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U.S. Judge Strikes Down Biden's Student Debt Relief Plan

(Reuters) -A federal judge in Texas on Thursday ruled that President Joe Biden's plan to cancel hundreds of billions of dollars in student loan debt was unlawful and must be vacated, delivering a victory to conservative opponents of the program.

U.S. District Judge Mark Pittman, an appointee of former Republican President Donald Trump in Fort Worth, called the program an "unconstitutional exercise of Congress's legislative power" as he ruled in favor of two borrowers backed by a conservative advocacy group.

The debt relief plan had already been temporarily blocked by the St. Louis-based 8th U.S. Circuit Court of Appeals while it considers a request by six Republican-led states to enjoin it while they appealed the dismissal of their own lawsuit.

The judge's ruling came in a lawsuit by two borrowers who were partially or fully ineligible for the loan forgiveness Biden's plan offered. The plaintiffs argued it did not follow proper rulemaking processes and was unlawful.

The borrowers were backed by the Job Creators Network Foundation, a conservative advocacy group founded by Bernie Marcus, a co-founder of Home Depot.

The U.S. Justice Department promptly moved to appeal the ruling. White House Press Secretary Karine Jean-Pierre said in a statement the administration strongly disagreed with the decision.

About 26 million Americans have applied for student loan forgiveness, and the U.S. Department of Education has already approved requests from 16 million. Jean-Pierre said the department would hold onto their information "so it can quickly process their relief once we prevail in court."

"We will never stop fighting for hard-working Americans most in need - no matter how many roadblocks our opponents and special interests try to put in our way," she said.

Biden's plan has been the subject of several lawsuits by conservative state attorneys general and legal groups, but plaintiffs before Thursday had struggled to convince courts they were harmed by it in such a way that they have standing to sue.

The plan, announced in August, calls for forgiving up to $10,000 in student loan debt for borrowers making less than $125,000 per year, or $250,000 for married couples. Borrowers who received Pell Grants to benefit lower-income college students will have up to $20,000 of their debt canceled.

The non-partisan Congressional Budget Office in September calculated the debt forgiveness would eliminate about $430 billion of the $1.6 trillion in outstanding student debt and that over 40 million people were eligible to benefit.

In his 26-page ruling, Pittman said it was irrelevant if Biden's plan was good public policy because the program was "one of the largest exercises of legislative power without congressional authority in the history of the United States."

Pittman wrote that the HEROES Act - a law that provides loan assistance to military personnel and that was relied upon by the Biden administration to enact the relief plan - did not authorize the $400 billion student loan forgiveness program.

"In this country, we are not ruled by an all-powerful executive with a pen and a phone," Pittman wrote. "Instead, we are ruled by a Constitution that provides for three distinct and independent branches of government."

Elaine Parker, the president of the Job Creators Network Foundation, in a statement said the ruling "protects the rule of law which requires all Americans to have their voices heard by their federal government."

(Reporting by Nate Raymond in Boston; Editing by Sandra Maler, Rosalba O'Brien and Kenneth Maxwell)

Copyright 2022 Thomson Reuters.

https://money.usnews.com/investing/...tudent-debt-relief-plan-unconstitutional

Good to see that republicans want all those with student loans to just continue to suffer repayment. Way to embrace those young voters GOPers! Man, I really want to live a couple more decades now, just to see the official end of the Republican party. I know it's pretty much over now, but wow, it looks like it may have to shut the doors permanently sooner rather than later.

Where does loan forgiveness stop? Just those that have loans now? Or those that take out loans in the future as well? What about mortgages? And vehicle loans. Forgive those as well? I mean, after all, those loans cut into the person's spending ability as well, right?

Loan forgiveness should not be a thing. How about dealing with the root cause? State schools shouldnt be charging so much to begin with.

Come on man, quit buying votes.

Seriously, you take a loan, the deal is to pay it back. Should all the people who have paid off loans get their money back?

My solution is anybody who received a degree should have to pay back the loans. Anybody who took loans but didn't receive a degree should be required to perform some sort of public service in addition to some scaled back loan amount.

As a parent who paid for 3 children's college education, I find out and out forgiveness revolting.

I agree totally with you on this one Eve.

First, you don't know how easy or not it was, and that isn't the point, now is it.

I agree. The problem is two fold, education has become a business and second, far to many people who have no business being admitted to a school are and kept around for a few years who finally fail out and have debt.

jc

Thanks for proving my point GOPers. The what's in it for me crowd hates democracy.

