Will Biden’s student loan plan hold up in court?

As some federal borrowers across the country prepare to have their loans canceled as a result of President Joe Biden’s debt cancellation plan, some borrowers may wonder if the effort legally stands.

The legality of Biden’s plan largely depends on who you ask. However, the Biden administration has vehemently defended canceling student loan debt for 20 million people and that the move is legally justified.

For the remaining 55%, Biden’s plan will offer more relaxed loan repayment terms, according to the Biden administration. Those terms include halving the amount borrowers must pay each month — from 10% to 5% of Discretionary Income — as well as covering borrowers’ unpaid monthly interest, among other efforts.

President Joe Biden announces student loan relief in Washington, August 24, 2022.

Olivier Douliery/AFP via Getty Images

“The Department of Justice, the Office of Legal Counsel and the Office of Legal Counsel of the Department of Education have reviewed the text of the Act and are satisfied that the action the Secretary has taken, the administration has taken here is legally justified,” the National Economic Council said. deputy manager Bharat Ramamurti said during a press briefing on Friday.

“The president was clear from the start that he didn’t want to move forward unless it was clear that it was legally accessible to him,” Ramamurti said. “…One of the first things he did when he came to power was to seek this legal opinion.”

The Department of Education, alongside the Department of Justice, issued a legal opinion last Tuesday defending the groundbreaking administrative decision, citing the HEROES Act.

The act gives the Secretary of Education broad authority to grant relief from student loan requirements during specific times — such as the ongoing COVID-19 pandemic — for particular purposes, such as resolving financial damages from wars or national emergencies.

“The Secretary of Education has used this authority, under this administration and every previous administration since the passage of the law, to relieve borrowers in the event of war, other military operation or a national emergency, including the ongoing moratorium on student loan repayments and interest,” the notice read.

The White House has repeatedly faced questions about the future of Biden’s plan in court, at a press conference Friday where officials said they expect legal challenges.

A June ruling against the Environmental Protection Agency from the Supreme Court cited the “major issues doctrine,” which requires Congress to clearly and explicitly grant agencies the power to employ extraordinary actions. He says this strategy can be used to undermine Biden’s plan.

“Recent Supreme Court decisions suggest that at least some of the current court’s justices may view sweeping executive action like this as running counter to congressional intent,” said Adam S. Minsky. , a student loan attorney, to ABC News. “But it’s not necessarily the same type of case that was recently decided.”

“It will be up to the courts to decide whether these claims are valid or not, but we believe we are on very solid legal ground,” Ramamurti said.

Jed Shugerman, a professor at Fordham Law, said he did not see the order “surviving a legal challenge”.

“My objective is that if the Biden administration is to prevail in an inevitable legal challenge, it must move to the most appropriate law as the legal basis for this policy (under the Higher Education Act of 1965) or greatly restrict its policy for specific COVID relief requests (and even then they would be vulnerable),” Shugerman told ABC News.

Minksy said this is uncharted territory, adding that Biden and former President Donald Trump have used the HEROES Act to suspend federal loan payments, interest and collections since the coronavirus pandemic began. COVID-19.

Graduates line up at the commencement ceremony in Mansfield, NJ on June 18, 2010.

Getty Images, FILE

Biden’s plan will erase at least $10,000 in federal student loan debt for Americans who earned less than $125,000 a year in tax year 2020 or 2021, or less than $250,000 as housework.

For Americans in that same income bracket who took out Pell grants to pay for college, that would wipe out up to $20,000.

It is unclear when borrowers will see a change in their account balance. The White House says applications for student debt relief will be launched in early October, with relief beginning to reach borrowers in early to mid-November.

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