Legal losses keep coming for Biden's student loan relief plan

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President Joe Biden answers questions with Education Secretary Miguel Cardona in October as they leave an event about the student debt relief portal. / AP

Another appeals court rejected President Biden's bid to reinstate his student debt plan on Wednesday, marking the latest legal setback in the administration's effort to forgive up to $20,000 in debt.

At the 5th Circuit Court, the U.S. Education Department had requested a hold on a November decision, where a federal judge in Texas ruled the loan program unlawful and vacated the debt relief program. Judge Mark T. Pittman, who was appointed by former President Donald Trump, wrote that the program was a "complete usurpation" of congressional authority by the executive branch. The decision by the appeals court maintains Pittman's order while the court rules more fully on the administration's appeal.

The Biden administration has said ultimately they'll ask the Supreme Court to weigh in on the legality of the plan.

Before the legal troubles, the Education Department approved about 16 million applications, those borrowers will see that debt discharged if and when the program overcomes the legal hurdles.

Federal loan payments have been on pause more or less since the COVID-19 pandemic began in early 2020, and the administration plans to keep it that way as the legal challenges to student loan relief play out. If the plan is allowed to go forward, or if the courts put a final stop to it, payments will resume 60 days later; if not, bills start coming due after June 30, 2023.

Biden's plan to relieve up to $10,000 in federal student loans for low-to-middle-income borrowers — up to $20,000 for qualifying Pell Grant recipients — has encountered multiple legal setbacks. Before the November ruling vacating Biden's student debt program, a federal appeals court in St. Louis had already placed the program on hold while it considered a separate lawsuit by six states challenging it.

The six states – Nebraska, Missouri, Arkansas, Iowa, Kansas and South Carolina — argued that a handful of state-based loan servicers that manage old, privately-held federal loans, would be hurt financially if borrowers were allowed to consolidate these loans and qualify for debt cancellation.

That suit had been dismissed by a U.S. district court judge in Missouri before the plaintiffs appealed to the 8th Circuit, which ultimately issued a nationwide injunction barring the debt relief program.

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