The Biden Administration May Illegally Cancel Student Debt This Week, Lawsuit Claims

A new lawsuit filed by a coalition of Republican-led states has alleged that the Biden administration has illegally directed student loan servicers to begin canceling student loans. The suit, filed Tuesday, claims that Secretary of Education Miguel Cardona is attempting to enforce new changes to the federal student loan program that have yet to be finalized. If true, these actions would constitute a brazen violation of federal lawand show just how desperate the Biden administration is to enact mass student loan forgiveness, despite legal constraints.

“This is the third time the Secretary has unlawfully tried to mass cancel hundreds of billions of dollars in loans,” the complaint reads. “Courts stopped him the first two times, when he tried to do so openly. So now he is trying to do so through cloak and dagger.”

Joe Biden has spent much of his presidency pushing mass student loan forgiveness. In 2022, he announced an ambitious plan for one-time student debt forgiveness of up to $20,000 per borrower. That plan was struck down at the Supreme Court. Another key element of Biden’s forgiveness agendaan income-driven repayment plan called the SAVE plan that would have allowed many borrowers to receive forgiveness after paying back only a small portion of their loanswas blocked by several federal courts in June and July.

However, these setbacks haven’t seemed to deter the Education Department. In April, Cardona released a set of proposed rules that would effectively usher in mass student loan forgiveness. The rules would target specific groups for forgiveness: borrowers whose balances have grown due to unpaid interest, borrowers who would be eligible for forgiveness had they enrolled in an income-driven repayment program like SAVE, borrowers who have been in repayment for decades, borrowers experiencing “hardship,” and borrowers who enrolled in “low-financial value” programs.

According to the Committee for a Responsible Federal Budget, these changes are estimated to cost nearly $150 billionthough the cost would likely be much higher if the SAVE plan remains blocked.

The lawsuit claims that Cardona has already instructed loan servicers to imminently forgive student loans under these new rules. The problem is that the rules are yet to be finalizedand federal law requires that changes like these not be implemented for at least 60 days.

The suing statesMissouri, Georgia, Alabama, Florida, North Dakota, Arkansas, and Ohiohave “obtained documents proving that the Secretary is implementing this plan without publication and has been planning to do so since May,” the suit reads. “Those documents instruct third-party organizations that service federal loans to begin canceling hundreds of billions of dollars beginning potentially this week.”

The complaint theorized that this approach was due to the particularly weak nature of this latest attempt at student loan forgiveness, especially given that, after a battery of legal setbacks, it’s highly unlikely that these rules would survive a legal challenge.

“All this explains why the Secretary now is trying to quietly rush this rule out too quickly for anybody to sue,” the complaint reads, adding that states are not able to reverse loan forgiveness once it’s been handed out. Therefore “it does not matter how many rules he breaks in the process, so long as he forgives billions of dollars in debt before the courts stop him.”