The administration of US President Joe Biden has tweaked its much-hyped student loan relief program to exclude about 770,000 borrowers with private loans guaranteed by the federal government, it announced on Thursday.
The move, revealed via email, appears to be designed to defuse legal challenges from multiple states and a libertarian law firm calling into question whether the Biden administration can use public money to wipe out private student loan debt or do so without congressional approval.
Students who obtained their loans through the Federal Family Education Loan Program (FFEL), which ended in 2010, and the Federal Perkins Loan Program, which ended in 2017, will no longer be eligible for loan forgiveness. In both programs, the federal government acted as guarantor to the private lenders who supplied the loans, meaning the private lenders and guaranty agencies involved have standing to sue over the financial injury they could suffer if such loans were forgiven.
A coalition of Republican-governed states sued the Biden administration on Thursday for allegedly overstepping the limits of executive power, arguing the administration’s debt forgiveness plan is “not remotely tailored to address the effects of the pandemic on federal student loan borrowers,” as is required by the 2003 law the government has used to legally justify the unprecedented move. Biden, the plaintiffs said, is still invoking Covid-19 – and extending the ‘health emergency’ declared in 2020 – to justify the sweeping debt cancelation even though he said earlier this month that the pandemic was over.
“The Department of Education is required, under the law, to collect the balance due on loans. And President Biden does not have the authority to override that,” Arkansas Attorney General Leslie Rutledge, leading a six-state group that also includes Iowa, Kansas, Missouri, Nebraska, and South Carolina, told the Associated Press in an interview on Thursday.
Biden’s much-anticipated student loan forgiveness initiative was unveiled in August, promising up to $20,000 in debt cancelation for Americans making under $125,000 annually. The plan has been criticized from both sides, with progressive Democrats arguing it doesn’t forgive enough debt, while Republicans insist the taxpayer should not be on the hook for someone else’s failure to repay their financial obligations. Some 44.5 million Americans have student loan debt, according to the Chamber of Commerce; just 3% of those are expected to be affected by Thursday’s announcement.