Biden’s student loan cancellation is put on hold again after day of legal whiplash

Just as it briefly appeared the Biden administration would have a window to push its plan forward, U.S. District Judge Matthew Schelp in Missouri granted an injunction blocking any widespread cancellation.

Six Republican-led states requested the injunction hours earlier, after a federal judge in Georgia decided not to extend a separate order blocking the plan.

The states, led by Missouri’s attorney general, asked Schelp to act fast, saying the Education Department could “unlawfully mass cancel up to hundreds of billions of dollars in student loans as soon as Monday.” Schelp called it an easy decision.

Biden’s plan has been on hold since September, when the states filed a lawsuit in Georgia arguing Biden had overstepped his legal authority. But on Thursday, U.S. District Court Judge J. Randal Hall decided not to extend the pause after finding that Georgia doesn’t have the legal right to sue in this case.

Hall dismissed Georgia from the case and transferred it to Missouri, which Hall said has “clear standing” to challenge Biden’s plan.

Proponents of student loan cancellation briefly had a glimmer of hope the plan would move forward — Hall’s order was set to expire after Thursday, allowing the Education Department to finalize the rule. But Schelp’s order put the question to rest.

“This is yet another win for the American people,” Missouri Attorney General Andrew Bailey said in a statement. “The Court rightfully recognized Joe Biden and Kamala Harris cannot saddle working Americans with Ivy League debt.”

Biden’s plan would cancel at least some student loan debt for an estimated 30 million borrowers.

It would erase up to $20,000 in interest for those who have seen their original balances increase because of runaway interest. It would also provide relief to those who have been repaying their loans for 20 or 25 years, and those who went to college programs that leave graduates with high debt compared to their incomes.

Biden told the Education Department to pursue cancellation through a federal rulemaking process after the Supreme Court rejected an earlier plan using a different legal justification. That plan would have eliminated up to $20,000 for 43 million Americans.

The Supreme Court rejected Biden’s first proposal in a case brought by Republican states including Missouri.

In his order Wednesday, Hall said Georgia failed to prove it was significantly harmed by Biden’s new plan. He rejected an argument that the policy would hurt the state’s income tax revenue, but he found that Missouri has a strong case.

Missouri is suing on behalf of MOHELA, a student loan servicer that was created by the state and is hired by the federal government to help collect student loans. In the suit, Missouri argues that cancellation would hurt MOHELA’s revenue because it’s paid based on the number of borrowers it serves.

In their lawsuit, the Republican states argue that the Education Department had quietly been telling loan servicers to prepare for loan cancellation as early as Sept. 9, bypassing a typical 60-day waiting period for new federal rules to take effect.

Also joining the suit are Alabama, Arkansas, Florida, North Dakota and Ohio.

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