On Friday, the Department of Education’s website for student debt relief displayed a message informing borrowers that “student loan debt relief is blocked.” It added, “Courts have issued orders blocking the student debt relief program. As a result, we are currently not accepting applications. We are seeking to overturn these orders.” The Department of Education said it would hold applications for the roughly 26 million people who have already applied for a pardon. The shutdown of the app marks a departure from the Education Department’s previous stance following an October court order that placed a temporary stay on the program in response to an emergency motion by lawyers for several Republican-led states. After that decision, the Biden administration continued to keep the application open because the stay only stopped debt settlement. Still, he had encouraged borrowers to apply. The Texas decision “empties the entire program, so they can’t have borrowers continue to apply,” noted higher education expert Mark Kantrowitz, who said he estimates there are about 38 million people eligible for the relief program of the debt. “For the 12 million who haven’t applied yet, they can’t apply now.”
Judge: “Illegal”
The ruling by U.S. District Judge Mark Pittman, who was appointed by former President Donald Trump, was in response to a lawsuit by a conservative group called the Job Creators Network Foundation, which argued that the Biden administration violated federal procedures by failing to publicly request contribution to the program. Pittman declared the program “illegal,” citing the 2002 Financial Aid Opportunities Act (HEROES), which gives the Department of Education the ability to grant waivers to financial aid recipients. “Whether the program constitutes good public policy is not for this Court to determine,” Pittman wrote in his ruling. “In this country we are not ruled by an all-powerful executive with a pen and a phone.” The Biden administration said it plans to appeal the ruling, but the legal process could take weeks to complete. The Fifth Circuit Court of Appeals will hear the case. That circuit has “arguably become one of the most conservative appellate courts in the country,” Height Securities noted in a Friday survey. After the appeals court ruling, each side is likely to appeal to the Supreme Court, where Justice Samuel A. Alito, a conservative, will hear the case first, Height Securities said. Whatever the outcome, the legal process may take time to unfold, Kantrowitz noted. This could create a financial crisis for many borrowers because the student debt repayment freeze ends in December, meaning repayments will resume in January. If the case is resolved in favor of the Biden administration before the end of the year, it is possible that some of the 26 million people who applied before the application closed could have their debt forgiven before January. However, the 12 million people who have not yet applied could be on the hook for repayment as early as 2023 because the Department of Education and loan servicers may not have enough time to process new applications before January. Kantrowitz added.
