The Biden administration has been hit with another lawsuit that contests its decision to renew its pause on repayment of federal student loans that Congress enacted as a pandemic-relief measure when former President Donald Trump was in the White House and which has been continued eight times without congressional approval, most recently on Nov. 22.
New Civil Liberties Alliance (NCLA) filed the lawsuit on behalf of the Mackinac Center for Public Policy, a free market and limited government think tank, against the U.S. Department of Education on April 6 (pdf).
As presented in the NCLA suit, filed in U.S. District Court for the Eastern District of Michigan, the initial loan deferment that Congress passed and which Trump signed on March 27, 2020, was scheduled to last for six months. Yet, when the act expired on Sept. 30, the Department of Education (DOE), without constitutional authority, kept the moratorium in place, as it continues to do, at expense to taxpayers.
Challenging Constitutionality of Policy
“We have no problem with the first pause; it was done through Congress and signed by President Trump,” said Sheng Li, litigation counsel for NCLA, in a conversation with The Epoch Times. “But when that six-month period expired, the Constitution requires that Congress pass an extension, and that is because Congress controls the power of the purse, and every month that the federal student loans are not repaid, the interest on that loan is forgiven—not paused, as is the case with the principal of the loan, but forgiven—and that money is not recoverable; it’s a gift.”Under the Constitution, the Department of Education cannot unilaterally authorize extending the pause on student loan repayment, Li said.
“There were two extensions during the Trump administration, and six in the Biden administration. Every month that the repayment moratorium continues, the government loses $5 billion it otherwise would have collected,“ Li said. ”The 30 extra months, beyond the original six months passed by Congress, of the pause on student loan repayment has cost $150 billion. And the cost keeps rising.”
Patrick Wright, vice president for legal affairs at the Mackinac Center, spoke to The Epoch Times about the issue.
“The unconstitutional pauses have cost the taxpayer $135 billion,” he said. “It’s well past time to enforce the separation of powers. Congress has the right to appropriate money. The president and the administrative state do not. National emergencies are not an excuse to blatantly ignore the Constitution.”
A specific harmful consequence that the Mackinac Center points to is that continuing the payment pause weakens and undermines a recruiting and employee-retention incentive that the organization and other nonprofits hold.
The incentive is provided through the federal Public Service Loan Forgiveness (PSLF) program, which went into effect in 2007, and makes available the forgiveness of the balance of student loan debt to those who work for a nonprofit for 10 years and make qualifying monthly payments on that loan debt over the period. As the Mackinac Center contends, if the debt moratorium remains active, the draw and attraction of debt relief that PSLF affords through employment in the nonprofit sector is removed.
The White House has cited the U.S. Supreme Court’s ongoing consideration of two landmark cases challenging the constitutionality of the Biden student loan forgiveness plan—which itself remains on hold after court challenges—as a reason for the DOE’s most recent renewal of the loan repayment pause. Though the conservative-leaning court is expected to rule against the DOE, with the decision most likely to be issued in June, the administration said it is prolonging the pause because it would be unfair for borrowers to continue to pay on debt that may be canceled.
The present extension is set to expire on June 30, or 60 days following the decision of the Supreme Court (expected to be issued in June), whichever comes first.
Second Lawsuit Filed in 2 Months
One of the biggest private student loan lenders in the United States, SoFi Technologies Inc., filed a lawsuit on March 3 in the U.S. District Court for the District of Columbia against the Biden administration over the most recent extension of the payment suspension.SoFi claimed in the complaint that the moratorium harms its student loan refinancing business.
Two of the most ardent and public supporters of student loan forgiveness and the extended payment pause—Sen. Elizabeth Warren (D-Mass.) and Rep. Ayanna Pressley (D-Mass.)—co-signed an April 5 letter to SoFi CEO Anthony Noto that was scathing in its criticism of SoFi’s lawsuit and requested information and answers to questions submitted in the letter (pdf).
“Your company’s attempt to use the courts to enact a backdoor repeal of this payment pause—at the same time the Supreme Court debates whether it will halt President Biden’s student debt cancellation plan, and while touting your values as a company that will ‘do the right thing,’—is unconscionable and you owe your customers, and the American public, an explanation for these actions,” the lawmakers wrote.
