**Lawsuit Challenges Biden Administration’s Student Loan Forgiveness Plan**
A lawsuit has been filed in Michigan challenging the Biden administration’s student loan forgiveness plan. The lawsuit argues that the administration overstepped its power by announcing the forgiveness in July, shortly after the Supreme Court struck down a broader cancellation plan proposed by President Joe Biden. The lawsuit was filed by the New Civil Liberties Alliance on behalf of the Mackinac Center for Public Policy and the Cato Institute. It seeks to deem the cancellation illegal and halt the Education Department from implementing it while the case is being decided.
**Education Department Responds to Lawsuit**
The Education Department has dismissed the lawsuit as a desperate attempt by right-wing special interests to keep borrowers in debt. In a statement, the department expressed its commitment to defending working families and stated that it will not back down. This lawsuit is part of a wave of legal challenges by Republicans against the Biden administration’s efforts to reduce or eliminate student debt. President Biden has indicated that he will pursue a different cancellation plan following the Supreme Court’s decision. Furthermore, his administration is introducing a more generous repayment plan, which opponents view as a covert attempt at cancellation.
**Background on Biden’s Student Loan Forgiveness Plan**
On July 14, the Biden administration announced that it would forgive loans for 804,000 borrowers enrolled in income-driven repayment plans. These plans have traditionally offered cancellation after borrowers make 20 or 25 years of payments. However, due to past administrative errors, the loan counts were inaccurate, causing setbacks for borrowers seeking forgiveness. To rectify this issue, the administration implemented a one-time adjustment that counted certain periods of past nonpayment as if borrowers had been making payments during that time. Consequently, this move helped push 804,000 borrowers closer to the cancellation threshold and brought millions of others closer as well.
**The Purpose of the One-Time Fix**
The one-time fix aims to address the issue of forbearance steering, in which student loan servicers encouraged borrowers to enter forbearance instead of enrolling in income-driven repayment plans. This practice was detrimental to borrowers who would have been better served by the long-term benefits of the income-driven plans. The one-time fix not only moved borrowers closer to forgiveness but also counted past periods in forbearance as progress toward Public Service Loan Forgiveness (PSLF). The PSLF program offers cancellation after 10 years of payments for borrowers who work in government or nonprofit jobs.
**Legal Challenges and Allegations of Illegality**
The lawsuit claims that President Biden’s action was illegal as it was not authorized by Congress and did not go through the necessary federal rulemaking process, which allows for public feedback. The lawsuit argues that the Department of Education lacks the authority to count non-payments as payments and criticizes the administration for not disclosing the legal basis for its decision or considering the substantial cost of the forgiveness plan. Additionally, the conservative groups involved in the lawsuit assert that Biden’s plan undermines the Public Service Loan Forgiveness program. The Mackinac Center and Cato Institute, which filed the lawsuit, explain that their employees are working towards student loan cancellation through this program and argue that Biden’s action diminishes the benefits for nonprofit employers. They claim that this unlawful reduction in the PSLF service requirement negatively impacts public service employers’ ability to recruit and retain college-educated employees.
**Previous Lawsuits and Ongoing Challenges**
This is not the first time the Cato Institute has sued the Biden administration over student loan cancellation. The Supreme Court previously struck down a broader cancellation plan proposed by the administration, which was also challenged by the Cato Institute. Additionally, the Mackinac Center is separately contesting Biden’s pause on student loan payments, which is set to end this fall, with payments resuming on October 1.
In conclusion, a lawsuit has been filed in Michigan challenging the legality of President Biden’s student loan forgiveness plan. The lawsuit alleges that the administration overstepped its power and seeks to halt the Education Department from implementing the plan while the case is being decided. The Education Department has dismissed the lawsuit as a desperate attempt by right-wing special interests. This legal challenge is part of a series of lawsuits by Republicans against the Biden administration’s student debt reduction efforts. The Biden administration’s plan aims to rectify past administrative errors and help borrowers achieve loan cancellation. However, the lawsuit argues that the plan is illegal and undermines the benefits of the Public Service Loan Forgiveness program. This ongoing legal battle adds to the complexity and controversy surrounding student loan forgiveness.