Biden’s plan to expunge billions of dollars’ worth of federal student loan debt, calling the debt relief program unlawful and vacating it.
“In this country, we are not ruled by an all-powerful executive with a pen and a phone,” wrote U.S. District Judge Mark Pittman of Fort Worth, in his decision. “Instead, we are ruled by a Constitution that provides for three distinct and independent branches of government.”
The judge also called Biden’s plan “an unconstitutional exercise of Congress’s legislative power.”
Pittman, previously appointed by former President Donald Trump, ruled the above in a lawsuit originally backed by the Job Creators Network Foundation, on behalf of two federal student loan borrowers who believe they had been unreasonably excluded from the debt relief program.
Myra Brown, a plaintiff in the lawsuit, did not qualify for relief as her federal loans are operated through a commercial lender instead of the now-defunct Federal Family Education Loan (FFEL) program. Borrower’s loans must be held by the U.S. Department of Education in order to qualify for relief.
The other plaintiff named in the suit, Alexander Taylor, qualifies for the $10,000 relief but is currently under the low-income threshold. In the complaint, Taylor argues for additional relief based on his low-income status, at a higher amount of $20,000 instead of $10,000. Currently, only students who received a Pell Grant, a form of federal aid for low-income students in college, qualify for this additional relief.
Both plaintiffs argued, among other complaints, that the Biden Administration violated the Administration Procedures Act (APA) by withholding a comment period to voice concerns on matters affecting the relief, including eligibility. The Biden Administration has since countered the argument, stating that the HEROES Act overrides this process.
In a statement, White House Press Secretary Karine Jean-Pierre said, “We strongly disagree with the District Court’s ruling on our student debt relief program and the Department of Justice has filed an appeal. The President and this Administration are determined to help working and middle-class Americans get back on their feet, while our opponents—backed by extreme Republican special interests—sued to block millions of Americans from getting much-needed relief.”
Debt relief in limbo while payments come back
The Biden Administration has since appealed Pittman’s decision, bringing the case to the notoriously conservative 5th Circuit Court of Appeals. If the 5th Circuit fails to overturn the decision, it’s likely the case will head up to the U.S. Supreme Court, yet there is no guarantee whether the highest court will take the case or not. Overall, it is likely borrowers will not hear a final verdict on debt relief for several weeks.
The recent verdict is a blow to student loan borrowers at a time when many are about to resume their loan repayments—paused since the onset of the pandemic—on Jan. 1.
President Biden announced on Nov. 3 that nearly 26 million Americans had submitted debt relief applications to the Education Department, and that the department was on track to approve cancellations for 16 million borrowers. However, Pittman’s decision now puts those cancellations—and any pending applications—on pause.
SECURE 2.0 may be borrower’s last saving grace
Assuming SECURE 2.0 passes, student loan borrowers will at least be able to add to their retirement while paying back their loans. Section 111 of the SECURE Act 2.0 allows companies to make matching 401k contributions to employees paying back their student loan debt, a powerful incentive for borrowers looking to pay down debt while adding to long-term savings.
“I think that’s the biggest impact,” said Laurel Taylor, CEO of FutureFuel.io, in a previous interview for 401k Specialist. “MIT AgeLab data show that users sequence debt first and then savings. Now, borrowers can make simultaneous progress. If they’re paying $350 a month in student loan payments for 10 years, it equates to $450,000 in retirement savings (assuming an 8% return). It’s approximately double what Baby Boomers have for retirement today. So SECURE 2.0 really is transformative for retirement income.”
SEE ALSO:
Here’s the Skinny on President Biden’s Student Loan Debt Relief
What SECURE 2.0 and the Loan Extension REALLY Mean for Student Debt
SECURE 2.0 Update: Where It Stands, What’s Likely to be Included