US: Texas judge strikes down Biden's loan forgiveness plan

On Thursday, a US judge in Texas blocked President Joe Biden's plan to provide millions of borrowers with up to $20,000 apiece in federal student-loan forgiveness — a program that was already on hold as a federal appeals court in St Louis considers a separate lawsuit by six states challenging it.

District Court Judge Mark Pittman, an appointee of former President Donald Trump based in Fort Worth, said the program usurped Congress' power to make laws.

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

He added:

“The Court is not blind to the current political division in our country. But it is fundamental to the survival of our Republic that the separation of powers as outlined in our Constitution be preserved.”

The debt forgiveness plan would cancel $10,000 in student loan debt for those making less than $125,000 or households with less than $250,000 in income. Pell Grant recipients, who typically demonstrate more financial need, would get an additional $10,000 in debt forgiven.

The cancellation applies to federal student loans used to attend undergraduate and graduate school, along with Parent Plus loans.

The 8th US Circuit Court of Appeals had put the forgiveness plan on hold on October 21 while it considered an effort by the states of Nebraska, Missouri, Iowa, Kansas, Arkansas and South Carolina to block the program.

While the stay temporarily stopped the administration from actually clearing debt, the White House has encouraged borrowers to continue applying for relief, saying the court order did not prevent applications or the review of applications. As of late October, more than 22 million borrowers had applied for debt relief.

The legal challenges have created confusion about whether borrowers who expected to have debt cancelled will have to resume making payments on January 1, when a pause prompted by the Covid-19 pandemic is set to expire.

Economists worry that many people have yet to rebound financially from the pandemic, saying that if borrowers who were expecting debt cancellation are asked to make payments instead, many could fall behind on the bills and default.

The White House did not immediately provide a response to the ruling.

In his order on Thursday, Pittman said the Higher Education Relief Opportunities for Students Act of 2003, commonly known as the Heroes Act, did not provide the authorisation for the loan forgiveness program that the Biden administration claimed it did.

The law allows the secretary of education to “waive or modify any statutory or regulatory provision applicable to the student financial assistance programs ... as the Secretary deems necessary in connection with a war or other military operation or national emergency".

The administration argued that the student loan relief was thus authorised as a means of dealing with the national emergency of the pandemic. Pittman disagreed, finding that a program of such massive import required clear congressional authorisation.

"[The Heroes Act] does not provide the executive branch clear congressional authorization to create a $400 billion student loan forgiveness program," he wrote.

“This administration continues to operate as if its own self-appointed authority in transferring billions of dollars in student loans is legitimate, but the rule of law says otherwise.”