Fixed it for you.
Sorry you wont be getting a free education off my back.

100%... if you can't afford a loan, don't take it out....

I disagree with loan forgiveness, but do think the cost of college needs to change... it's outrageous especially when you factor the negative ROI on many degrees...

Part of that quoted part I didn't say.

I agree with the point. As I said, education has become big business and are more interested in packing enrollments over teaching. Between admitting people who really aren't cut for college and offering all sorts of useless degrees, it's a sham. The schools know good and well that a large percentage of the people who enter as freshman will never make the junior year, but hey, that's $40,000 or more in to the system.

It doesn't cost the school any more to have an extra 20 people per class. It lowers the costs to the university system.

Maybe we should make the universities return some money if this blatant bribe goes through.

It's exactly the point.

How many 18 year olds have you known that can afford 60k-10ok in loans?


Which is why we are where we are.

According to some only the wealthy should be going to college because they're the only ones who can afford it.

buying votes worked.

#promistednotkept

I will play devil's advocate because everybody is agreeing too much and that just bothers me.
I actually think that post secondary education costs have gotten cheaper in real terms, accounting for inflation, over the past 30 years. The problem is, I don't think people are performing an apples to apples comparison, meaning for example, that I don't think that the product that OSU is offering today is the same as it was in 1992. Today, a school can record and provide video content of lectures, rather than pay a person with a Ph.D. to produce that same lecture 3 times per year. That is a giant cost savings. So, why is that price tag higher?
OSU today offers more degrees of questionable value because there is a demand for those degrees. Also, if you look at the degrees of high value, say engineering, the course load is increasing, mostly with non-engineering content, making it almost impossible for someone to get out in four years unless they start college with existing college credit.
The other major change driving up the cost is the "college experience", lifestyle, and brand recognition cost. These are the factors actually driving people to make there college choices. Most of the young adults are not shopping around for their education and making rational consumer decisions, and the parents go along with it because of the pressure to support their children and because the college experience has sort of become a rite of passage and often parents are encouraging their kids to go the the same school out of some sort of school pride - there's some cheap advertising. If you look at the schools like OSU and how they have changed, this is clearly where they are investing their money, upgrading to buildings with new fancy architectures, building fancy fitness facilities, replacing boring cafeterias with higher end dining options and more dining options.
As is typically the case, the consumer sets the market, not the companies or service providers and if we want this to change, we don't need to give anybody loan bailouts or pay for college. We just need rational consumer behavior and we need to stop making a big deal out of what school a person went to or whether our parents cheer for their football team every Saturday.
In fact, at a State level, what the State of Ohio should do, is figure out which degrees we think offer the best ROI and make it so that those students get their degrees from Ohio, not from OSU, or YSU, or OU, then, you allow anybody who meets qualifications offer the required courses for those degrees, and you make them compete on price. Then, a student can take their MATH 121 at one school for $450, and their CHEM 330 at another school for $425, and so on. I gaurantee, if take away the fact that a degree says Ohio State University on it, you will see a lot more people taking classes at Columbus State for a fraction of the cost.

Ding, Ding, Ding!!! ^ We have a winner! ^

I took out 100k in loans and choose a profession that I knew I'd be able to pay it back in a relatively short period if I lived extremely frugily for a few years... forgiving $10k by passing the buck to other American's makes no sense to me...

if we want to forgive some of the loans and can figure a way to make the schools pay for it I'm 100% on board...

We also need to lower the price of college and hold the schools more accountable...

I actually agree with you, Eve. Here’s the problem. We have one party who thinks that the solution is to bail the water from the sinking ship without fixing the leak and the other party who says “The ship is fine as is!” with nobody proposing to do what you proffer.

The other problem is that we do have a ton of people with gobs of outstanding student loan debt. It’s a legitimate problem. I get that the outright forgiveness isn’t a well-planned route, especially because it doesn’t deal with the cause of the problem, and we will still churn out more people in the same or worse situation, but it’s still a problem nonetheless.

Here’s the rub, and to also respond to your second post, the problem is way more complex than two-fold.

Let’s compare this to the housing crisis in 2008 and you’ll realize how similar the two are, to use your construct as an example. In that case, you have a ton of people getting loans that had no business paying them off. Then you had people who legitimately should have qualified for loans that got burned because demand was so high from people who weren’t qualified to take out loans driving demand (and therefore the price) upward. This created a huge quagmire.

