HIGHLAND HEIGHTS, Ky. — The future of President Joe Biden’s student loan debt forgiveness plan is cloudy after a federal appeals court issued an injunction preventing the government from canceling any debt while the court considers a lawsuit challenging the plan.
The question of whether she’ll have to pay off her student loan debt is one Northern Kentucky University student Stacey Armah would like to have an answer to. “I had to take out a loan this year because I was struggling financially,” said Armah, a junior at NKU. “So when I heard about the loan forgiveness, I was like, okay I have a chance. Maybe my savings can go into something else. I don’t have to pay for this. And I’m hoping I qualify, because it’s just $5,500. But now, I don’t know anymore. So I’m still saving.”
That confusion is shared by many who’ve taken out loans, especially now that Biden’s plan to erase debt faces the possibility of its own erasure.
When the plan was announced, many people were already counting the dollars they would save by having their debt forgiven. Count Armah, who is studying business information systems, and is thus quite good at counting, as one of them.
“I was relieved, because originally when I started college, my goal was to graduate without any loans. But then I was like, you’re going to get to a point where you’re going to struggle financially. And then that happened to me. And I was very skeptical of taking out a loan. Because I’ve heard of student loans people are still paying. So I’m like, I have to work during the summer to save up to pay this loan, and I’m hoping it doesn’t incur interest on it,” she said.
Ken Katkin, professor at NKU’s Chase College of Law, gave some context to people believing their debt forgiveness was assured. “One of the reasons I think it seemed like such a done deal before is that it’s difficult for people to challenge it in court if they can’t show how they themselves are harmed by it,” Katkin said.
The Missouri Attorney General made the case that Missouri would lose the funds it receives from processing loans if loans were forgiven.
“And so if these student loans are forgiven, then there will be less processing to do, and less payments for the processing. And so the Missouri government will be harmed by losing that money. And so that satisfied what's sometimes called the requirement of standing that allowed them to bring a lawsuit,” Katkin explained. It was enough to satisfy the 8th Circuit Court of Appeals to allow lawsuits challenging Biden’s plan to proceed. The court issued an injunction preventing the government from forgiving any debt while it considers such lawsuits.
Even though the 8th Circuit Court of Appeals found the Missouri Department of Education could bring a lawsuit because it would be financially harmed by debt forgiveness, Katkin thinks the federal government may still be able to counter that argument. “It’s actually possible that the United States Government can redress that argument by saying, ‘we’ll just pay you all the money that you would’ve lost, so you’re not actually going to be any worse off.’ And so that might still take away the standing that the 8th Circuit Court found that Missouri has,” he said.
Katkin speculated on Biden’s possible recourse. “He can probably extend the current debt moratorium for a while longer,” Katkin said. “It’s probably the case that the president has more well-settled authority to temporarily suspend payments than to forgive the debt entirely. But even there, there could be problems. Because if President Biden decides to do that again now, he’s gonna have to base that on the same idea that COVID remains a national emergency.”
The Heroes Act authorizes the president to take measures to prevent student debt holders from being adversely affected by an emergency, which in this case is the COVID-19 pandemic.
“But a permanent forgiveness would do more than just make sure they’re not adversely affected. It would benefit them. And it may be happening at a time when it’s less clear that there’s still a national emergency. Although generally, the president does get some leeway in deciding whether there’s a national emergency or not,” Katkin said. “And I think the current Supreme Court is skeptical of these kinds of assertions of executive authority.”
When asked what advice he would give his students who’ve taken out federal loans, Katkin said, “If you were thinking, ‘should I set some money aside or not?’ I would recommend doing it. I think there’s some reason to believe that in the end, the courts are going to rule against the administration, and the debts are going to have to be paid in full.”
That wasn’t exactly the analysis Armah, who hopes to go into the field of data analysis after college, wanted to hear.
“I won’t lie, I’m kind of scared. Because it was really good news with my family. We were like, ‘okay, so we’re not gonna have to all contribute and help you pay off this loan.’ And then we find out that it’s been paused, and it’s not gonna come, we’re like okay, you have to work this summer again. I don’t know how you’re going to balance working and an internship with this degree you’re trying to earn, but you’re going to have to find a way to pay this back, so I was not happy about that,” she said. “Biden, if you’re hearing this, please bring this back. People are struggling.”