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A federal judge in Missouri temporarily blocked a Biden administration plan to cancel student debt less than a day after another judge had allowed it to proceed, throwing into uncertainty the fate of a program that could affect more than 27 million borrowers.
The decision, which came down late Thursday, stymied the administration’s efforts to finalize the program before President Biden leaves office in January, and was the latest roadblock in his halting efforts to fulfill a campaign pledge to provide mass student loan relief. Legal challenges have held up several programs, and the one stopped on Thursday has now been halted twice.
The program would cancel up to $20,000 in accrued interest on the loans and would forgive outstanding balances for borrowers who started repaying their loans decades ago, among other measures. It is the biggest piece of the president’s multipronged effort to offer broad student debt cancellation after the Supreme Court threw out his first plan.
A coalition of seven Republican states sued last month to block the plan, arguing that the Education Department had rushed to lay the groundwork for the program before it was completed and that the debt cancellation it proposed could financially harm states and federal loan servicers. J. Randal Hall, a U.S. District Court judge for the Southern District of Georgia, temporarily blocked it a month ago. He then released the hold on Wednesday, before transferring the case to what he concluded was the more proper venue of Missouri.
In a blunt order on Thursday, Judge Matthew T. Schelp of the U.S. District Court for the Eastern District of Missouri wrote that the states were likely to succeed in challenging the program as unlawful. Making his case, he cited a decision in July by the U.S. Court of Appeals for the Eighth Circuit to block the SAVE program, the administration’s other major student debt plan.
Letting the hold on the program expire now, Judge Schelp reasoned, could open the door for the Education Department to cancel significant amounts of debt that could be difficult to collect later if courts found the program unlawful. So he put the hold back in place.
Referring to the Education Department, which is the defendant in the case, Judge Schelp wrote, “Allowing defendants to eliminate the student loan debt at issue here would prevent this court, the U.S. Court of Appeals and the Supreme Court from reviewing this matter on the back end, allowing defendants’ actions to evade review.”
In a statement, the Education Department criticized the ruling and the lawsuit, which it said “was brought by Republican elected officials who made clear they will stop at nothing to prevent millions of their own constituents from getting breathing room on their student loans.”
Other critics of the lawsuit called the decision a politically motivated pre-empting of a program whose details are still being worked out.
“With a dearth of legal reasoning, today’s decision takes the extraordinary step of blocking a proposed federal student debt relief rule that has yet to be finalized and has never been implemented,” Persis Yu, the deputy executive director of the Student Borrower Protection Center, said in a statement. “This case lacks seriousness, and this judge’s order puts our captured courts on full display.”
On Wednesday evening in Georgia, Judge Hall ruled that the state had not demonstrated that it stood to suffer harm under the program and could not be a party to the lawsuit.
But the ruling punted the case to friendlier territory in Missouri, where the state’s attorney general, Andrew Bailey, has notched major wins against the Biden administration’s student-debt agenda by arguing that it could directly harm the Missouri Higher Education Loan Authority, called MOHELA, the quasi-independent student-loan servicer based in his state.
“This is a huge win for transparency, the rule of law, and for every American who won’t have to foot the bill for someone else’s Ivy League debt,” Mr. Bailey wrote on social media.
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