Federal judge hands Biden win as Republicans challenge student loan bailout

A federal judge on Wednesday set back Republican efforts to thwart President Biden’s student loan bailout, allowing the government to proceed with his debt cancellation plan weeks before the November election. 

U.S. District Judge Randal Hall of Augusta removed Georgia from a lawsuit brought by seven Republican-led states against the Biden administration after he determined the Peach State lacked standing to sue over the loan forgiveness action. The judge said Georgia had failed to show it would be harmed by the administration’s plan to eliminate $73 billion in student loan debt held by tens of millions of Americans.

The decision came down one day before a temporary restraining order issued by Hall on Sept. 5 was set to expire. The judge did not extend the order and the Department of Education is now permitted to finalize regulations to enact Biden’s plan.

Georgia had claimed the student loan bailout would lead to tax revenue losses, but Hall, a Republican appointee, disagreed and transferred the case to federal court in Missouri.

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“There is no indication that the rule is being implemented to attack the states or their income taxes, so any loss of … tax revenue is incidental and insufficient to create standing for Georgia,” Hall wrote in his opinion. 

The judge had previously ruled that Missouri did have standing to sue because that state operates a nonprofit student loan servicer that stands to directly lose millions of dollars in funding under the debt forgiveness plan.

The administration proposed the regulation in April after previous plans were blocked by the courts. Biden as a candidate in 2020 pledged to bring debt relief to millions of Americans who turned to federal student loans to fund their higher education. The draft regulation, according to court papers, would allow the government to provide full or partial debt relief to an estimated 27.6 million borrowers. 

In addition to Georgia and Missouri, Republican attorneys general in Alabama, Arkansas, Florida, North Dakota and Ohio are party to the lawsuit challenging the policy. The states asked U.S. District Judge Matthew Schelp in Missouri, a Trump appointee, to rule Friday on whether to extend the temporary restraining order blocking the proposal. 

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A Department of Education spokesperson praised the judge’s “acknowledgment that this case has no legal basis to be brought in Georgia,” in a statement to Reuters. The spokesperson characterized the GOP-led lawsuit as an attempt “to prevent millions of their own constituents from getting breathing room on their student loans.”

“We will continue our lawful efforts to deliver relief to more Americans, including by vigorously defending these proposals in court,” the spokesperson added, per Reuters.

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The Biden administration’s proposal would bail out borrowers who owe more than they first borrowed due to accrued interest; individuals who have been in repayment for at least 20 to 25 years, depending on their circumstances; and borrowers who were eligible for student loan forgiveness under previous programs but who never applied.

The Justice Department had argued that since the Department of Education had not yet finalized the rule, there was no agency action for the judge to review in this case. The Republican-led states insisted that the Biden administration was preparing to immediately cancel student loan debt once the rule became final before the action could be challenged in court.

The White House has said its student loan bailout is a necessary action to provide relief to millions of debtors burdened by loans they took out to pursue higher education.

Republican critics of the plan have said the president lacks the authority to cancel student loan debt without an act of Congress and have suggested the bailout is unfair to taxpayers and other borrowers who already paid back their loans without relief.

Reuters contributed to this report.