A lawsuit was filed on Friday by the New Civil Liberties Alliance against the federal government, seeking to block a plan that would forgive $39 billion of student loan debt, claiming the violates the Appropriations Clause of the Constitution because only Congress has the authority to cancel debts owed to the Treasury Department.
A copy of the complaint, filed in the District Court for the Eastern District of Michigan, can be accessed by clicking here.
Last month, the Biden Administration announced it was discharging $39 billion in student loans to correct inaccuracies in counting qualifying monthly payments under income-driven repayment programs. In the past, according to the administration and the Department of Education, a “significant” number of payments that should have moved borrowers closer to having their loans forgiven were not accounted for properly.
But the administration needed to go through the proper rulemaking procedure, the suit alleges, rather than issuing a press release “that did not identify any laws to justify it.”
Simply canceling the debt for individuals removes any incentive for individuals to participate in the Public Service Loan Forgiveness program, the suit alleges. It asks the court to declare the policy unlawful, set it aside and block any cancellation of student loans based on it. The policy harms nonprofit employers by reducing the value of PSLF as a recruitment tool if borrowers can get forgiveness in less than 10 years. Both outfits used similar arguments in separate lawsuits challenging the payment pause and Biden’s broader student loan forgiveness program.
This is the second time that the NCLA, backed by the Cato Institute and the Mackinac Center for Public Policy have challenged a student loan debt cancellation plan from the federal government.
“Newsflash for Secretary Cardona and Administrator Cordray: Non-payments are not payments,” said Mark Chenoweth, the president and general counsel for NCLA, in a statement. “No amount of nonsense changes the essential fact Congress required debtors to make payments before receiving debt relief.”
The Education Department said the suit is “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. We are not going to back down or give an inch when it comes to defending working families.”
