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Federal judge in St. Louis weighs effort to halt student loan forgiveness

The proposal prompted a lawsuit filed in September by Missouri, Nebraska, Arkansas, Iowa, Kansas and South Carolina.

ST. LOUIS — A federal judge in St. Louis is weighing the fate of the Biden administration's plan to forgive student loan debt for tens of millions of Americans following a court hearing on Wednesday.

It's unclear when U.S. District Judge Henry Autrey will rule on the lawsuit filed by six Republican-led states that seeks an injunction to halt the student loan forgiveness plan. 

Judge Autrey told the parties he will give them an answer "soon".

5 On Your Side's Justina Coronel spoke to the attorneys from the U.S. Department of Justice outside of the courtroom and she asked what "soon" meant.

They say they understand it as in days rather than hours. Whatever he decides, an appeal is likely.

Democratic President Joe Biden announced in August that his administration would cancel up to $20,000 in education debt for huge numbers of borrowers. The announcement immediately became a major political issue ahead of the November midterms.

The proposal prompted a lawsuit filed in September by Nebraska, Missouri, Arkansas, Iowa, Kansas and South Carolina. Other lawsuits followed, including one filed Monday by the Job Creators Network Foundation alleging that the administration violated federal procedures by failing to seek public input on the program.

In the lawsuit brought by the states, a court filing on behalf of the administration said the Department of Education has “broad authority to manage the federal student financial aid programs.” It stated that the Higher Education Relief Opportunities for Students Act of 2003, or HEROES Act, allows the secretary of education to waive or modify terms of federal student loans in times of war or national emergency.

“COVID-19 is such an emergency,” the filing stated.

The Congressional Budget Office has said the program will cost about $400 billion over the next three decades. James Campbell, an attorney for the Nebraska attorney general's office, told Autrey that the administration is acting outside its authorities in a way that will cost states millions of dollars.

“What they're trying to do is go around Congress, and this they cannot do,” Campbell said.

The plan would cancel $10,000 in student loan debt for those making less than $125,000 or households with less than $250,000 in income. Pell Grant recipients, who typically demonstrate more financial need, will get an additional $10,000 in debt forgiven.

The administration faced threats of legal challenges to its plans almost immediately. Conservative attorneys, Republican lawmakers and business-oriented groups asserted that Biden was overstepping his authority in taking such sweeping action without the assent of Congress. They called it an unfair government giveaway for relatively affluent people at the expense of taxpayers who didn't pursue higher education.

Meanwhile, many Democratic lawmakers facing tough reelection contests distanced themselves from the student loan plan.

The HEROES Act is a post-Sept. 11, 2001, law meant to help members of the military. The Justice Department says the law allows Biden to reduce or erase student loan debt during a national emergency. Republicans argue the administration is misinterpreting the law because, in part, the pandemic no longer qualifies as a national emergency.

But attorney Brian Netter of the U.S. Department of Justice said the fallout from the COVID-19 pandemic is still rippling. He said student loan defaults have skyrocketed over the past two-and-a-half years.

“This (the HEROES Act) is a statute about emergencies — about national emergencies,” Netter said.

Furthermore, Campbell argued this policy would hurt the states financially, create tax harms, and consolidation harms too.

They argue, this would impact a student loan service provider based in Missouri called MOHELA.

The policy creates an incentive for borrowers to consolidate Federal Family Education Loans owned by MOHELA into Direct Loans owned by the government. 

However, the day the lawsuit was filed, the Department of Education changed its policy. 

"These folks who could've consolidated out of MOHELA to government direct loans, well they put a pause on that," 5 On Your Side's Political Analyst Anita Manion said. "There's 770,000 people who originally thought they would get debt forgiveness who will not."

Manion believes this could help their case.

The cancellation applies to federal student loans used to attend undergraduate and graduate school, along with Parent Plus loans. Current college students qualify if their loans were disbursed before July 1. Administration officials said applications for debt relief will be available in October.

The plan makes 43 million borrowers eligible for some debt forgiveness, with 20 million who could get their debt erased entirely, according to the administration.

What's next

Autrey did not give an indication when he will rule on the injunction request.

Manion says she believes the defendants have a strong argument but they face a conservative judge. 

"They chose to bring this to case to Missouri, so you have to assume that wasn’t a coincidence," she notes. 

If it is appealed, in which the case will go to the 8th Circuit Court of Appeals.

Manion says this is a panel of conservative judges.

Federal student loan payments resume in January after a nearly three-year pause from the pandemic.

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