Multiple organizations sued on Friday to stop the Biden administration’s limited plan to cancel $30 billion owed to the Treasury by 804,000 student-loan borrowers, which they argue is unconstitutional.
On behalf of the Cato Institute and the Mackinac Center for Public Policy, the New Civil Liberties Alliance filed a complaint in the U.S. District Court for the Eastern District of Michigan challenging the Biden administration’s new use of an innovation, announced in July, called the One-Time Account Adjustment. It enables the Biden Administration to grant borrowers with at least three years of “forbearance” from making monthly payments on their loans. These non-payments would then be treated as qualifying monthly payments needed to earn loan forgiveness under the Public Service Loan Forgiveness (PSLF) and Income-Drive Repayment (IDR) programs.
PSLF currently requires borrowers to work in a public service job for ten years and make monthly payments throughout that ten-year period to receive forgiveness, the complaint noted. IDR also requires monthly pavements for either 20 or 25 years.
“No authority allows the Department to count non-payments as payments,” the complaint said. “In addition to illegally accelerating PSLF and IDR forgiveness by three years, the ‘One-Time Account Adjustment’ scheme will outright cancel a massive amount of debt owed to the Treasury. By having their loans cancelled three years early, 3.6 million borrowers will each make 36 fewer monthly payments, resulting in the cancellation of 130 million monthly payments.”
The suing parties allege that the U.S. Department of Education’s plan violates the Constitution’s appropriations clause, which grants only Congress the power to cancel debt owed to the Treasury. Since the plan was announced, the Biden administration has rushed its implementation, announcing it via a press release that states neither the policy’s legal authority nor its massive expense. The Biden administration also failed to promulgate it through “the required notice-and-comment and negotiated rulemaking process under the Administrative Procedure Act,” the NCLA asserted.
“For far too long, borrowers fell through the cracks of a broken system that failed to keep accurate track of their progress towards forgiveness,” Secretary of Education Miguel Cardona said upon the scheme’s introduction. “Today, the Biden-Harris Administration is taking another historic step to right these wrongs and announcing $39 billion in debt relief for another 804,000 borrowers. By fixing past administrative failures, we are ensuring everyone gets the forgiveness they deserve, just as we have done for public servants, students who were cheated by their colleges, and borrowers with permanent disabilities, including veterans. This Administration will not stop fighting to level the playing field in higher education.”
In rejecting Biden’s original student-loan-cancellation program, the Supreme Court ruled that Biden lacked the authority to forgive student loans for entire categories of borrowers under the HEROES Act of 2003.
“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,'” Sheng Li, litigation counsel for NCLA, said in a statement. “This time the Department’s loan-cancellation scheme does not even pretend to have a statutory ‘mousehole.’”