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A federal appeals court on Wednesday ruled that bankrupt Florida grocery store owners could discharge debts owed to a produce supplier, resolving a "tug-of-war" between U.S. bankruptcy law and a federal law intended to protect companies delivering perishable foods, Reuters reported. Spring Valley Produce Inc. had appealed a bankruptcy court order allowing Central Market of FL Inc. to discharge a $261,504.15 debt for produce that Central Market never paid for. Spring Valley argued that the Perishable Agricultural Commodities Act (PACA) overrules bankruptcy law's normal discharge of debts, because PACA makes it illegal for a buyer to fail to make prompt payment for produce. PACA automatically creates a "statutory trust" when produce is delivered, and Spring Valley argued that Central Market was a fiduciary of the PACA trust created by its deliveries. Because Central Market was a fiduciary, its owners' debts to Spring Valley were not dischargable under normal bankruptcy rules, Spring Valley argued. The U.S. Court of Appeals for the 11th Circuit disagreed, saying that PACA "imposes some trust-like duties," but it did not qualify for the fiduciary exemption in bankruptcy law. Specifically, PACA does not require a produce buyer to keep trust assets segregated from its other assets or prevent the buyer from using the trust assets for other purposes, the 11th Circuit ruled. The 11th Circuit said that its decision balanced "two statutes with competing interests" without eroding PACA's protections for produce suppliers. Produce suppliers can ask a court to force the disgorgement of payments made in breach of the PACA trust, and they are entitled to the highest priority for repayment in bankruptcy, the 11th Circuit wrote. "Allowing PACA debtors to be freed from personal liability for their debts through bankruptcy discharge promotes the overarching goal of the Bankruptcy Code of providing debtors with a fresh start," the 11th Circuit wrote. "At the same time, PACA still provides significant benefits to unpaid produce sellers."

Several states are moving ahead to exempt residents from being taxed on forgiven student loan debt under President Joe Biden’s relief plan, while Mississippi has decided against the exemption, Bloomberg News reported. New York, Pennsylvania, Kentucky, Virginia, Hawaii, and Idaho are the latest states to exempt their residents that qualify under Biden’s plan from state income tax. Others—Arkansas, California, Massachusetts, and South Carolina—are still reviewing whether debt forgiveness will be subject to taxation. The canceled debt will be subject to income taxes in Mississippi, the state Department of Revenue confirmed. As debt cancellation is generally considered income, the federal government exempted student loan debt forgiveness between 2021 and 2015 from federally taxable income. But more than a dozen states don’t fully conform to that provision of the American Rescue Plan Act and have the option to collect taxes. Nonconforming states would have to issue guidelines or pursue legislative action to prevent residents from ending up paying between $500 and $1,100 in state taxes for the 2022 tax year. However, most legislatures have adjourned for the year.

Federal student loans totaling $1.5 billion will automatically be canceled for nearly 80,000 borrowers who went to Westwood College, a for-profit trade school that shut down in 2016, the Education Department said today, the New York Times reported. “Westwood operated on a culture of false promises, lies and manipulation in order to profit off student debt that burdened borrowers long after Westwood closed,” said James Kvaal, the department’s under secretary. From 2002 until it closed, Westwood misled prospective students about its training programs and its graduates’ earnings and career prospects, according to the agency. As it recently did for former students of Corinthian Colleges, the Education Department intends to wipe out the outstanding federal loans of those who attended from 2002 until the school closed without requiring borrowers to apply. The move significantly expands the $130 million in debt cancellation that the agency previously gave to 4,000 Westwood borrowers who applied through the “borrower defense to repayment” relief system, a program for those who attended schools that broke consumer protection laws.

