Biden’s student loan policies continue to face legal challenges

By Katie Lobosco, CNN

(CNN) — Legal challenges are continuing to target some of President Joe Biden’s student loan policies.

While the president’s major student loan forgiveness program was blocked by the Supreme Court in late June, the Biden administration is also facing lawsuits over some of its other policy changes aimed at making it easier for borrowers to pay back their loans.

On Monday, the US 5th Circuit Court of Appeals temporarily blocked new provisions that were meant to be implemented in July, which would make it easier for borrowers to get their debts erased when they’re misled or defrauded by their college under a rule known as borrower defense to repayment.

The rule has been in place for decades. But the lawsuit targets new provisions – including one allowing for automatic debt discharges a year after a college’s closure date and another that bans colleges from requiring borrowers to agree to mandatory arbitration – which are now blocked.

The emergency injunction request was made by Career Colleges and Schools of Texas, a group of for-profit universities. The appeals court order did not explain the reasoning for the decision but said that the case will be heard on November 6.

Student loan borrowers may still submit applications for debt relief under the borrower defense rule during this time, but the Department of Education “will not adjudicate or process affected applications under the new regulations while the court’s order is in place,” according to the agency’s website.

Aaron Ament, president of the nonprofit National Student Legal Defense Network, warned that “countless students are at risk of being taken advantage of by higher ed profiteers” until the protections are restored.

Another lawsuit challenges $39 billion of student debt forgiveness

Meanwhile, in a separate lawsuit filed last week, two conservative groups sued to stop the Biden administration from carrying out a one-time adjustment to some borrowers’ accounts, which was aimed at more accurately counting certain payments made previously under an income-driven repayment plan.

These plans calculate payments based on a borrower’s income and family size – regardless of the person’s total outstanding debt. Generally, they lower monthly payments to help borrowers avoid defaulting on their loans and wipe away remaining balances after qualifying payments are made for 20 to 25 years.

What the administration has referred to as “fixes” are expected to result in the cancellation of $39 billion worth of federal student loan debt for 804,000 borrowers, according to the Department of Education.

The lawsuit, which was filed by the New Civil Liberties Alliance on behalf of the conservative groups Cato Institute and the Mackinac Center for Public Policy, argues that one-time adjustment “is substantively and procedurally unlawful” – similar, it says, to the broader student loan forgiveness program struck down by the Supreme Court.

The Department of Education announced in July – weeks after the other forgiveness program was blocked – that it would begin to notify the 804,000 borrowers of their forthcoming debt cancellation.

But the one-time adjustment had been planned for more than a year. First announced in April 2022, the move was meant to help borrowers whose payments were miscounted and were already eligible for debt relief under an income-driven repayment plan.

The changes followed a Government Accountability Office report that found that the Department of Education had trouble tracking borrowers’ payments and hadn’t done enough to ensure that all eligible borrowers receive the forgiveness to which they are entitled. In fact, 7,700 loans in repayment, or about 11% of loans analyzed, could have potentially already been eligible for forgiveness.

In a statement sent to CNN, the Department of Education said the lawsuit “is nothing but a desperate attempt from right wing special interests to keep hundreds of thousands of borrowers in debt, even though these borrowers have earned the forgiveness that is promised through income-driven repayment plans.”

This latest legal challenge does not appear to immediately impact the Biden administration’s new income-driven repayment plan known as SAVE (Saving on a Valuable Education), which launched last week.

Once the SAVE plan is fully phased in, which is expected to happen next year, some borrowers could see their monthly bills cut in half and remaining debt canceled after making at least 10 years of payments.

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CNN’s DJ Judd contributed to this report.