So, what happened? Bankruptcies, foreclosures, bubbles burst, bailouts (hmmm…) and we got over it. You can’t really do the same thing with an education. Oh, and you also can’t discharge the debt in bankruptcy either. So it sticks.

By the way, on that whole “bailout” thing, that was $700B worth of taxpayer funds in 2008 to bailout banks for bad debts. So (not pointing the finger at you yourself) if you were okay with that, and not student loan forgiveness, weelllllllll……….. try to at least be consistent. Oh, and by the way, that whole bailout thing was the straw that broke the camel’s back on my affiliation with being a Republican.

So here we are now. What’s my solution? I actually have had numerous conversations about this. We have to turn off the loan faucet. One way to start is to make student loans dischargeable in bankruptcy. To your point, it would equate to other debt where, year, it murders the credit of the people who can’t pay back the loans, and it helps turn off the faucet from lenders who don’t want to take the risk of losing their payback. The current metric of “it stays with you until you die” doesn’t discourage banks from lending, and people still take out the loans because they’ve been misled in many cases about the quality of their education. In some cases, even to the level of fraud by now-defunct universities.

Obviously, there is also the case in point of the federal government being a huge lender. I think, across the board, a metric should be computed where you take into account the investment you are putting into the asset itself. What type of major? What type of student are we dealing with? That should all be taken into consideration. Also, like Eve said, and like your own state does, cheaper, yet legitimate means of education should also be available.

The bottom line is the leak has to be plugged and nobody seemingly wants to actually do that. That doesn’t just involve the loan holders but also those who are giving and receiving the loan benefits.

Should be “yeah” and not “year”. Stupid big hands on a little iPhone.

Usually I can at least see both sides on a given issue but this was one policy decision that I am coming up short on and adamantly oppose. I voted blue in 2020 but this definitely impacted that decision at the midterms.

I agree that the higher education system is part of the problem and needs to be revamped, but issues like this always seem to come back to one thing: credit.

As a country we live and die on credit. Dawglover05 touched on it well, credit increases demand for a good/service (housing, college, cars, etc), which raises the price of the good/service. It even potentially prices out some consumers that shouldn't be priced out. We as a society seem to have two things driving this: 1) I want _____ (typically now), 2) I can afford $_____ per month (even if it's for the rest of my effective life). At some point the snowball of monthly debt obligations rolling down the hill gets too big.

College educated individuals are more likely to be higher paid professionals, and I don't see a catastrophe, current or imminent, that warrants straight up forgiveness of student loans, decided upon by ONE individual. At the very least, a program of this scale needs to be discussed by legislators, not decided upon unilaterally. What happened was not democracy, it was a dictatorial decision.

This program doesn't consider the parents/borrowers who worked extra hours/second job to pay for education without loans. It doesn't take into account those with private student loans. If we're going to cite the system as causing damage to these parties, shouldn't they be included?

This policy brings into play the problem of moral hazard (ie people with fire insurance tend to take less risk against preventing fires). And that's probably my biggest beef with it - the lack of accountability that is expected at the moment.

I don't post often but when I do I try to post objectively. With this in mind I'll say the next part carefully. I have friends and family that will benefit from this forgiveness. I love that they will get something. Speaking of myself, I made many many sacrifices during and after college to 1) take out as few loans as possible 2) make sure I could pay them back and 3) pay them off early. I worked 30 hours a week. I missed out on a ton of stuff I wish I could have taken part in as part of the college experience. I chose a major that I mostly enjoy, but I approached it as a trade, something I knew I could find stable employment in, as opposed to following some of my other interests and dreams. And when I got my first job out of college I planned and budgeted to get myself out of debt. I didn't live large. Had I'd known I'd get a bailout I would be less inclined to make these sacrifices. Heck, I would probably have take out an extra $10k-$20k in loans, not worked, and enjoyed the last two years of school.

I have no regrets over the sacrifices and decisions I made. I was personally responsible for and accountable for my actions. I don't see why it's such a big leap to expect the same on an individual level. Yes, there are bad actors on the lending side and they need to be taken to task. But aside from anything fraudulent I typically come back to expecting personal accountability.

Question on loan forgiveness.

What is being done to ensure this isn't an issue again in a few more years? Are we going to do a loan forgiveness every 5 years? What makes the current outstanding loan holders special that they get this "once in a lifetime offer".

That is my issue with it.

