President Joe Biden's administration has been hit with the first lawsuits against a recently unveiled order that would—unless blocked—cancel thousands of dollars in debt for millions of Americans.
The problem, according to the suits, is that the order is not legal.
The Department of Education referred a request for comment to the White House, which did not immediately respond to a query.
Legal BasisThe U.S. government holds approximately $1.6 trillion in student debt, for more than 45 million people.
The debt is held in part by two systems—the Direct Loan Program and the Federal Family Education Loan Program. Under Cardona's order, $10,000 to $20,000 in debt would be canceled for individuals who earn less than $125,000 per year or households that earn less than $250,000 per year.
The administration cited the Higher Education Relief Opportunities for Students (HEROES) Act of 2003, which says that the Department of Education can “waive or modify any statutory or regulatory provision applicable to the student financial assistance programs” when “necessary in connection with a war or other military operation or national emergency.”
Only people who are serving on active duty during a war or national emergency, reside in an area declared a disaster area, or who have suffered "direct economic hardship" as a direct result of a war or national emergency are eligible for the waiver or modification.
Lisa Brown, a Department of Education lawyer, said that the authority can be used because of the COVID-19 pandemic.
Christopher Schroeder, an assistant attorney general, also said the HEROES Act enables Cardona to execute his authority.
The cases challenge that view.
PlaintiffsSimpson filed the lawsuit in Indiana on behalf of Frank Garrison, a PLF public interest attorney. Garrison has paid off some, but not all, of his student debt.
Garrison would be left worse off due to having to pay taxes on the amount forgiven under the program, according to the suit. Garrison has also been making regular payments, which makes him eligible for regular debt forgiveness, so his total amount owed will not change his monthly payment or total obligation, according to the suit.
The suit says the Department of Education lacks the authority to promulgate the order.
"Yes, we're technically still in the national emergency. Yes, the US is still technically a disaster area, but the mere fact of living in the United States doesn't mean that the pandemic is preventing people from paying their loans and it's just not how that law was intended," Simpson said.
Daniel Laschober, the plaintiff in the other case, noted that the Department of Justice in 2021 said that the education secretary "does not have statutory authority to provide blanket or mass cancellation ... whether due to the COVID-19 pandemic, or for any other reason."
Laschober said his adjustable-rate mortgage will go up due to interest rates rising in part because of the student debt cancellation, which is estimated to cost $400 billion to $519 billion. The jump in mortgage payments would be higher than the relief he'd get from the administration's action.
The cancellations are slated to start in October. PLF is asking for a temporary restraining order to be entered that would prevent the administration from starting the cancellations until the case is resolved.