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Conservative Group Files Lawsuit to Block Student-Debt Relief for 800K Borrowers

  • Conservative groups just filed a lawsuit to block Biden’s latest student-debt relief effort.
  • Last month, Biden announced $39 billion in relief for 800,000 borrowers through an adjustment to income-driven repayment plans.
  • The groups argued it was an overreach of authority and harmed their nonprofit recruiting efforts.

The lawsuits aren’t over for President Joe Biden’s student-loan forgiveness plans.

On Friday, the New Civil Liberties Alliance — a nonprofit organization aimed at protecting constitutional freedoms — filed a lawsuit on behalf of conservative groups Cato Institute and the Mackinac Center for Public Policy to stop Biden’s latest plan to forgive student debt for a targeted group of borrowers.

Last month, the Education Department said it would be automatically canceling $39 billion in student debt for 804,000 borrowers as a result of changes to the department’s income-driven repayment plans. The relief was for borrowers who have completed the necessary 20 or 25 years of qualifying payments. The groups wrote in a press release that the relief is an “utter disregard for federal law and the Constitution,” and they sued the department in the US District Court for the Eastern District of Michigan, asking the court to set the relief aside.

The same groups also challenged Biden’s broad plan to cancel up to $20,000 in student debt for federal borrowers, which the Supreme Court struck down at the end of June.

“Despite its massive expense and impact on the legal rights and obligations of millions of borrowers, the Department did not promulgate this policy through mandatory notice-and-comment and negotiated rulemaking procedures,” the groups said in their complaint. “Instead, it used a press release that neither identified the policy’s legal authority nor considered its exorbitant price tag.”

The complaint added that the relief would harm the groups’ recruiting efforts because it would make the Public Service Loan Forgiveness Program — which forgives student debt for government and nonprofit workers after ten years of qualifying payments — less impactful for job candidates. They argued that as nonprofits, “unlawful cancellation of student-loan debt reduces the amount of a borrower’s PSLF-cancellable debt and thus reduces the amount by which PSLF benefits qualified employment.”

The Education Department has not yet commented on this lawsuit, and it has already begun notifying borrowers who qualify to have their loans forgiven. This comes right before borrowers are set to resume payments again in October after an over three-year pause on payments — and the department said it was working to get relief to those eligible through the IDR before payments resume. It’s unclear at this point how this lawsuit will impact that timeline.

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