First, they took the loans, whether they had a good understanding or not, or predatory lending practices took place, many could have gone to cheaper schools.
Second, what about all those folks they paid their loans, or all the people who will take loans in the future?

I'm fine with making changes to help, but if you want to help, convert the loans to a zero interest repayment plan, and do a forgiveness based on annual payment. You make your payments on time for the whole year, you get a reduction (based on a percentage of the payments made during that year). Rinse and repeat every year, you pay, you get rewarded.

But then we also need to do a better job of controlling the cost of education, provide alternatives to expensive big name schools, and educate families and students about these options and the costs.

People can file bankruptcy on every other kind of debt. That in and of itself is loan forgiveness. Why should this be any different? Now the typical response is that tax payers pay the price. But do you think that's any different than bankruptcies? The cost of bankruptcies gets passed directly on to the consumer. It seems as though people wish to single out college loans and make them different than any other type of debt in this country.

Do I think the system is broken and needs to be fixed? I certainly do. But when one side keeps saying.......



NRTY..

And for those who say this is buying votes? Sounds exactly like what the other side says when a Republican gets elected by promising tax cuts.

Nothing.

That’s exactly the problem. We will have this problem again in a few years until people start realizing and challenging the cost-benefit analysis of higher education to the point where demand plummets, or the cost comes down some other way to be commensurate with the benefit.

That was a very thoughtful post, Mike.

I can see the flaw of the blanket forgiveness being implemented lump sum. I do think two things either need to happen or be maintained better.

One, there is no justifiable reason for the loan rates being as historically high as they were. Why were mortgages in the range of 2.8-4% when student loans were in the range of 6.8-7.5%? That’s horrifically unjustifiable at best.

The second thing I think is there should be a non-bankruptcy option for loan forgiveness, but like I said before, and like Pit delved into, I think bankruptcy should be an option as well. PSLF, peace corp, and other public service options I think are good, and they span over ten years, but they have - up through now at least - been horribly managed.

Here’s the other issue. If we keep churning out students with massive debt, they are going to increasingly influence Washington’s political makeup and policy decisions. That demographic already has to a large decree with what we’ve seen lately. Until it gets fixed, that increases, whether people like it, love it or hate it.

I agree with that.

To go back to a few other points, I see the bailouts of banks and large companies a bit differently. While gross, that was better than the outcome had that not been done. I think you can imagine the numbers of jobs that would have been impacted, across the entire spectrum. We also have to consider that most of those loans were more or less required by federal actions...you remember redlining. Before that, banks weren't giving loans to people who had no realistic means to pay them off. I see it the same with the damn student loans. Far too many were given to people who had little chance of getting a degree, or one that would give them some chance at paying the off.

As to Pit's point about cutting taxes, I seem to remember more than a few posts about how you in your job saw first hand the excessive waste in government while reviewing contracts. I don't see cutting taxes as buying votes, but a segment of the population seem to focus on "the rich" getting richer.

I am all for cutting interest on those loans. I would be for eliminating accumulated interest and applying interest already paid to the loan amount.

I don't have a problem with fixing the problem, but don't get on me so to speak because I am against out and out forgiveness.

Redlining prevented minorities from buying homes in white neighborhoods and nothing more. They were already giving minorities loans in predominantly minority neighborhoods. Talk about trying to rewrite history. If you mean once it was required that people get loans that weren't qualified I agree with you. I knew people getting home loans I wouldn't trust loaning $20 to until payday. And they were some of the same people asking to borrow $20 until payday. But that wasn't redlining.


So are you saying that cutting taxes helps create a less wasteful government? So is it your contention we should stop allowing bankruptcies in this country as well? Because that's pretty much the exact same thing. Both would be the forgiving of loan debt.

You see I understand what you are saying about the bailouts to the banks. You use losing jobs in your example. But did you ever stop to think about how much heavy student debt impacts the economy? These former students can't afford to buy homes, buy new cars and are very limited with having the ability to stimulate the economy. That too has a great impact.

But don't get me wrong here. I think the entire system needs overhauled. I wouldn't mind a minimum GPA being attached to such loans. I wouldn't mind excluding certain degrees that offer very low odds of producing incomes that make it likely that you can pay that loan back. Of course I think you would need certain exemptions for teachers as an example.

Appreciate the response. For what it's worth I enjoy reading your commentary on pretty much every topic as you put a lot of thought into your posts.

