A group of conservative and libertarian organizations filed a lawsuit against the Biden administration on Friday to stop a second attempt at student loan forgiveness after the Supreme Court struck down an earlier forgiveness plan.
In the case of Biden v. Nebraska, the Supreme Court ruled that the Department of Education could not unilaterally forgive $10,000 in student debt for low-to-middle-income borrowers and required congressional approval to do so. The Biden administration has since attempted a different kind of loan forgiveness program through its Saving on a Valuable Education (SAVE) Plan, which would alter repayment terms for certain borrowers and is the target of the plaintiffs’ lawsuit. (RELATED: Experts Warn Against Biden Circumventing Supreme Court On Student Debt)
“In the Nebraska case, the Supreme Court struck down the Department of Education’s brazen attempt to pull a billion-dollar elephant out of a statutory mousehole. This time the Department’s loan-cancellation scheme does not even pretend to have a statutory mousehole,” wrote Sheng Li, counsel for the New Civil Liberties Alliance (NCLA), a nonprofit conservative litigator representing the Mackinac Center for Public Policy and the Cato Institute, who are the plaintiffs, in a press release.
Cato v. Cardona – Plaintiffs’ Complaint by Daily Caller News Foundation on Scribd
The SAVE Plan establishes a cap on student loan repayments at 5% of discretionary income every month for undergraduate borrowers, with balances under $12,000 being discharged 10 years after graduation, according to a White House press release about the plan. Some borrowers would end up paying $0 every month, wrote Secretary of Education Miguel Cardona on X, formerly known as Twitter, about the plan, which would cost $39 billion in total, according to the NCLA press release.
The NCLA-led lawsuit argues that the plan violates the appropriations clause of the U.S. Constitution in Article I, Section 9 — which reads that “[n]o money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law” — by effectively depriving Treasury of funds it would receive from borrowers’ repayments, according to the lawsuit. Additionally, it argues that the Biden administration violated the Administrative Procedure Act by not holding a “notice-and-comment” period before finalizing the plan, instead announcing it in a press release.
The plaintiffs also claim that such programs would affect their hiring, as it would disincentivize applicants who wish to take advantage of the Public Service Loan Forgiveness (PSLF) program, which enables borrowers who work for certain nonprofit groups to receive loan forgiveness after 10 years of work, according to the complaint. The plaintiffs claim this gives them standing to sue, which has previously precluded other lawsuits against Biden’s loan forgiveness programs from proceeding.
“The Department of Education’s suspending of repayment obligations is an unlawful form of debt relief that substantially reduces the incentives PSLF provides and thus undermines Congress’s goals in enacting that program,” the Mackinac Center wrote on its website.
Among the defendants named in the suit, apart from Cardona, is Richard Cordray, a former Democratic nominee for Ohio’s gubernatorial election in 2018, who is the chief operating officer of Federal Student Aid.
The case has been given the name Cato v. Cardona and has been filed in the United States District Court for the Eastern District of Michigan, with the presiding judge being Thomas Lamson Ludington, an appointee of President George W. Bush. The Biden administration has 60 days to respond to the complaint.
The Department of Education did not immediately respond to a request for comment.
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