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The first legal challenge to President Biden’s plan to wipe out billions of dollars of federal student loans arrived yesterday, when a lawyer working for a conservative legal group filed a lawsuit seeking to block debt cancellation, the New York Times reported. “In an end-run around Congress, the administration threatens to enact a profound and transformational policy that will have untold economic impacts,” Frank Garrison, a lawyer at Pacific Legal Foundation, said in a complaint filed in federal court in U.S. District Court for the Southern District of Indiana. “The administration’s lawless action should be stopped immediately.” The biggest obstacle for those seeking to fight Mr. Biden’s plan in court has been finding a plaintiff who has the legal standing to claim that they would be harmed by the policy. Mr. Garrison’s claim centers on the Biden administration’s plan to automatically cancel the debts of some borrowers, arguing that it would personally harm him by forcing him to pay taxes on those forgiven debts. Garrison, who lives in Indiana, has been pursuing loan forgiveness through a relief program for public service workers, he said in his court filing. Under that program, he would eventually qualify to have his loan debt wiped out without owing any federal or state taxes.

The Biden administration's plan to provide student loan debt forgiveness will most benefit Americans who live in less affluent parts of the country — the South in particular, a report from the Federal Reserve Bank of New York said Tuesday, Reuters reported. The administration's plan "pushes more forgiveness dollars toward borrowers living in lower- and middle-income neighborhoods than borrowers living in higher-income communities," the New York Fed said in a post on the bank's website. If implemented, "the reduction in student debt prevalence and balances will create a substantial financial improvement for borrowers." The report noted that some 65% of government student loan borrowers live in neighborhoods with annual median household incomes below $83,000. The New York Fed said that regionally those in southern states — where Republican-led criticism of Biden's plan has often been the loudest — will see the biggest benefit from the debt forgiveness plan. The bank said that the president's proposal will cancel out just under half a trillion dollars in outstanding loans, eliminating outstanding balances for 40.5% of those who'd taken out federal loans, while eliminating nearly a third of all outstanding federal student loans.

President Biden’s plan to wipe out significant amounts of student loan debt for tens of millions of borrowers could cost about $400 billion, the nonpartisan Congressional Budget Office (CBO) said in a report yesterday, the New York Times reported. The CBO also said the full price tag of the plan could push even higher because Mr. Biden extended a pause on federal student loan repayments through the end of the year, which could end up costing some $20 billion. In August, Mr. Biden announced a plan to forgive $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 families. The CBO expects that 90 percent of the 37 million borrowers with direct loans from the federal government would take advantage of debt forgiveness once it becomes available. The White House indicated on Monday that it would push forward with its plan despite criticism from conservative critics who have vowed to launch legal challenges. Still, the official timing for debt relief is uncertain; the Department of Education said it would set up an application process by the end of the year. About 60 percent of student loan borrowers have received Pell grants, and a majority come from families making less than $30,000 a year. The Education Department estimates that 27 million borrowers will qualify for up to $20,000 in relief. Millions of other borrowers will be eligible for $10,000 in debt relief, as long as they earn less than $125,000 a year or are in households earning less than $250,000. Borrowers will be assessed based on the income they reported in 2021 or 2020.

The House passed a bill on Wednesday that allows spouses who combined their student debts under a federal program to split their loans, sending the legislation to President Biden’s desk, The Hill reported. Democrats have touted the bill for making hundreds of additional Americans eligible for loan forgiveness, which also allows some borrowers to escape joint loans in cases of divorce or domestic abuse. The legislation, titled the Joint Consolidation Loan Separation Act, passed in a 232-193 vote, with 14 GOP members joining Democrats in support. The Senate approved the bill by unanimous consent in June. Biden is expected to sign it into law — the Office of Management and Budget earlier this week said the administration supports the legislation. Under the measure, borrowers who are still tied to a joint consolidation loan — taken out through an Education Department program that was in existence for 13 years until 2006 — would have the opportunity to fill out an application requesting that the department split their credit into two separate direct loans.

