Attorney General Bailey Files Suit Against Third Biden-Harris Student Loan Forgiveness Scheme Days After SCOTUS Sides With Missouri
Seven Republican-led states have launched a new lawsuit aimed at blocking the Biden administration’s latest student loan forgiveness plans, which are set to begin rolling out this fall.
This legal action adds to the growing list of challenges against President Joe Biden’s student loan policies and could further delay his most recent attempt to provide debt relief ahead of the November election.
Supreme Court Rejects Biden Administration’s Desperate Appeal to Revive Student Loan Forgiveness Plan
Last week the Supreme Court rejected a Biden administration plea to revive its latest multibillion-dollar student loan forgiveness plan, as lawsuits continue to move through lower courts.
In an unsigned order with no noted dissents, the court urged the appeals court to issue a more detailed ruling on the plan “with appropriate dispatch.”
Two Lower Court Rulings Jeopardize Biden’s Student Loan Forgiveness Plan
Litigation in two separate cases concerning the SAVE (Saving on a Valuable Education) plan jeopardizes one of the Biden administration’s key student loan policies just months before the November election.
The plan was initially blocked in June by U.S. District Judge John Ross in St. Louis, who issued a preliminary injunction preventing the administration from implementing the forgiveness provision of the SAVE plan. The 8th U.S. Circuit Court of Appeals in St. Louis further blocked the entire debt relief plan on August 9, prompting the administration’s emergency appeal to the Supreme Court.
Meanwhile, a separate challenge by another group of Republican-led states is pending in the 10th U.S. Circuit Court of Appeals in Denver.
This marks the second emergency appeal regarding the SAVE Plan submitted to the Supreme Court this summer. Last month, three other Republican-led states asked the court to maintain a partial block on the plan as their lawsuit proceeds in lower courts.
Missouri Attorney General Issues Statement
The lawsuit alleges that the plaintiffs have obtained documents revealing the Department of Education’s intent to begin offering student debt relief as early as this week, in violation of a statute that prohibits the education secretary from implementing a rule less than 60 days after its publication.
“We successfully halted their first two illegal student loan cancellation schemes; I have no doubt we will secure yet another win to block the third one,” Missouri Attorney General Andrew Bailey, who is leading the lawsuit, said in a statement.
“The Biden-Harris Administration is dedicated to saddling working Americans with Ivy League debt, even if they have to break the law to do it. Our latest lawsuit challenges their third and weakest attempt to mass-cancel student loans in the dark of night without letting Congress – or the public – know about it. That’s illegal,” said Attorney General Bailey. “We successfully halted their first two illegal student loan cancellation schemes; I have no doubt we will secure yet another win to block the third one. They may be throwing spaghetti at the wall to see what sticks, but my office is meeting them every step of the way.”
In the suit, the States assert, “Through compulsory process at the end of August, the States have just obtained documents proving that the Secretary [of Education] is implementing this plan without publication and has been planning to do so since May. The Secretary of Education (1) is unlawfully trying to mass cancel hundreds of billions of dollars of loans, and (2) has quietly instructed federal contractors to ‘immediately’ begin cancellation as early as September 3, 2024 (but possibly beginning on September 7).”
“The actual cost of the Third Mass Cancellation Rule is thus the $146.9 billion estimated by the Department plus much of the $475 billion cost of the SAVE Plan,” the States note. “This is the third time the Secretary has unlawfully tried to mass cancel hundreds of billions of dollars in loans. Courts stopped him the first two times, when he tried to do so openly. So now he is trying to do so through cloak and dagger.”
Lawsuits Against Student Loan Forgiveness Plan
In late March, 11 Republican-led states filed a lawsuit against the Biden administration’s student loan debt forgiveness plan,
The SAVE plan emerged after the Supreme Court last year rejected a broader debt relief effort by the Biden administration under its pandemic-era plan, which aimed to erase up to $20,000 in student debt for about 43 million borrowers.
Kansas Judge Halting Final Phase on SAVE Program
In Kansas, U.S. District Judge Daniel D. Crabtree halted the Biden administration from implementing the final phase of the Saving on a Valuable Education program, known as SAVE. Undergraduate borrowers were poised to see their payments reduced by half starting in July—from 10 percent to 5 percent of income above 225 percent of the federal poverty line. Similarly, borrowers with graduate loans would have experienced reduced payments based on a weighted average between 5 percent and 10 percent. This aspect of the program, launched in October, will remain on hold pending litigation.
