US appeals court halts Biden administration student loan forgiveness plan
© WikiMedia (The White House)
US appeals court halts Biden administration student loan forgiveness plan

The US Court of Appeals for the Eighth Circuit Monday issued a nationwide injunction against the Biden administration’s federal student loan forgiveness plan. The administration is temporarily barred from dispensing loan forgiveness to the millions of student borrowers who already applied to the plan. The injunction will remain in place until the court decides otherwise or the US Supreme Court takes up the issue.

The court found that allowing the Biden administration’s plan to go into effect would cause an “irreversible impact” on the states bringing suit. In issuing the injunction, the court reasoned that the injunction should apply nationwide, since to limit it to the states bringing suit “would be impractical and…fail to provide complete relief.”

The case was initially brought by the states of Nebraska, Missouri, Arkansas, Iowa, Kansas and South Carolina. The states argued that the Biden administration’s federal student loan forgiveness plan violated the separation of powers and the Administrative Procedure Act. Specifically, the states cited concerns that the plan’s far-reaching fiscal implications.

At the core of the case was the state of Missouri and the Missouri Higher Education Loan Authority (MOHELA). The Missouri state legislature created MOHELA to support and fund projects at public colleges and universities in Missouri. Missouri claimed that the Biden administration’s plan would significantly reduce MOHELA’s revenue, since it depends on servicing student loan accounts to raise revenue. If MOHELA is unable to raise revenue, it will be unable to meet its obligations to the Missouri Treasury Department, thus putting the state in financial harm.

A federal district judge originally dismissed the suit on October 21, claiming the states lacked standing to bring suit. The three-judge panel writing for the US Court of Appeals for the Eighth Circuit, however, found that not only did the states have standing to bring suit, they also faced irreparable harm if the Biden administration plan was permitted to continue.

The Biden administration announced the federal student loan forgiveness on August 24. The plan would forgive $10,000 in non-Pell Grant federal student loans and $20,000 in Pell Grant federal student loans for individuals making less than $125,000 per year. Since the announcement of the plan, several states have brought suit to stop the plan from going into effect.

On November 11, a Texas federal district court also blocked the Biden administration’s plan. The Justice Department has since appealed the decision to the US Court of Appeals for the Fifth Circuit.