Republican States Sue to Block Biden’s Loan Forgiveness Plan…Again!

GOP States Block Biden’s Plan

Here we go again! A group of GOP states filed a lawsuit in Federal court on September 3rd to block Biden’s “Plan B” for mass loan forgiveness. Read more on what that plan is all about here. This lawsuit uses many of the same standing claims and complaints which blocked Biden’s initial loan forgiveness plan, as well as the ongoing SAVE plan lawsuits. We’ll save you some time by not breaking down every claim in the lawsuit like we did with those other cases. To summarize, they believe the President and the Department of Education (DOE) are overstepping their boundaries, overriding the will of the court from last summer, and deceptively trying to skirt the procedural rules for implementing new student loan policies. That last bit is what makes this case unique from others.

On June 30th, 2023 (the same day SCOTUS struck down his original loan forgiveness plan), Biden vowed to try again using a different path. We saw this “Plan B” go through the negotiated rulemaking process beginning in October 2023, with a draft of the plan being published in April of 2024. But that draft was missing a lot of necessary fine print, along with a launch date. So, we were surprised the next announcement from the Biden admin was a list of plan highlights on August 2nd with instructions that borrowers must opt out by August 30th if they didn’t want to participate. We knew something was odd about this as we still didn’t have the fine print or the go live date. This lawsuit (allegedly) makes Biden’s intentions clearer.

The lawsuit claims the DOE conspired to enact the loan relief as early as September 6th, without any advanced announcement, in order to forgive billions of dollars before any litigation could block it. And once the debt had been forgiven, DOE (allegedly) knew it would be next to impossible to reinstate the loans. The plaintiffs claim to have copies of multiple communications which DOE sent to servicers with very specific instructions to start cancelling loans the week of September 3rd, with an effective backdate of July 1st. They even found copies of the congratulatory letters servicers were then supposed to send to borrowers, crediting the Biden-Harris administration. These communications have not been made public but were attached to the legal filing. While DOE did follow the negotiated rulemaking process for this forgiveness initiative, the lawsuit claims it did not follow the statutory procedure of posting the program rules to the Federal register and then waiting 30 days. In fact, there is still nothing posted to the register as of the date of this publication, 9/5/2024.

This case marks five major lawsuits aimed at blocking Biden’s three attempts for mass loan forgiveness. Given the success of these prior cases, we are not optimistic that Biden’s Plan B will come to fruition. We will continue to update this blog as the case unfolds.

September 6^th Update

As expected, the Federal court sided with GOP claimants and granted a temporary restraining order (TRO) which blocks the Biden administration from “implementing the Third Mass Cancellation Rule. Further, Defendants are RESTRAINED from mass canceling student loans, forgiving any principal or interest, not charging borrowers accrued interest, or further implementing any other actions under the Rule or instructing federal contractors to take such actions.”

The court commented: “Plaintiffs show a substantial likelihood of success on the merits given the Rule’s lack of statutory authority, and the Secretary’s attempt to implement a rule contrary to normal procedures. This is especially true in light of the recent rulings across the country striking down similar federal student loan forgiveness plans.”

This block is effective for 14 days. Meanwhile, a formal hearing is set for September 18^th so both sides can battle it out. More to come!

September 19^th Update 

Judge Hall has extended the restraining order that is blocking Biden’s Plan B loan forgiveness for another 14 days.

October 3^rd Update

After a very thorough explanation regarding both standing and venue, the judge in GA dismissed IN PART the case against Plan B and transferred the case to MO. Given the stronger standing claim with regards to Mohela, the judge basically said that it makes way more sense for Missouri to try this case. So, the restraining order is lifted…for now. While most of the media outlets are quickly painting this as a win for the Biden administration, we’re not sure. We suspect the Missouri court will be sympathetic to the plaintiffs and put another restraining order in place quickly. In other words, this whole process was likely just reset back to square 1.

October 4^th Update

As expected, a Federal judge in Missouri slapped another restraining order on Biden’s Plan B for loan forgiveness just one day after the case was moved from Georgia to Missouri.