Judge Crabtree, appointed by President Barack Obama, criticized the Education Department for not clearly demonstrating that Congress authorized the repayment plan initiated by the Biden administration in 2023. He emphasized the program’s significant economic impact, estimated at $230 billion over the next decade by the Congressional Budget Office, as necessitating congressional oversight.
The ruling follows Crabtree’s recent assessment that eight of the 11 states challenging the repayment plan failed to adequately prove how they would be adversely affected. He singled out Alaska, Texas, and South Carolina as states that successfully argued the plan could harm their tax revenue. Conversely, he dismissed arguments from Kansas, Idaho, Alabama, Louisiana, Montana, Utah, Nebraska, and Idaho.
Separate Ruling Against Biden Loan Forgiveness in Missouri
In a separate ruling in Missouri, U.S. District Judge John A. Ross barred the Education Department from forgiving additional loans under the SAVE plan. This decision marks a victory for Missouri Attorney General Andrew Bailey, who led a coalition of six states in April to challenge the program.
Bailey argued that the Missouri Higher Education Loan Authority, a quasi-state agency servicing federal student loans and funding state scholarships, loses revenue when Direct Loans—those owned by the federal government—are forgiven. This argument echoed claims in the lawsuit that dismantled Biden’s debt relief plan and contributed to advancing this lawsuit, bolstering the case to halt further debt relief under the program.
Ross, also appointed by President Obama, questioned whether Congress envisioned such a comprehensive loan repayment plan as the one created by the Biden administration in 2023, indicating potential jeopardy for the SAVE plan’s future.
Joe Biden has faced criticism from Republicans who accuse him of shifting the burden to taxpayers and undermining the Supreme Court, which blocked the White House’s student loan forgiveness plan last year.
Missouri State Attorney General Applauds Ruling
Missouri State Attorney General Andrew Bailey, representing one of the seven states that brought the lawsuit said, “By attempting to saddle working Missourians with Ivy League debt, Joe Biden is undermining our constitutional structure, Only Congress has the power of the purse, not the President. Today’s ruling was a huge win for the rule of law, and for every American who Joe Biden was about to force to pay off someone else’s debt.”
Arkansas State Attorney General Voices Support
Arkansas Attorney General Tim Griffin said: “With Independence Day fast approaching, another court has reminded President Biden that he is not a king. He can’t go around Congress and unilaterally cancel student loans. He should have learned that from Schoolhouse Rock!”
The other states involved in the lawsuit include Florida, Georgia, North Dakota, Ohio, and Oklahoma.
Monthly Student Loan Forgiveness Announcements
With the November election approaching, the administration has been keen to highlight its progress in debt cancellation programs, making similar announcements almost monthly.
In April, the administration announced another round of cancellations totaling $7.4 billion for 277,000 borrowers.
On May 1st, the Biden administration has announced the cancellation of $6.1 billion in student loans for 317,000 borrowers who attended The Art Institutes.
On 22nd May, the cancellation of an additional $7.7 billion in student loans was announced.
$167 Billion in Loans Forgiven So Far
Including the latest forgiveness action, the administration has now cancelled over $167 billion in debt for almost 4.7 million borrowers which amounts to 10% of all outstanding student loan debt and an average of $34,783 per student.
Biden Plans To Offer More Student Loan Forgiveness
The Biden Administration introduced broader student debt relief proposals set to take effect this fall impacting 30 million borrowers.
Biden’s recent proposal for student loan forgiveness is advancing as a proposed regulation, presenting him with a renewed opportunity to rally young voters for the upcoming November election.
The Education Department had filed paperwork for the new regulation on April 16th, 2024 kickstarting the 30-day public comment period which ended on Friday, May 17th 2024.
The Department of Education will spend a few weeks reviewing the feedback and then publish a final ruling. Biden’s plan would use the 1960s-era Higher Education Act to offer forgiveness to several categories of borrowers, marking a significant step towards implementing the announced loan cancellation sidestepping Congress following the Supreme Court’s rejection of the administration’s initial proposal last year.
