A federal judge will allow a temporary restraining order that prevented President Joe Biden from discharging student loan debt for more than 25 million Americans to expire Thursday, clearing the way for the administration to move forward with the plan.
The decision delivers a small victory in the Biden administration’s ongoing fight to alleviate federal student loan debt, and a much-needed win after a series of legal challenges have stymied those efforts. Student debt relief has become highly politicized and divisive as conservatives seek to dismantle plans they say unfairly burden taxpayers and are a naked attempt at swaying voters.
The ruling, issued late Wednesday by U.S. District Judge J. Randal Hall in Georgia, stems from a lawsuit filed in September by seven Republican-led states to stop the Biden administration’s new student loan forgiveness rule. The states – Missouri, Georgia, Alabama, Arkansas, Florida, North Dakota and Ohio – claim that the administration is exceeding its authority and illegally preparing to forgive loans before the rule is even in effect. They say the regulation would hurt state tax revenue and the earnings of state entities such as the Missouri Higher Education Loan Authority (Mohela).
Those arguments resonated with Hall when he imposed the restraining order last month. Yet he decided that Georgia, which claimed the forgiveness program would deny the state income-tax revenue, failed to show sufficient harm. The court dismissed Georgia from the lawsuit, ruling the state had no standing and could no longer be the venue for the case. Judge Hall said it would be more equitable to transfer the case to the Eastern District of Missouri because the states rely on the harm to Mohela as their primary basis for standing.
Missouri Attorney General Andrew Bailey has argued the quasi-state agency that services federal student loans and funds state scholarships would lose revenue from servicing direct loans – those made and owned by the federal government – when the loans are reduced or eliminated. It’s the same argument that was used to derail Biden’s earlier plan to deliver up to $20,000 in student loan forgiveness to more than 40 million borrowers. The Supreme Court struck down that program in 2023.
“This case by the Missouri Attorney General is as absurd as it is dangerous,” said Persis Yu, deputy executive director and managing counsel at Student Borrower Protection Center, an advocacy group. “The decision to file this case in the Brunswick Division of the Southern District of Georgia – a carefully chosen court with a single Republican-appointed judge – was a clear and desperate move to undermine democracy and stack the odds against working families.”
The latest lawsuit involves a proposed rule designed to reach borrowers who the Education Department says are shut out of existing loan forgiveness programs or have been trapped in unaffordable debt. The proposed plan, created through the federal negotiated-rulemaking process, is slated to be finalized this fall.
No debt can be forgiven under the policy before then, but the GOP-led states said the department instructed its loan servicers to start clearing balances before the rule is finalized. They said it was unprecedented for the department to let borrowers opt out of the plan before it even goes into effect. Although federal law says major rules may not take effect until 60 days after publication, the attorneys general claim the department intends to immediately begin forgiving loans once the rule is published, according to the complaint.
The Education Department would not comment on the specifics of the case, but a spokesperson for the agency praised the court’s ruling and said the lawsuit “reflects an ongoing effort by Republican elected officials who want to prevent millions of their own constituents from getting breathing room on their student loans.”
With the expiration of the temporary restraining order, the Biden administration can move forward with finalizing the rule. Still, the Missouri court could place the program on ice before it takes effect.
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