Student loan forgiveness: Court rules debt forgiveness for 804,000 can go forward

A federal district court on Monday dismissed a lawsuit from two conservative groups aimed at blocking the latest plan from the Biden administration to offer student loan forgiveness to more than 800,000 borrowers.

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The plan is meant to erase outstanding debt worth about $39 billion that certain borrowers still owe after making 20 to 25 years’ worth of payments. The court ruling will pave the way for the plan to go forward.

The payment arrangement affects those with federally backed student loans who enrolled in “income-driven payment plans,” or plans that align payments with a person’s income. While the plan has helped some with lowering monthly payments, borrowers have found that some payments they made have not been correctly credited.

In April, the administration announced it would make a one-time adjustment to make sure the payments submitted by borrowers were properly credited.

The suit, which was filed by the Cato Institute and Mackinac Center, argued that not only is the administration working on an accelerated schedule to “evade judicial review” of its program, but that the federal government doesn’t have the authority to forgive the debt in the first place.

Judge Thomas L. Ludington dismissed the groups’ case and rejected a request that the forgiveness be temporarily blocked. Ludington said the conservative groups did not have standing in the case. In other words, the court ruled they could not bring the case because they would be harmed by the plan.

“Before the ink dried on the Supreme Court’s June 30 decision striking down a $430 billion student-loan cancellation program ... the (Education) Department announced a host of equally unlawful loan cancellation schemes,” the groups’ lawsuit read. The suit targeted Education Secretary Miguel Cardona and the head of the Federal Student Aid office, Richard Cordray.

The U.S. Supreme Court in June rejected Biden’s student loan forgiveness program, which would have canceled as much as $20,000 in student loan debt for individual borrowers, totaling $430 billion.

The plan announced by Biden in July is supposed to adjust the way the Education Department calculates certain student loan payments. The adjustments are being made, the department said, to correct past errors in counting payments and the result would show that borrowers made payments that were not counted correctly toward their debt.

Starting Monday, borrowers can begin looking for emails that have the subject line, “Your student loans have been forgiven,” according to ABC News.

It’s expected that by the end of the day Monday, the Department of Education will have wiped the debt of more than 200,000 people.

Around 614,000 people are expected to have their entire student loan debts canceled.

The suit came days ahead of the date the plan was to go into effect. Loan servicers were to be notified by Aug. 12 of which borrowers had met their 20–25-year commitment to have their outstanding debt forgiven.