The Biden administration plans to take up the student debt forgiveness fight to the highest court in the US and ask it to reinstate its student debt cancellation plan, warning that US citizens would face a lot of financial strain and default rates would spike if the loan forgiveness plan is blocked.
Biden’s student forgiveness plan has faced some difficulties recently after two federal courts halted it. The Justice Department is determined to see the program succeed, and they plan to ask the Supreme Court to block the rulings and let the plan take effect quickly.
The administration announced its plans to appeal one of the rulings made by a federal appellate court in St. Louis, in a legal filing on Thursday, November 17, to the US Supreme Court.
Even though the White House is hopeful that it will win the case, there are some reservations about its chances against a Supreme Court that is mostly conservative.
Biden’s ambitious student loan forgiveness plan promises a $10,000 loan forgiveness to people earning less than $125,000 a year and households earning less than $250,000. Recipients of the Pell Grant would also get an additional $10,000 in loan forgiveness.
This week, the Biden administration also made several other legal filings, warning that many Americans will have difficulty repaying their student loans come January if the Supreme Court does not lift the court orders halting the loan cancellation plans.
According to the Education Department, borrowers would have to pay about $200 or $300 more than they would if the cancellation plan goes through. The added strain on individuals and households would cause default rates to increase exponentially, which is already happening in the wake of other natural disasters that cause more financial stress.
Education Undersecretary James Kvaal said that the department anticipated a massive increase in student loan defaults, which was one of the things the student debt cancellation program was supposed to alleviate.
The Justice Department also asked an appeals court in Texas to revoke a decision by Judge Mark Pittman of the US District Court in the Northern District of Texas to strike down the cancellation plan. Judge Pittman, a Trump appointee, ruled that Biden’s plan was unconstitutional.
A St. Louis appeals court halted the plan after six states argued that the loan relief program would have dire financial consequences for them because it threatened their tax revenues. The court then issued a nationwide injunction stopping the forgiveness plan from moving forward.
Biden’s campaign promise to cancel student debt played a massive role in swinging the vote and winning him the presidency. Approximately 26 million people have applied for the program, with 16 million applications approved. Last week, the Education Department stopped accepting new applications after the courts ruled the program illegal.
Since President Biden put the plans in motion, they have faced many legal challenges, with opponents asking the Supreme Court twice to cancel the plans. However, the Supreme Court rejected the requests to intervene in both cases.
Now, over 40 million borrowers are uncertain whether they will have to start making payments in January, with 18 million having been promised cancellation of their entire loan balance.
