On September 5, a U.S. District Judge in Georgia handed down a temporary restraining order on the Biden administration’s latest student loan forgiveness plan, which would provide debt relief to nearly 28 million borrowers. [Reuters]

Catch up quick: The plan, introduced in April, is designed to provide targeted relief to borrowers who:

  • owe more than they initially borrowed due to interest
  • have been paying for at least 20 or 25 years
  • attended low-ROI career training programs
  • are eligible for existing forgiveness programs, but never applied

The Biden administration estimates that the program will cost $147 billion over the next decade.

Zoom in: This order comes in response to a lawsuit filed earlier this week by seven Republican-led states seeking to block the plan before it can take effect. The suit was filed by Missouri Attorney General Andrew Bailey and on behalf of Alabama, Arkansas, Florida, Georgia, North Dakota, and Ohio. [Inside Higher Ed]

  • According to the plaintiffs, the Biden administration is “unlawfully trying to mass cancel hundreds of billions of dollars of loans” without judicial review, which they claim exceeds the Education Department’s (ED) legal authority.
  • The plaintiffs claim that mass loan forgiveness will cause financial harm to the states, as it could result in revenue loss for state-based federal student loan lending and servicing entities (particularly Missouri’s MOHELA).
  • Federal law stipulates that major rules may not take effect until 60 days after publication. The suit alleges that ED is trying to “skirt” this law by preparing loan servicers to immediately begin discharging debt once the rule goes into effect, per confidential documents obtained by the states. [The Washington Post, subscription model]

What’s next: The plan is still under review with the Office of Management and Budget; however, the temporary restraining order prevents ED from launching the plan until at least after a hearing scheduled for September 18.

Why it matters: This is the third time Republican-led states have challenged the Biden administration’s debt relief efforts. The SAVE income-driven repayment plan is halted for the foreseeable future as litigation persists, and a one-time plan to discharge up to $20,000 in loans for eligible borrowers was struck down by the Supreme Court in June 2023. [SCOTUS Blog]

Meanwhile, according to the Government Accountability Office (GAO), borrowers are still struggling to find financial footing: nearly one-third of borrowers who resumed payment in October 2023 are already past due, putting them at risk for delinquency and default, which come with severe financial consequences.