A recent lawsuit filed by a coalition of Republican-led states alleges that the Biden administration has unlawfully instructed student loan servicers to start canceling student loans. The lawsuit, filed on Tuesday, claims that Secretary of Education Miguel Cardona is pushing for changes to the federal student loan program that have not yet been finalized. If proven true, these actions would violate federal law and demonstrate the administration’s eagerness to implement widespread student loan forgiveness, despite legal limitations.
“This marks the third time the Secretary has tried to cancel billions of dollars in loans unlawfully,” the complaint states. “After being stopped by the courts in his previous attempts, he is now resorting to covert methods.”
President Biden has been advocating for mass student loan forgiveness throughout his term. In 2022, he proposed a plan for one-time debt forgiveness of up to $20,000 per borrower, which was rejected by the Supreme Court. Another aspect of Biden’s forgiveness agenda, the SAVE plan – an income-driven repayment program aiming for loan forgiveness after minimal repayment – was halted by federal courts in June and July.
Despite these setbacks, the Education Department continues its efforts. In April, Cardona proposed rules that would facilitate mass student loan forgiveness. The rules aim to forgive specific groups of borrowers, including those with growing balances due to unpaid interest, those eligible for forgiveness under programs like SAVE, long-term repayment borrowers, individuals facing financial hardship, and those enrolled in low-value programs.
The estimated cost of these changes is approximately $150 billion, but could rise if the SAVE plan remains blocked.
The lawsuit alleges that Cardona has directed loan servicers to start forgiving student loans under these new rules before they are finalized, contrary to the 60-day waiting period required by federal law.
The suing states – Missouri, Georgia, Alabama, Florida, North Dakota, Arkansas, and Ohio – have evidence that the Secretary is implementing this plan without proper publication, with instructions for loan forgiveness potentially starting this week.
The complaint suggests that this rushed approach reflects the weakness of the latest forgiveness attempt, making it unlikely to withstand legal challenges after previous failures.
“The Secretary is racing to roll out this rule quickly to avoid legal action, prioritizing debt forgiveness over adherence to rules,” the complaint states, emphasizing the irreversible nature of loan forgiveness once granted.