President Biden’s plan to forgive some student debt has sharply divided liberal economists and pitted the White House economic team against both independent analysts and veterans of past Democratic administrations, the New York Times reported. The areas of disagreement include how much the package of debt relief and other changes to student loans will cost taxpayers and whether the plan is “paid for” in budgetary terms. The plan’s impact on inflation, which is rising at a rapid clip, and the degree to which it will help those most in need are also matters of contention. The plan, announced last week, includes forgiving up to $10,000 in loans for individuals earning $125,000 or less and an additional $10,000 for borrowers from low-income backgrounds who received Pell Grants in college. Mr. Biden also proposed changes to loan repayment plans going forward that will reduce monthly costs and eliminate interest accumulation for potentially millions of lower-earning borrowers who maintain payments. White House officials have offered partial estimates of who will benefit most from those moves, and how much they might reduce federal revenue. The officials have made a case for why the package will not add to inflation. And they have claimed it will be “paid for,” though not in any way that budget experts agree fits that term. Conservative economists have attacked the plan, claiming that it would stoke higher inflation and burden taxpayers with hundreds of billions of dollars in new debt. Some liberal economists have defended it as a lifeline for graduates who have been harmed by the soaring costs of higher education. For starters, it’s unclear what share of eligible borrowers will go through the process to request debt cancellation from the Education Department, which has not yet set up the forgiveness program. It is also not clear how many people who apply to have their debt canceled would have paid back their full balance if Mr. Biden had not taken any action. Each of those variables could significantly affect the total cost in lost revenue. Outside groups have tried to estimate the total cost. The Committee for a Responsible Federal Budget calculates the budget impact at somewhere between $440 billion and $600 billion over a decade. The University of Pennsylvania’s Penn Wharton Budget Model estimates just over $600 billion over 10 years. The White House will not complete an official estimate of the plan’s costs until winter at the earliest, according to the White House budget office. But officials say those outside estimates are far too high. The budget office estimates that one part of the program, the debt relief of up to $20,000 per borrower, will reduce loan payments to the government by $24 billion a year over the next decade, assuming three-quarters of borrowers opt into the program.

U.S. President Joe Biden's decision to forgive a portion of student loan debt for many Americans is on a strong legal and fiscal footing, Bharat Ramamurti, director of the White House National Economic Council, said on Friday, Reuters reported. Biden said on Wednesday he would forgive $20,000 in student loan debt for borrowers who went to college on Pell Grants, and would forgive $10,000 for those who did not receive Pell Grants. The plan applies to those who earn less than $125,000 a year. Ramamurti emphasized on Friday that this was a one-time measure. The plan faced criticism from both Republicans and some Democrats over its potential price tag. And some questioned whether Biden had the legal authority to wipe away the debt unilaterally. Ramamurti said Biden's move is based on laws passed by Congress and that the White House is on "very strong legal ground." Ramamurti said the White House's initial estimates assume 75% of those eligible for the relief apply for it and cautioned that a more thorough financial review will be undertaken by the Education Department.

The few Americans who continued to make student loan payments during a federal pause enacted at the beginning of the pandemic will now be eligible for a refund, the Wall Street Journal reported. On Wednesday, President Biden announced a sweeping student loan forgiveness plan that will provide up to $10,000 in loan forgiveness for people with annual incomes below $125,000 or couples with incomes under $250,000. Those who received Pell Grants, a federal financial-aid award for students from low-income households, can be eligible for forgiveness of up to $20,000. The Education Department yesterday clarified that those who paid off all or part of their federal student loans since March 13, 2020, will still qualify for forgiveness. Borrowers can request a refund by calling their loan servicer directly. The student loan pause halted mandatory payments, interest accrual and collections on federal student loan debt from March 13, 2020, onward. The pause was a pandemic-relief measure that has since been extended multiple times. As part of Wednesday’s announcement, the pause has been extended until the end of the year, with payments set to resume in January 2023.

President Biden said Wednesday he will cancel up to $10,000 in federal student loan debt for many borrowers — and double that amount for Pell Grant recipients — a move that could offer some level of forgiveness for up to 43 million people, the Washington Post reported. The forgiveness is expected to apply to Americans earning under $125,000 per year, or $250,000 per year for married couples who file taxes jointly. The White House estimates that nearly 90 percent of relief will go to people earning less than $75,000 and that roughly 20 million borrowers could have their debt completely canceled. The president is also is extending a pandemic-era pause on federal student loan payments, first implemented under the Trump administration, through Dec. 31, and proposed creating a new income-based repayment plan to lower monthly bills for undergraduate borrowers. Current students with loans are eligible for relief, if their household income was under $250,000 during the last federal student aid award year. Loans must have been originated before July 1 to qualify. The Biden administration also proposed creating a new repayment plan tied to borrowers’ earnings, capping monthly payments for undergraduate loans to 5 percent of a person’s discretionary income instead of 10 percent. It also would raise the amount of income that is considered non-discretionary, and forgive balances after 10 years of payments, instead of 20 years. The White House’s decision rejects the warnings of centrist Democratic economists — such as Larry Summers, the former Democratic treasury secretary — who have said it will increase inflation and add to the federal deficit. Republican lawmakers are also expected to blast the White House over the move, arguing it offers unnecessary subsidies to Americans who made bad decisions while doing nothing for those who did not go to college. Additionally, the executive order will likely face legal opposition, said Lanae Erickson, who heads social policy at Third Way, a centrist Democratic think tank. She suspects the policy could be challenged on the same grounds as the West Virginia v. Environmental Protection Agency case, in which the Supreme Court ruled the federal government can’t act on policy with broad economic significance without clear congressional authorization. Read more.

For more information from the White House on the announcement, please click here.