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Home»Loans»District judge blocks student loan forgiveness one day after restraining order lifted
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District judge blocks student loan forgiveness one day after restraining order lifted

October 9, 2024No Comments3 Mins Read
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District judge blocks student loan forgiveness one day after restraining order lifted
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Millions of student loan borrowers had about 24 hours to celebrate the expiration of a temporary restraining order on student loan forgiveness before another temporary block was put in place. 

On October 2, U.S. District Judge Randal Hall ruled that Georgia lacked standing to pursue legal action against President Joe Biden’s student loan forgiveness plan and allowed the restraining order to expire. 

In his ruling, he deferred the case to Missouri, which acted quickly. By the evening of October 3, news broke that U.S. District Judge Matthew Schelp issued a preliminary injunction at the suing states’ request, once again blocking the plan.

When Hall deferred the case to Missouri, he did so with the argument that Missouri may have a legal basis to sue. The states argue student loan servicer MOHELA, headquartered in the midwestern state, faces the most potential loss. 

Missouri injunction the latest in student loan forgiveness legal battles

Hall’s original restraining order came on September 5 in response to a lawsuit filed by seven states claiming the newest SAVE plan, a reworked version of Biden’s original forgiveness plan, is illegal. 

The states, including Alabama, Arkansas, Florida, Georgia, Missouri, North Dakota and Ohio, also claimed the administration tried to enact this policy before the Department of Education finalized the plan’s rules, which isn’t expected until later this month. 

On September 19, Hall extended the restraining order another 14 days, which stayed in place until late Wednesday when Hall allowed it to expire. With a new hope instilled, albeit cautiously, borrowers anticipated swift action by the administration to start providing debt relief. 

See also  Who’s responsible for repaying student debt?

Schelp’s injunction cut the time to act dramatically short. In his statement, Schelp wrote that the court had already found that irreparable harm would occur if the administration “unlawfully” eliminated student loan debt. He went on to warrant the injunction based on said harm and the public’s interest in holding the administration accountable.

“Balancing the harm and the injury, merged with the public’s interest, easily leads this Court to the conclusion that preliminary injunctive relief should issue. The public has an immense interest in its own government following the law.” 

Schelp also cited concern over the administration providing relief before the courts could review the case.

If finalized, the student loan forgiveness plan would provide full or partial relief to about 25 million Americans. Those who qualify include:

  • Those holding a loan with a higher balance than they originally borrowed.
  • Borrowers holding a graduate or undergraduate loan older than 20 or 25 years, respectively.
  • Attendees of low-value programs.
  • Those who qualify for other student loan forgiveness programs but have yet to apply.

Current student loans news

Use the student loans news hub to stay updated with the latest news that could impact your balance and your wallet.

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What this means for borrowers

Along with dashed hopes, borrowers may be feeling legal whiplash. While the newest injunction will not directly impact student loan balances, it shows the hurdles the plan still faces just weeks before the election.

During ongoing litigation, borrowers should continue making their student loan payments to avoid defaulting on their loans.

See also  Subsidized vs. Unsubsidized Student Loans: What's the Difference?

October 1 marked the end of Biden’s on-ramp plan, which protected borrowers from the consequences of late or missed payments. Now, servicers can report late or missed payments to credit bureaus, consider loans delinquent or place them in default. 

Regardless of the decision, borrowers may qualify for other student loan forgiveness programs currently available. These include income-driven repayment programs, public service loan forgiveness and programs for doctors, nurses, teachers and military service members.

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