ST. LOUIS (AP) — A federal appeals court issued an administrative stay Friday night temporarily blocking President Joe Biden’s plan to forgive billions of dollars in federal student loans, throwing the program into limbo just days after the people started asking for loan forgiveness.
The Eighth Circuit Court of Appeals issued the stay while it considers a motion by six Republican-led states to block the program. The suspension ordered the Biden administration not to act on the program while it considers the appeal.
It’s unclear what the ruling means for the 22 million borrowers who have already applied for the relief. The Biden administration had promised not to write off debt until October 23 as it battled legal challenges, but the earliest it was expected to start writing off debt was mid-November.
White House press secretary Karine Jean-Pierre encouraged borrowers to continue to apply for the relief, saying the court’s temporary order does not prevent applications or applications from being considered.
“We will continue to move full speed ahead with our preparations in accordance with this order,” she said in a statement. “And, the administration will continue to fight Republican officials who are suing to block our efforts to help working families.”
The crucial question now is whether the problem will be resolved before January 1, when payments on federal student loans are expected to restart after being halted during the pandemic. Millions of Americans were to have their debt completely canceled under Biden’s plan, but now face uncertainty over whether they will have to start making payments in January.
Biden has said his previous payment pause extension will be his last, but economists worry that many Americans may not have regained financial footing after the pandemic upheaval. If borrowers who expected debt cancellation are asked to make payments in January, there are fears that many of them could fall behind on bills and default on their loans.
A notice of appeal to the United States Court of Appeals for the Eighth Circuit was filed Thursday evening, hours after U.S. District Judge Henry Autrey’s ruling in St. Louis. that since the States of Nebraska, Missouri, Arkansas, Iowa, Kansas and South Carolina have failed to establish standing, “the Court has no jurisdiction to hear this case.
Separately, the six states also asked the district court for an injunction restraining the administration from implementing the debt cancellation plan until the appeal process is completed.
Nebraska Attorney General Doug Peterson, one of six attorneys general leading efforts to block the debt relief program, welcomed the court’s decision.
“We are delighted that the temporary reprieve has been granted,” Peterson said in a statement. “It is very important that the legal issues involving presidential power be analyzed by the court before transferring more than $400 billion in debt to American taxpayers.”
Speaking ahead of Friday’s decision at Delaware State University, a historically black university where the majority of students receive federal Pell grants, Biden touted the number of applicants. who applied for the loan relief in the week since his administration made its online application available.
The plan, announced in August, would forgive $10,000 in student loan debt for those earning less than $125,000 or households with incomes below $250,000. Pell Grant recipients, who typically demonstrate greater financial need, will get an additional $10,000 in debt forgiveness.
The Congressional Budget Office said the program would cost about $400 billion over the next three decades. James Campbell, a lawyer for the Nebraska Attorney General’s Office, told Autrey in an Oct. 12 hearing that the administration was acting outside of its powers in a way that would cost the states millions of dollars.
Forgiveness applies to federal student loans used to attend undergraduate and graduate school, as well as Parent Plus loans. Current students are eligible if their loans were disbursed before July 1. The plan makes 43 million borrowers eligible for debt forgiveness, including 20 million who could see their debt wiped out entirely, according to the administration.
The announcement immediately became a major political issue ahead of November’s midterm elections..
Conservative lawyers, Republican lawmakers and business-oriented groups have argued that Biden overstepped his authority by taking such sweeping steps without congressional consent. They called it an unfair government giveaway to the relatively well off at the expense of taxpayers who did not pursue higher education.
Many Democratic lawmakers facing tough re-election contests walked away from the plan.
Biden on Friday lambasted Republicans who criticized his relief package, saying “their outrage is false and hypocritical.” He noted that some Republican officials have had their debts and pandemic relief loans forgiven.
The six states sued in September. Lawyers for the administration countered that the Department of Education has “broad authority to administer federal student financial assistance programs.” A court filing said the Higher Education Student Aid Opportunity Act of 2003, or HEROES Act, allows the Secretary of Education to waive or vary the terms of wartime federal student loans. or national emergency.
“COVID-19 is such an emergency,” the filing reads.
The HEROES Act was enacted after the terrorist attacks of September 11, 2001 to help the military. The Justice Department says the law allows Biden to reduce or forgive student loan debt in the event of a national emergency. Republicans argue the administration is misinterpreting the law, in part because the pandemic is no longer considered a national emergency.
Justice Department attorney Brian Netter told Autrey during the Oct. 12 hearing that the fallout from the COVID-19 pandemic was still being felt. He said defaults on student loans have skyrocketed over the past 2 1/2 years.
Other lawsuits have also sought to shut down the program. Earlier Thursday, Supreme Court Justice Amy Coney Barrett denied an appeal from a group of Wisconsin taxpayers seeking to stop the debt cancellation program.
Barrett, who oversees emergency appeals from Wisconsin and neighboring states, did not comment on the dismissal of the appeal from the Brown County Taxpayers Association. The group wrote in its Supreme Court filing that it needed an emergency order because the administration could begin writing off outstanding student debt as early as Sunday.
Associated Press reporter Darlene Superville contributed from Dover, Delaware.