A judge rejected a lawsuit against student-loan forgiveness for over 800,000 borrowers.

A judge rejected a lawsuit against student-loan forgiveness for over 800,000 borrowers.

Student Debt Relief Lawsuit Dismissed: Borrowers Can Breathe a Sigh of Relief

Student Debt Relief

In a much-awaited ruling, a federal judge has dismissed a lawsuit that sought to block student debt relief for thousands of borrowers on income-driven repayment plans. This comes as a major victory for President Joe Biden’s administration and paves the way for $39 billion in debt relief for around 800,000 borrowers.

Last week, two conservative-backed groups, the Cato Institute and the Mackinac Center for Public Policy, filed a lawsuit through the New Civil Liberties Alliance, a nonprofit aimed at protecting constitutional freedoms, in an attempt to stop the relief. However, Judge Thomas Ludington of the Eastern District of Michigan Northern Division ruled that the groups lacked standing to bring the case and hence dismissed it.

The Education Department had already announced the first batch of relief for borrowers, thanks to a one-time account adjustment that identified those who had made the required 20 or 25 payments on income-driven repayment plans. As a result, loan discharges for these borrowers began on Monday, marking a substantial step towards reducing the burden of student debt.

The groups behind the lawsuit argued that the relief would undermine their recruitment efforts through the Public Service Loan Forgiveness (PSLF) program. The PSLF program forgives student debt for government and nonprofit workers after ten years of qualifying payments. However, Judge Ludington found their claims regarding PSLF to be insufficient to prove injury.

In his decision to dismiss the case, Ludington stated, “Plaintiffs’ presidents’ own declarations do not suggest that any employee was actually impacted by the Adjustment. Their declarations merely assert that Plaintiffs plan to recruit PSLF participants in the future, some of whom may be impacted by the Adjustment. This is far too speculative for standing.”

While the ruling does not directly address the legality of the Biden administration’s actions, it asserts that the plaintiffs were not the appropriate parties to challenge those actions. Despite the setback, the Mackinac Center’s Director of Public Relations, Holly Wetzel, mentioned that they are currently reviewing their legal options.

With the lawsuit dismissed, the Education Department can now proceed with its plans to review borrowers’ income-driven repayment accounts every two months to determine eligibility for debt relief. Importantly, borrowers who do not wish to avail of the relief will have the option to opt out. Additionally, borrowers can also consider applying for the SAVE Plan, a new income-driven repayment plan that aims to reduce monthly payments.

As borrowers breathe a sigh of relief, it is worth noting that this ruling does not preclude other potential legal challenges. However, for now, the road to much-needed student debt relief has been cleared, allowing countless individuals to find some reprieve from the burden of loans.