Supreme Court nominee and U.S. Court of Appeals Judge Amy Coney Barrett on Capitol Hill in Washington, D.C., Oct. 21, 2020.
Ken Cedeno | Reuters
On Friday, the Supreme Court rejected a second request to block the Biden administration’s student loan debt relief program.
Judge Amy Coney Barrett denied an emergency application to block the program brought Tuesday by the Pacific Legal Foundation, a conservative legal group, on behalf of two borrowers in Indiana.
On Oct. 20, Barrett denied a similar request from the Brown County Taxpayers Association of Wisconsin.
Barrett is responsible for such filings issued by cases in the 7th U.S. Circuit Court of Appeals, which includes Indiana and Wisconsin.
Friday’s decision has little practical effect. For now, student loan forgiveness remains on hold due to a challenge by six Republican-led states. An 8th Circuit Court of Appeals judge in October granted the states’ emergency petition to halt the plan pending the states’ appeal.
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Since the White House unveiled its plan in August — to cancel $10,000 in student loans for most borrowers and up to $20,000 for those who received Pell Grants for low-income families — it has faced at least six lawsuits.
Nearly 26 million Americans have already applied for student loan forgiveness, and the Biden administration has approved 16 million of the applications, the White House said Thursday. The administration continued to encourage borrowers to apply for relief despite recent challenges.
Caleb Krukenberg, an attorney at the Pacific Legal Foundation, said in an emailed statement: “We are disappointed by today’s denial, but will continue to fight this program in court.”
“Virtually since this program was announced, the administration has tried to avoid judicial review,” Krukenberg said. “So far they have succeeded. But that doesn’t change the fact that this program is illegal through and through.”
“Sustainability” remains an issue for forgiveness challenges
The main hurdle for those hoping to thwart the president’s actions is finding a plaintiff who can prove they were harmed by the policy, experts say.
“Such an injury is necessary to establish what the courts call ‘legal standing,'” Lawrence Tribe, a Harvard law professor, recently told CNBC. “No individual, business or country is visibly harmed in the way that private lenders would be if, for example, their student loans were canceled.”
In that light, Barrett’s decision to reject the Pacific Legal Foundation’s request is not surprising, said higher education expert Mark Kantrowitz.
“There were very few substantive differences between their original claim and the new claim, which speaks to a lack of legal standing,” he said.
In the Pacific Legal Foundation lawsuit, Indiana-based plaintiffs Frank Garrison and Noelle Johnson said they would be financially harmed if some of their student debt was automatically forgiven because they would incur state taxes on that canceled debt.
Indiana is one of several states that said the waiver would be taxed at the state level and potentially at the county level.
Both Garrison and Johnson are lawyers; Garrison works for the Pacific Legal Foundation and Johnson for the Public Interest Legal Foundation. They are seeking relief through the Public Service Loan Forgiveness Program, which allows those who work for the government or for specific nonprofits to have their debt canceled after 10 years or 120 payments. PSLF forgiveness is not considered taxable income.
After the initial lawsuit, the Department of Education said borrowers could opt out if they didn’t want their loans forgiven.
Student loan borrowers ‘in the dark’
As legal challenges mount, financial advisers say borrowers are left wondering where student loan forgiveness stands.
“The intervention of the courts is really troubling because people are looking for certainty about what’s happening with their student loans,” said Ethan Miller, a certified financial planner and founder of Planning for Progress in Washington, DC. Miller specializes in student loan clients.
“There was a plan that clearly outlined the steps,” he said. “And yet all are placed in limbo.”