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Small-Business Group Files New Lawsuit Challenging Student Loan Relief Program

Student Loan Relief ProgramThe Job Creators Network Foundation argues that the Biden administration violated federal procedures by failing to seek public input when moving forward with the student loan relief program.

10/13/2022 12:45 P.M.

4 minute read

A new lawsuit against the Biden administration’s student loan debt relief program has been filed by a small-business advocacy group, according to PBS.org.

The lawsuit was filed Oct. 10 by the Job Creators Network Foundation and argues that the Biden administration violated federal procedures by failing to seek public input when implementing the student loan debt relief program.

Elaine Parker, president of Job Creators Network Foundation, claims the program is executive overreach and says that it fails to address the root cause of rising debt, citing the “outrageous increase in college tuition that outpaces inflation every single year,” according to the PBS report.

“This bailout is going to affect everyone in this country because of the mass size of the program,” she said in the article. “And everyone should have the opportunity to provide their views to the government. These universities need to be held accountable for this student debt crisis.”

Similar lawsuits against the Biden administration and the Department of Education are ongoing. One case, from the Wisconsin Institute for Law and Liberty, argued the debt collection plan violated the Equal Protection Clause of the 14th Amendment in addition to usurping authority from Congress because the White House claimed the program was intended to improve racial justice. This case was recently dismissed for lack of standing, ACA International previously reported.

Six state attorneys general have filed suit against the Biden administration for overreach of its executive powers in its student loan forgiveness plan. This week, a district judge heard the motion for preliminary injunction in that case in Missouri federal court, according to CNN. The state attorneys general seek to temporarily pause the student loan relief program, stating it will worsen inflation, ACA previously reported.

The judge reviewing the preliminary injunction discussed the plaintiffs’ standing in the case, according to the CNN report.

The states said in court documents that the Biden administration does not have the legal authority to implement broad student loan forgiveness.

“The states also argue that the policy would hurt them financially, as well as the revenues of a student loan servicer based in Missouri known as MOHELA,” CNN reports.

A separate state case challenging the DOE’s student loan forgiveness also calls into question the costs and impact on the economy from the student loan forgiveness and payment pauses.

That case, a lawsuit in an Oregon District Court, is challenging the Department of Education and Secretary of Education Miguel Cardona’s authority to discharge or forgive student loan debt on a mass basis under the Higher Education Relief Opportunities for Students (HEREOS) Act of 2003, ACA previously reported.

ACA’s Take

ACA continues to follow these cases. The case in Oregon was the first one of its kind seen by ACA that notes the student loan relief plan’s potential impact on inflation and that if the government’s key tool to fight inflation is raising interest rates, then anyone with variable/adjustable interest on any loan type—a mortgage, in this case—will suffer an economic loss as their interest costs rise.

An analysis released by the Penn Wharton Budget Model in August said the forgiveness plan could total about $300 billion in costs initially and reach as much as $330 billion if the effort continues for new borrowers and others who would be eligible for forgiveness in the future.

ACA members in student loan servicing have successfully helped consumers develop income-driven repayment programs that work. They also explain the many options for consumers who truly cannot afford to pay. In many cases, discussions with servicers can also rectify past financial decisions that were not a consumer’s best option.

That continues to beg the question: What is the true problem the student loan forgiveness plan is meant to solve?

“Actions for broad student loan forgiveness ignore structural changes that could be made to the price of college, to the education system in general, and other reforms that would actually address the heart of the problem,” said ACA CEO Scott Purcell.

David Williams, president of Williams & Fudge Inc., said, “Our country was founded on and will continue to strive with both a separation of power and a credit system with integrity. It is important that we continue to focus on controlling costs and providing best in the world opportunities for citizens and not let politics and regulatory overreach get in the way of progress.”

On Capitol Hill, ACA submitted a letter to the Senate Committee on Banking, Housing and Urban Affairs before a May 2022 hearing, outlining concerns with blanket student loan forgiveness policies and the impact on borrowers and the credit-based economy.

If you have executive leadership updates or other member news to share with ACA, contact our communications department at [email protected]. View our publications page for more information and our news submission guidelines here.

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