Where student debt relief stands for 30 million borrowers after court battles

• Millions of student loan borrowers have faced whiplash in the past 24 hours.
• A Missouri judge blocked Biden from carrying out his broader debt relief plan just hours after receiving the case.
• The ruling came before the Department of Education even published the final debt relief rule.

It’s been a tumultuous 24 hours for millions of student loan borrowers — and the confusion is widespread.

Borrowers woke up on October 3 to the news that a federal court may have given President Joe Biden’s administration a small legal victory. After a group of GOP state attorneys general filed a lawsuit in early September in Georgia to block Biden’s second attempt to cancel student debt — expected to benefit more than 30 million borrowers – a federal judge ruled that Georgia was the wrong place to file the cases. the case and refused to continue blocking the relief.

The Georgia judge ended up transferring the case to Missouri, which he determined was the proper place for it. That’s because the lawsuit claimed the exemption would hurt Missouri-based student loan company MOHELA’s revenue. Just hours later, a Missouri judge issued a preliminary injunction on the exemption, blocking the Department of Education from implementing the plan before the final rule for the exemption was even finalized.

The ruling formally ended any glimmer of hope borrowers might have had just hours earlier when a Georgia judge refused to block the relief. It also drew criticism from the Biden administration and some lawmakers for blocking a plan that was still underway.

“The Department of Education is extremely disappointed by this decision,” a department spokesperson told Business Insider.

“This lawsuit was filed by elected Republicans who have made it clear they will stop at nothing to prevent millions of their own constituents from getting breathing room on their student loans,” the spokesperson continued. “We will continue to vigorously defend these proposals in court. We will not stop fighting to fix the broken student loan system and provide support and help to borrowers across the country.”

Before the latest ruling, a temporary restraining order from a Georgia judge was in place on the aid and was set to expire on October 3. Judge Matthew Schelp of the Eastern District of Missouri, appointed by former President Donald Trump, replaced the temporary restraining order with the preliminary injunction hours after the case was transferred to his district.

Schelp wrote in his ruling that the order prevents the Department of Education from “en mass canceling student loans, forgiving any principal or interest, not charging borrowers accrued interest, or further implementing any other actions under the Rule.

That means broader student loan forgiveness is on hold until a court makes a final decision on whether you can get relief. This ruling is unrelated to the income-based SAVE repayment plan, which is stalled following separate legal challenges.

The relief doesn’t even exist yet

After the Supreme Court rejected Biden’s first attempt to forgive student loans last summer under the HEROES Act of 2003, which allowed the secretary of education to waive or modify student loan balances in connection with a national emergency such as the pandemic , his Department of Education began to pursue a new avenue of aid using the Higher Education Act of 1965.

A key difference with this new route is that it required the department to go through a process known as negotiated rulemaking, which was a lengthy process that included a series of stakeholder negotiation sessions and a comment period. public before the rule can be finalized.

Notably, the rule has not yet been finalized, and the process depends in part on when that rule is enforced. The GOP attorneys general group argued that based on communications between the department and the loan of service they obtained in court proceedings, the department was preparing to implement the exemption before completion, which they argued violated administrative procedure and therefore the plan should be thrown out.

However, the Department of Education wrote in response to the lawsuit that “all steps it has taken to date, including the Department’s work with third parties, have been preparatory only and have not indicated that any discharge of student debt will occur prior to the issuance a final rule”.

The department rejected claims that it was preparing to implement the exemption in violation of administrative procedure, saying instead that it was customary for the department to prepare operators for any change regardless of whether a rule had been finalized.

Missouri Attorney General Andrew Bailey, one of the plaintiffs in the lawsuit, praised the court’s decision, written on X, that the back-and-forth legal rulings were “a huge — and swift — victory for every American who won’t have to pay for someone else’s Ivy League debt.”

However, some MPs criticized the decision on a plan that has yet to be finalized – suggesting the suit is on shaky legal ground and may fail to block the exemption outright.

“President Biden has the legal authority to cancel student debt under the Higher Education Act,” said Sen. Elizabeth Warren. he wrote on X Thursday. “What is illegal and unprecedented is for a judge to block a rule that doesn’t even exist. This is another baseless decision by a Trump judge to block aid for millions of Americans.”