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AmextaFinance > Finance > Court Dismisses Challenge To Key Student Loan Forgiveness Plan
Finance

Court Dismisses Challenge To Key Student Loan Forgiveness Plan

News Room
Last updated: 2023/08/14 at 5:35 PM
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A federal court on Monday dismissed a last-minute legal challenge to one of President Biden’s key federal student loan forgiveness initiatives. Over 800,000 borrowers are set to receive student debt relief this week, with potentially more in the coming months.

Contents
Over 800,000 Borrowers Told They Qualify For Student Loan ForgivenessCourt Dismisses Legal Challenge, Allowing Student Loan Forgiveness To ProceedWhat The Ruling Means For Student Loan BorrowersFurther Student Loan Forgiveness Reading

Here’s the latest.

Over 800,000 Borrowers Told They Qualify For Student Loan Forgiveness

Last month, the Education Department approved nearly $40 billion in student loan forgiveness under a temporary initiative called the IDR Account Adjustment. This program gives the Education Department the authority to credit borrowers with time toward 20- or 25-year student loan forgiveness under income-driven repayment programs, even for borrowers not currently enrolled in that kind of repayment plan. IDR allows borrowers to repay their loans in accordance with their income and family size, with any remaining balance forgiven after 20 or 25 years.

Under the adjustment, the Education Department can count most past periods of repayment, as well as some periods of deferment and forbearance, toward their IDR loan forgiveness term. The adjustment can also benefit borrowers on track for Public Service Loan Forgiveness if they have been employed by qualifying government or nonprofit employers.

The Biden administration established the IDR Account Adjustment to address longstanding problems with IDR and PSLF including administrative issues, poor oversight, and servicing practices that led borrowers into interest-accruing forbearances, rather than IDR plans.

On July 14th, the Education Department sent emails to over 800,000 borrowers notifying them that they are eligible for student loan forgiveness under the temporary program.

Court Dismisses Legal Challenge, Allowing Student Loan Forgiveness To Proceed

Earlier this month, the New Civil Liberties Alliance filed a lawsuit on behalf of the Cato Institute and the Mackinac Center for Public Policy to block student loan forgiveness under the IDR Account Adjustment. The same conservative groups had filed legal challenges seeking to stop other Biden administration student debt initiatives. The groups argued that the IDR Account Adjustment was illegal and should be stopped.

But on Monday, a federal court dismissed the suit, concluding that the Plaintiffs do not have standing. Standing is the concept that an entity seeking remedies in federal court must demonstrate a concrete injury directly tied to the challenged rule or program. In this case, the groups argued that the IDR Account Adjustment would harm their interests as nonprofit organizations by reducing the effectiveness of the PSLF program as a recruiting and retention tool.

But the Court disagreed. “Plaintiffs have not shown an individualized, concrete, and particularized injury-in fact, so they do not have Article III standing,” reads the decision. “Even if any of Plaintiffs’ hypothetical injuries were sufficiently concrete and particularized for Article III standing purposes, Plaintiffs have not shown that the Adjustment caused their injury. Any of the hypothetical injuries Plaintiffs allege would be caused by Plaintiffs’ own employees or prospective employees, not the Adjustment. Thus, there is no causation sufficient for Article III standing.”

What The Ruling Means For Student Loan Borrowers

With the case dismissed, the Education Department is free to continue implementing the IDR Account Adjustment. Borrowers who were notified last month that they qualify for student loan forgiveness could start receiving loan discharges this week. The Education Department will continue running the IDR Account Adjustment every two months for the remainder of the year, and more borrowers may qualify.

It is unclear if the challengers will appeal the federal district court’s ruling. An appeal could still be problematic for the Biden administation if an appellate panel sides with the Plaintiffs. But for now, student loan forgiveness can proceed under the IDR Account Adjustment.

Further Student Loan Forgiveness Reading

5 Student Loan Forgiveness Updates As Payments Resume In A Matter Of Weeks

Student Loan Forgiveness May Begin This Week Under Adjustment, But Uncertainty Looms

Critical Student Loan Repayment And Forgiveness Deadlines Loom In August — And Beyond

Student Loan Forgiveness Just Got Easier For These Borrowers

Read the full article here

News Room August 14, 2023 August 14, 2023
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