The Biden administration’s student loan forgiveness initiative is poised to face an array of legal challenges that could freeze the plan before it gets up and running, threatening a policy that has stirred fierce bipartisan debate and infighting among Democrats, the New York Times reported. The plan announced by the White House last week would wipe out significant amounts of debt for millions of Americans. Those earning less than $125,000 per year would have $10,000 in debt erased, and those who received Pell grants would get $20,000 in debt relief. While it fulfills one of President Biden’s campaign promises to help graduates who have fallen behind in their payments, the plan carries a significant cost — projected to be between $300 billion and $500 billion — to the federal government, which will not receive repayments that it is currently owed. 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. 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. Some critics have compared Mr. Biden’s move to similar executive actions undertaken by former President Donald J. Trump, including his use of emergency powers to fund a border wall in 2019. Although that was different than canceling federal debt, opponents of the decision argued that Mr. Trump was abusing his authority by transferring Pentagon funds to pay for wall construction without congressional approval. The Supreme Court allowed the construction to go forward while the case worked its way through lower courts, but Mr. Biden halted work on the barrier upon taking office. Because of the expectation of a legal fight, some have warned that borrowers expecting forgiveness should not yet get their hopes too high. 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, legal experts say, is that banks or loan servicers who stand to lose money from fees that they would have been scheduled to collect file suits. Since many borrowers would owe less money overall, the amount that they pay each month to companies that manage loan payments would also shrink.