From a moral standpoint I tend to agree about the mismatch of interest rates on student loans vs mortgages. The easy answer is that student loan interest rates are set by Congress at a flat rate, whereas mortgages are heavily influenced by the 10 year treasury. The 10 year treasury is in turn influenced by market forces (buyers of treasuries) and the Fed when they set the federal funds rate. Mortgage rates are then adjusted at the individual loan level to better price in risk. For example, a borrower with a longer established credit history/higher credit score and a lower loan-to-value pose less risk to a lender, therefore their interest rate will generally be lower than a sub-prime borrower with a history of delinquency and bankruptcy. Everything about mortgage rates at least has some logic. But I would agree with setting student loan interest rates at a lower level. As it stands now, there's no risk since they cannot be discharged (at least not easily). Come on elected leaders, make it happen.

Student loans are such a unique product that it makes hard to compare it to other credit products on an equal basis. There's no collateral. There's no verification of income or ability-to-repay assessment. Even if you could argue that the degree would be revoked if the debt was discharged post-bankruptcy, employers wouldn't discount what you learned. What would stop someone from taking out $200k in student loans, graduating from an Ivy League, and declaring bankruptcy to discharge them? They'd most likely meet the threshold to doing so. Their credit is likely not well established and will take a hit, but I think it's an easy decision to live with a 500 credit score for 7 years to wipe out $200k in debt. Based on this I wouldn't support discharge of student loans in bankruptcy without more information on how this might work. And I have a very hard time supporting discharge of student loans in bankruptcy for an individual who took out a significant amount of loans and their degree in an obviously low demand field didn't pan out.

So where do we go from here with our education system? I think we as a country need to decide the direction it would take. Do we want to offer free higher education across the board? I could support that. Do we want to start considering ability-to-repay based on degree (not an income based repayment plan as we currently see them)? I don't see that as a plausible nor desirable outcome. Can we incentivize personal decision making and achievement more? Maybe we expand grants to more students based on their academic performance before and during college. There are certainly holes in that strategy of course.

The point is we have to decide what outcome we want. AFAIK, the government makes student loans in an attempt to be impartial and grant opportunity more fairly, which at face value sounds great. But when you look at how much college tuition has exploded as a result of the government offering loans it's clearly time to revisit the approach.

well one thing is for certain: nothing will change.

we will never agree because we as americans do not operate with the same foundational facts of our country. we live in a country where the people went out of their way to make life harder than it has to be. we all have different ideas of what needs to happen because we we all have different ideas and can't agree on what the root causes are.

The first thing we need to do is start actually educating our kids and stop treating and teaching children like future worker drones for factories that don't exist. Kids were actually taught to think for themselves before these minimum efficiency tests were ever a thing. Education needs to be a fuller, richer experience catered to the strengths of each child, not some make all the pegs fit the same sized hole system. And we should educate anyone willing to learn because, at the end of the day, a better educated workforce is a benefit to all of us.

Right, but banks view it as loaning money to people who can't afford the loan.

I am not for discriminating against anybody based on anything expect for the reasonable expectation the loan can be paid back.

I am not saying there was or wasn't discrimination based on other factors. I do know banks had to loosen their requirements to get a loan.

I agree. Loans were given out to people who probably never should have received them because they had low test scores. Colleges knew these people probably weren't going to graduate, or at least attain a degree of meaning, and now they are stuck.

It's the education farce that has developed that a person needs college to get ahead. Take the loans. Go to college.

Most people would be far better off in an affordable community college. Get a technical degree of some sort, or knock out 2 years of credits that can transfer to a university and then go get the 4 year degree. That way you have the 4 year education at something over half the cost.

As you know, we have done that here in Tennessee. If you have a B average, community college is free.

Grade inflation has become a big problem, but that is another story.

Just another reason the big bad red wave had a blue lining.

Good post - I agree with this, and agree with Pit that I don't understand why student loan debt can't be part of bankruptcy...

I think it's because they can't take your education away from you. However, they can take physical assets like a home or car and get some of their money back.

The whole purpose of bankruptcy is to get out from under the debt. You can't file on back taxes, child support, fines, and penalties, or other monies owed to the government, but everyone else can be filed on and the debt dismissed, as far as I know. It should discharge all debts IMO.

Kind of makes sense... maybe there is a middle ground... like the debt gets basically wiped out but the debtor has to give 10% of wages for next 5 years or so to pay back a penalty...

Are medical debts able to be wiped in bankruptcy? I'd see them as similar in terms of not a physical asset that can be taken back....

Similar, yes, but do people choose to get sick?