Last week, two more legal challenges were filed against the Biden administration over its policy of canceling student loans up to $10,000 for millions of borrowers.
On September 27, the Pacific Legal Foundation filed its first lawsuit against the student loan cancellation program. They claimed that the White House had illegally bypassed Congress and invoked the law to help Iraq War veterans and their families. Multiple Republican state attorneys general filed a similar complaint two days later.
The complaint stated that the Mass Debt Cancellation by the Biden Administration is not only economically unwise but also unfair. “No statute allows President Biden unilaterally to relieve millions of people from their obligation to repay loans they voluntarily took on.”
The complaint brought out opposition to student debt relief by Nancy Pelosi (D-CA), who had argued last year, that any action on loan cancellation must be taken from Congress. However, Pelosi seemed to pivot before declaring that Biden’s bold action was a significant step in the Democrats’ fight for higher education access.
The attorneys general also cited the Supreme Court’s recent West Virginia v. EPA decision, which stated that federal agencies cannot claim “highly consequential powers beyond what Congress could reasonably understand to have granted”. A separate lawsuit was filed by Attorney General Mark Brnovich (R-AZ), who argued that the “massive debt forgiveness program” is fundamentally unfair and unconstitutional.
The lawsuit stated that “The Biden Administration has chosen to usurp Congress’ role and the power of the purse is especially harmful” because almost every previous bailout of an industrial industry by Congress has also extracted necessary reforms from the industry.” “Here, half a trillion dollars in student debt cancellation is a clear admission of the need for structural reforms in higher education. However, it does not include any reforms such as requiring colleges to reduce costs or to be more transparent about low job prospects for certain courses of study.
Biden decided to cancel $10,000 of student loans per borrower and extended the pause in federal student loan repayments to January 2023. Undergraduate loan borrowers will be able to pay a maximum of 5% monthly. Pell Grant students will be eligible for $20,000 debt cancellation.
According to a nonpartisan analysis by the University of Pennsylvania’s Wharton School that found 42% of the benefit would be a help to Americans earning over $82,400 per annum, eliminating $10,000 of student loans per borrower in 2022 will cost $298 billion, and $329 billion respectively if the policy is extended each year. The Congressional Budget Office also predicts that the total cost will reach $400 billion. An additional $20 billion is incurred by the extended pause in repayments.
The lawsuit by the Pacific Legal Foundation argued that student loan cancellation was largely an “election-year ploy”. This is the most serious abuse of power since Donald Trump’s eviction moratorium prior to the 2020 election through the Centers for Disease Control and Prevention. Many swing-state Democrats, however, resisted the debt cancellation policy. This is something many Americans fear will increase inflationary pressures.