Biden Administration Using Various Strategies
The Biden administration has consistently canceled student loans using a variety of existing programs while also pursuing a broader one-time cancellation plan. This approach builds on a proposal that was struck down by the Supreme Court last year but utilizes different legal strategies.
Biden’s New Student Loan Forgiveness Plan Estimated To Cost $84 Billion, Adding To The Already Massive $475 Billion
A recent analysis by the Penn Wharton Budget Model (PWBM) suggests that Biden’s new student debt relief plan could incur approximately $84 billion in costs if put into action. This amount is in addition to the $475 billion previously estimated for Biden’s prior SAVE plan.
The report states “We estimate that the New Plans will cost $84 billion in addition to the $475 billion that we estimated for President Biden’s SAVE plan, for a total cost of about $559 billion across both plans.”
The New Plans contain 5 main provisions
#1 Waived Accrued and Capitalized Interest
Up to $20,000 in interest will be waived, irrespective of borrower’s income levels. Single individuals earning under $120,000 or couples earning under $240,000 annually are eligible for a complete waiver of all balances exceeding the initial balance under any Income-Driven-repayment (IDR) plan. No application is necessary as automatic relief will be applied.
Estimated cost of $57.75 billion
#2 Forgiving Student Debt For Borrowers In Repayment For 20 Years
Those who began repaying loans on or before July 1, 2005 (or July 1, 2000 for those with graduate debt) will have all undergraduate debt eliminated. No enrollment in IDR plans is necessary for this relief, although other application requirements for borrowers are yet to be clarified.
Estimated cost of $19.07 billion
#3 Automatic Debt Relief
Automatically relieving debt for eligible borrowers not enrolled in specific forgiveness programs. Those who meet forgiveness criteria but aren’t enrolled will benefit from favorable repayment rules, including those of the SAVE plan or closed school discharge. No application is required as automatic relief will be applied.
Costs already included as part of the prior SAVE loan forgiveness.
#4 Assisting Borrowers From Low Value Programs or Institutions
Debt relief will be extended to those who accrued debt from programs or institutions that did not provide “sufficient value” in terms of post-graduation earnings.
Not enough details have been provided by the administration to calculate the cost.
#5 Loan Repayment Hardships
Relief will be tailored to each borrower’s situation, though whether it will cover partial or full debt is unspecified. The department’s hardship proposal aims to provide loan cancellation to borrowers facing a high risk of loan default. Additional details are pending on this proposal.
Breakdown of the Budget Cost Estimates
The Penn Wharton Budget Model breaks down the budgetary impact of each of the 5 provisions including the number of individuals benefitting along with their average household income.
One of the biggest criticisms of the New Plan is the benefit provided for about 750,000 households making over $312,000 in average household income.
Ranking Member Cassidy Slams Biden’s Backup Student Loan Scheme
Sen. Bill Cassidy, R-La., the ranking member of the Senate Health, Education, Labor and Pensions Committee said, “The Supreme Court already ruled the Biden administration doesn’t have the authority to unilaterally take student debt from those who willingly took it on and transfer it to taxpayers who chose not to go to college or already worked to pay their loans off. Now, the Department of Education is completely rewriting the Higher Education Act piece by piece to resurrect this unconstitutional student loan scheme. Where is the relief for the guy who didn’t go to college but is working to pay off the loan on the truck he takes to work? What about the woman who paid off her student loans, but is now struggling to afford her mortgage? Instead, the Biden administration is sticking these Americans with the bill of someone else’s student debt.”
Public Opinion Does Not Favor Biden On Student Loan Debt
A new poll from the University of Chicago Harris School of Public Policy and The Associated Press-NORC Center for Public Affairs Research reveals that three in ten U.S. adults approve of how President Biden has handled student loan debt, while four in ten disapprove, with the remaining respondents either neutral or uncertain.
The outlook is similarly bleak among those with unpaid student loans, whether for themselves or a family member.
Court Challenges Ahead
The U.S. Supreme Court struck down a student loan cancellation proposal last year. The court determined that the post-9/11 HEROES Act, which permits the federal government to waive student loans during emergencies, was not designed to provide universal loan forgiveness.
