WASHINGTON —While the Biden Administration’s announcement of student loan forgiveness has received considerable attention, a number of legal experts are saying “not so fast.”
As CUToday.info reported here, President Biden has announced a new round of federal student loan debt relief, saying he is cancelling $10,000 in debt for those earning less than $125,000 per year and $20,000 for those who had received Pell grants for low-income students.
The announcement has created a fierce debate, with even some Democrats keeping their distance from the proposal.
Should the plan come to fruition, estimates of the cost have ranged from $300 billion to $500 billion.
But putting the plan in place is no sure thing.
‘Questions Raised’
“Enacting such a major fiscal outlay through emergency executive powers has raised questions about whether Mr. Biden has the authority to carry out such a policy on his own, and many expect lawsuits and a protracted legal battle, including by those who stand to lose financially from the plan,” the New York Times reported. “Those who might try to claim such damages could include loan servicers who are missing out on processing fees or lawmakers who view the policy as an infringement on congressional budgetary authority.”
According to the Times, financial services trade groups, scholars and think tank experts have been spending their time trying to determine if the White House initiative is on sound legal footing or if it could be ripe for court challenges.
“Because of the expectation of a legal fight, some have warned that borrowers expecting forgiveness should not yet get their hopes too high,” the Times added.
‘Dubious’ Prospects
Lanae Erickson, SVP-social policy, education and politics at The Third Way, a center-left think tank, told the Times, “Blanket student loan forgiveness is undoubtedly an act of economic and political significance, and the likelihood it is upheld within the president’s authority is dubious. It is incumbent upon the advocates and policymakers who pushed to take this unprecedented step to also communicate to borrowers that there is a strong chance it will never come to fruition.”
According to the analysis, one of the main questions revolving around the student loan program is who — if anyone — has the legal “standing” to claim that they have been harmed by the policy and are entitled to file a lawsuit.
The ‘Most Likely Outcome’
“The most likely outcome, legal experts say, is that banks or loan servicers stand to lose money from fees that they would have been scheduled to collect file suits,” the Times said. “Since many borrowers would owe less money overall, the amount that they pay each month to companies that manage loan payments would also shrink.”