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Student Loan Forgiveness update: Texas Court blocks Biden’s debt relief plan

The President’s program has faced a number of legal challenges in GOP-led states and the latest looks set to go all the way to the Supreme Court.

Update:
Texas Court blocks Student Loan Forgiveness plan
BloombergGetty

A Texas judge has blocked the implementation of President Biden’s landmark student debt relief plan that was set to cancel hundreds of billions of dollars for borrowers.

District Judge Mark Pittman ruled that Biden’s Student Loan Forgiveness initiative was unconstitutional and lacked the required congressional approval. The Biden administration will be unable to action the promised debt relief until the legal challenge is settled.

The Texas lawsuit was brought on behalf of an organisation called the Job Creators Network Foundation. A St Louis-based appeals court had already issued a temporary block on the plan and this further complicated Biden’s hopes of the program going live before the end of the year.

“The Program is thus an unconstitutional exercise of Congress’s legislative power and must be vacated,” Pittman wrote in a 26-page ruling.

In a statement White House press secretary Karine Jean-Pierre said: “We strongly disagree with the District Court’s ruling on our student debt relief program.”

What does the Texas block mean for Student Loan Forgiveness?

In September the Congressional Budget Office calculated that the program would wipe off around $430 billion from the $1.6 trillion of outstanding federal student debt. Since the online application process opened last month more than 22 million had signed up for the support, but that has been thrown into jeopardy.

The White House has indicated that it will pursue all legal avenues to enact Biden’s program. It looks like the case will eventually end up in the Supreme Court, where the conservative-leaning Justices hold a 6-3 advantage.

However in recent weeks the Supreme Court has appeared unwilling to intervene to block Student Loan Forgiveness. The Trump-appointed Justice Amy Coney Barrett has already rejected two challenges to Biden’s plan, dismissing them without comment.

However those challenges had previously been rebuffed in lower courts too, so it was less likely that Justice Barrett would intervene. Where the Texas case differs is that a lower court has sided with Biden’s opponents, opening up the possibility for a prolonged Supreme Court case.

This would be a nightmare for borrowers who are scheduled to resume making student loan repayments from 1 January 2023. Many who had been expected the remainder of their loans to be written off by the forgiveness initiative may find themselves forced to unexpectedly resume repayments.

With millions of people struggling to rebound from the financial consequences of the pandemic, such uncertainty could see borrowers fall behind on their payments and side into default.