Utilizing a different legal basis, Biden Administration’s new proposal aims to forgive loans for over 25 million Americans. Opponents view it as unjust burden for taxpayers and have vowed to contest it legally.
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Social Security Projected to be Insolvent by 2035, Medicare by 2036
The Trustees of Social Security and Medicare unveiled their yearly financial forecasts for both programs, looking ahead over the next 75 years. The newly released projections for Social Security paint a grim picture of rapid progression towards insolvency in 10 years, underscoring the urgent need for trust fund remedies to avert widespread benefit reductions or sudden adjustments in taxes or benefits.
Social Security Projected to be Insolvent by 2035, Medicare by 2036
National Debt Exceeds Previous Projections, Signaling Troubling Times Ahead for the U.S. Economy as per CBO March report
The Congressional Budget Office (CBO) performs nonpartisan analysis for the U.S. Congress. The latest Budget and Economic Outlook released March 2024, offered dire projections for the country’s fiscal and economic landscape over the upcoming decades. Unfortunately the national debt is higher than initially anticipated and is projected to hit $141 trillion by 2054.
The 10 States Taxing Social Security in 2024 and the 2 That Just Stopped
As 2023 tax filing season draws to a close, retirees across the nation are adjusting their financial plans for 2024, but a crucial detail could drastically alter the landscape of retirement living: the taxing of Social Security benefits. While many bask in the belief that their golden years will be tax-friendly, residents in nine specific states are facing a reality check as their Social Security benefits come under the taxman’s purview. Conversely, a wave of relief is set to wash over two states, marking an end to their era of taxing these benefits. This shift paints a complex portrait of retirement planning across the U.S., underscoring the importance of staying informed of the ever changing tax laws. Are you residing in one of these states? It’s time to uncover the impact of these tax changes on your retirement strategy and possibly reconsider your locale choice for those serene post-work years. Here are the states taxing social security benefits.
The States Taxing Social Security in 2024 and the 2 That Just Stopped
Top 10 Cities Where Home Sellers Are Losing Big, With San Francisco Seeing 20% Take a Loss, Quadruple the National Average
In San Francisco, a significant number of home sellers are experiencing financial losses at levels not seen in over a decade. This uptick in losses can be attributed to home prices normalizing after a period of steep increases. Currently, nearly 20% of sellers in the city are selling their homes for less than their purchase price, with average losses around $155,500. In contrast, the national scene is less bleak, with only 4% of home sellers across the United States facing losses, as home prices generally continue to hover near peak levels. The typical loss for those unlucky few is about $40,000. Redfin conducted an analysis of the top 50 metros to narrow down the cities where the seller sold the home for less than they bought it for. Here are the top 10 cities where home sellers are facing losses
Retire Abroad and Still Collect Social Security? Avoid These 9 Countries Where It’s Not Possible
Dreaming of retiring to a sun-drenched beach or a quaint village? Many Americans envision spending their golden years abroad, savoring the delights of new cultures and landscapes. However, an essential part of this dream hinges on the financial stability provided by Social Security benefits. Before packing your bags and bidding farewell, it’s crucial to know that not all countries play by the same rules when it comes to collecting these benefits overseas. Here are the nine countries where your dream of retiring abroad could hit a snag, as Social Security benefits don’t cross every border. Avoid living in these countries so your retirement plans don’t get lost in translation.
Retire Abroad and Still Collect Social Security? Avoid These 9 Countries Where It’s Not Possible
Americans Are Teetering on the Edge of Financial Strain As 1 in 5 Users Is Maxed-Out
In its Quarterly Report on Household Debt and Credit for the first quarter of 2024, the New York Fed’s Center for Microeconomic Data highlighted a concerning trend: more borrowers are falling behind on credit card payments. 1 out of every 5 borrowers is maxed-out.
Americans Are Teetering on the Edge of Financial Strain As 1 in 5 Users Is Maxed-Out
John Dealbreuin came from a third world country to the US with only $1,000 not knowing anyone; guided by an immigrant dream. In 12 years, he achieved his retirement number.
He started Financial Freedom Countdown to help everyone think differently about their financial challenges and live their best lives. John resides in the San Francisco Bay Area enjoying nature trails and weight training.
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