A federal judge on Monday dismissed a lawsuit from conservative groups that aimed to block the Department of Education (ED) from forgiving $39 billion in student loan debt after the department announced fixes to income-driven repayment (IDR) plans.
In July, ED announced that it would forgive $39 billion in federal student loan debt for 804,000 eligible borrowers enrolled in IDR plans after a one-time adjustment was made to address “historical failures” of the federal student loan program, where qualifying payments were not accounted for. ED first announced in April 2022 that it would perform this one-time adjustment to count some borrowers’ accounts in long-term forbearances toward forgiveness under the IDR and Public Service Loan Forgiveness (PSLF) programs.
However, a lawsuit filed by the New Civil Liberties Alliance (NCLA) on behalf of the Cato Institute and the Mackinac Center for Public Policy in August challenged the relief, seeking to stop the student loans from being discharged.
The groups argued that ED violated its authority issuing the forgiveness, and that the department was “crediting non-payments during periods of forbearance as monthly payments.” Additionally, the groups argued that forgiving these borrowers’ student loan debt would “erase their incentive” to seek student loan forgiveness through the PSLF program and would hurt nonprofit organizations.
On Monday, U.S. District Judge Thomas Ludington of the Eastern District of Michigan dismissed the entire lawsuit, saying the conservative groups lacked standing since they “do not suggest that any employee was actually impacted by the adjustment.” Luddington added that the notion that PSLF employers would be hurt by this one-time-adjustment is “too speculative for standing.” Additionally, he wrote in his decision that the groups “make vague and conclusory statements that some ‘undisclosed’ number of borrowers will receive credit toward loan forgiveness for some periods of forbearance.”
Holly Wetzel, director of public relations for the Mackinac Center, told Business Insider that the groups were reviewing their legal options. “The judge's ruling was not on the legality of the Biden administration's actions, but rather he indicated that we were not the right parties to challenge those actions,” Wetzel said. On Tuesday afternoon, the three conservative groups plan to file an appeal to the U.S. Court of Appeals for the Sixth Circuit.
ED on Monday began to discharge the $39 billion student loans of the 804,000 eligible borrowers. Borrowers were notified about their eligibility in July, if they made either 20 or 25 years of monthly IDR payments, depending on the plan.
President Joe Biden on Monday released a statement following Luddington’s decision, saying when he took office “over 804,000 borrowers never got the credit they earned,” and that his administration was delivering the forgiveness that borrowers were promised.
“I was determined to right this wrong, and today, because of actions my administration took, these 804,000 borrowers who have been in repayment for over 20 years will start to see their student debt canceled,” Biden said in a statement. “Over 614,000 of them will have all of their remaining federal student loan debt canceled once this action is complete.”
Publication Date: 8/16/2023