The cost of renting a home in the U.S. is surging and young workers have felt the sharpest pain, many of them taking on additional jobs or roommates to afford housing costs, Reuters reported. Household rents in 2021 jumped 10% from pre-pandemic levels, according to Census Bureau estimates released last week. The figures came as rising healthcare and rental costs pushed U.S. consumer prices up unexpectedly last month. The data from the bureau’s annual American Community Survey put median U.S. rent at $1,037 in 2021, up from $941 in 2019. Year-over-year increases in the median household rent over the past decade were typically 2% or 3% — one exception was the 5% rise from 2018 to 2019. Adding to renters' woes, rents in the professionally-managed sector — usually larger properties operated by management companies — have risen even more dramatically. Annual rent growth there hit 11.6% at the end of 2021 and start of 2022, about three times what it was in the five years prior to the pandemic, according to the Harvard Joint Center for Housing Studies. At the same time, vacancy rates fell to their lowest since 1984 as post-pandemic demand surged.

The House Rules Committee yesterday advanced a bill allowing borrowers to sever spousal student loans, potentially making hundreds of additional Americans eligible for loan forgiveness, The Hill reported. Democrats on the committee also focused on how the bill will finally allow individuals to leave the program in cases of divorce or domestic violence. “Victims of domestic violence or economic abuse should never have to pay the debts of their abuser,” said Chairman Jim McGovern (D-Mass.). “Closing this loophole is just common sense.” The bill was voted out of committee 7-3 and is expected to get a floor vote today. Nearly 15,000 people combined their student loans under the program between 1993 and 2006, with couples agreeing to be held liable for each other’s debts, according to the Washington Post. But there was no way to sever the joint debt under the program, leaving some people shouldering the debt of their exes — or abusers in some cases. About 770 loans have yet to be paid off, the Post reported. The Joint Consolidation Loan Separation Act would also make program participants eligible for the Public Service Loan Forgiveness program ahead of the Oct. 31 deadline for applications, as well as President Biden’s recently announced student loan forgiveness program providing up to $20,000 in forgiveness for federal borrowers making less than $125,000.

The centerpiece of the student debt-relief plan that President Biden announced last month is his decision to cancel up to $20,000 per borrower in federal loans. But the more far-reaching — and, over time, more expensive — element of the president’s strategy is his blueprint for a revamped income-linked repayment plan, which would sharply reduce what many borrowers pay every month, the New York Times reported. It could, however, have unintended consequences. Unscrupulous schools, including for-profit institutions, have long used high-pressure sales tactics, or outright fraud and deception, to saddle students with more debt than they could ever reasonably hope to repay. By offering more-generous educational subsidies, the government may be creating a perverse incentive for both schools and borrowers, who could begin to pay even less attention to the actual price tag of their education — and taxpayers could be left footing more of the bill. “If people are taking out the same or more amount of debt and repaying less of it, then it’s just taxpayers bearing the brunt of it,” said Daniel Zibel, the chief counsel at the National Student Legal Defense Network, an advocacy group. Experts are particularly concerned about how the new subsidies could be manipulated by for-profit colleges, many of which have a record of persuading people to take on high debt for degrees that often fail to deliver the kind of earnings boost the schools advertise. Past efforts to rein in poorly performing institutions have been derailed by lobbying, litigation and shifting political tides. The government’s most forceful hammer — a regulation put in place during the Obama administration known as the “gainful employment” rule, which threatened to cut off federal aid funds to for-profit schools whose students earned too little to pay off their loans — was scrapped in 2019 by Betsy DeVos, the education secretary under President Donald J. Trump. The new subsidies could also make students less cautious about taking on high debt. The Education Department has not yet published the details of Mr. Biden’s new repayment plan, but the outline the president described last month could transform higher-education financing, especially for undergraduate degrees, by shifting more of the costs from borrowers to taxpayers.