Background
In 2020, in response to the economic hardships caused by the COVID-19 pandemic, the Biden administration implemented a pause on federal student loan payments and interest accrual. This moratorium was set to expire on August 31, 2022. However, on August 24, 2022, the U.S. Department of Education announced that it would extend the pause until the end of 2022.
On September 29, 2022, a federal district court in Texas ruled to block the Biden administration’s student loan repayment plan, finding that the administration lacked the authority to unilaterally cancel or modify student debt. The U.S. Department of Justice appealed the ruling, arguing that the district court misinterpreted the law and that the administration had the authority to implement the plan.
Appeals Court Ruling
On November 14, 2022, a three-judge panel of the U.S. Court of Appeals for the Eighth Circuit lifted the district court’s ban on the student loan repayment plan, allowing the Biden administration to proceed with implementing the plan. The appeals court found that the Texas court lacked jurisdiction to hear the case and that the Biden administration had the authority to implement the plan under the Higher Education Relief Opportunities for Students (HEROES) Act of 2003.
Key Points of the Ruling
- The Eighth Circuit held that the Texas court lacked jurisdiction to hear the case because the plaintiffs (a group of student loan borrowers) did not have standing to sue. The court found that the plaintiffs had not shown that they had suffered any concrete or particularized injury as a result of the Biden administration’s student loan repayment plan.
- The Eighth Circuit also rejected the plaintiffs’ argument that the Biden administration lacked the authority to implement the plan under the HEROES Act. The court found that the HEROES Act gave the Secretary of Education broad authority to modify or cancel student loans in response to a national emergency. The court found that the COVID-19 pandemic qualified as a national emergency and that the Biden administration’s student loan repayment plan was a reasonable exercise of the Secretary’s authority under the HEROES Act.
Implications of the Ruling
The Eighth Circuit’s ruling is a significant victory for the Biden administration and for student loan borrowers. The ruling allows the administration to proceed with implementing the student loan repayment plan, which will provide much-needed relief to millions of Americans.
The ruling also sets a precedent for the Biden administration to use the HEROES Act to cancel or modify student loans in the future. The HEROES Act gives the Secretary of Education broad authority to modify or cancel student loans in response to a national emergency. The Eighth Circuit’s ruling suggests that the administration could use the HEROES Act to cancel student loans in response to other national emergencies, such as a recession or natural disaster.
Next Steps
The Biden administration is expected to begin implementing the student loan repayment plan in the coming weeks. The plan will provide for the following:
- A pause on student loan payments until December 31, 2022.
- A reduction of monthly loan payments by up to $10,000 for borrowers who earn less than $125,000 per year (or $250,000 for married couples).
- Forgiveness of all remaining student loan debt for borrowers who have been in repayment for 20 years or more.
The Biden administration has also announced that it will forgive $10,000 in student loan debt for borrowers who received Pell Grants. Pell Grants are need-based grants that are awarded to low-income students.
Conclusion
The Eighth Circuit’s ruling is a significant victory for the Biden administration and for student loan borrowers. The ruling allows the administration to proceed with implementing the student loan repayment plan, which will provide much-needed relief to millions of Americans. The ruling also sets a precedent for the Biden administration to use the HEROES Act to cancel or modify student loans in the future.
