Lauren Davidson hoped that $10,000 would eat into her student loan balance.
The public music school teacher’s debt has grown to $60,000 since graduating from Grand Valley State University in 2014. But Davidson, like millions of other student loan borrowers, is now waiting to see if a state relief plan survives legal challenges.
“I really hope it has been challenged now, it has been decided that it can be launched because it would help so many people to do so many things and take this huge burden off their shoulders,” he said you.
Related: Michigan borrowers are ‘rolling the punches’ in hopes of student debt relief
President Joe Biden announced in August a plan to waive $10,000 per federal student loan borrower and $20,000 for Pell Grant recipients who earn less than $125,000 individually or $250,000 as a household. In Michigan, that means 1.3 million people could see debt relief, including 849,300 Pell Grant recipients who qualify for up to $20,000.
Over the weekend, the US Department of Education began notifying eligible borrowers.
But two recent court decisions have put the plan in jeopardy, meaning it could be months before 26 million claimants see debt relief — if ever.
“For those who have already applied, there is little left to do but wait for the court battle to end,” said Jonathan Hanson of the University of Michigan’s Ford School of Public Policy.
Debt relief is on hold for the time being.
A federal judge in Texas initially blocked the plan on November 10, calling it unconstitutional. Then the 8th US Circuit Court of Appeals in St. Louis struck another blow, issuing an injunction to prevent the US Department of Education from hearing any more applications.
“Basically, the Court of Appeal has put the program on hold until the case can be heard. So it could potentially take a few months where we just have to wait for that,” Hanson said.
The Biden administration plans to take action against these verdicts.
I have already applied. What’s next?
The US Department of Education has begun notifying eligible borrowers that it has sent approvals to loan providers and “you do not need to take any further action.” Education Minister Miguel Cardona went on to say lawsuits have “blocked our ability to pay off your debt,” but the ministry believes the legal challenges are unfounded.
“Your application is complete and approved, and we will settle your approved debts if and when we prevail in court. We will update you if there are any new developments,” he said.
Here’s a look at how many people could get debt relief by state:
(Can’t see the map? click here.)
Can I still apply?
An injunction from the US Court of Appeals prevented the federal government from accepting new applications for the time being.
The Federal Student Aid website now states, “Student loan debt relief is on hold.” Previously, applications were open until December 31, 2023.
Is the plan legal?
It depends who you ask.
The Biden administration relied on a 2003 law to implement the program.
The HEROES Act gives federal education officials the power to eliminate debt “on a class-wide basis in response to the COVID-19 pandemic,” the U.S. Department of Justice wrote in an August statement. For example, the administrations of former President Donald Trump and Biden have suspended student loan payments for almost three years.
“The government argues that the COVID-19 pandemic has created a national emergency that has put many people at financial risk,” Hanson said. “That’s the authority with which they say, ‘In the face of the national emergency, we have the authority to deliver this loan forgiveness.'”
But this argument faces several challenges.
Two borrowers – backed by a conservative group – filed a lawsuit in October, claiming they were harmed by the scheme. Plaintiff Myra Brown says she does not qualify because she holds commercial loans, and plaintiff Alexander Taylor argues that he will not receive full debt relief because he is not a Pell Grant recipient.
Also contentiously, plaintiffs allege that the Biden administration failed to permit public comment required under the Administrative Procedures Act, which governs the process by which federal agencies develop and enact regulations.
Related: 5 Facts About How Much Michiganders Student Loan Debt Is
In a separate lawsuit, six Republican-led states allege that the Biden administration exceeded its executive powers. They argue the program will deprive them of tax revenue and hurt a Missouri-based loan servicer, Mohela.
Both lawsuits make similar claims.
“There are a variety of different cases that have been filed. But the crux of it, a couple of the main cases, is that the administration lacks the legal authority to implement such a large loan forgiveness program without further approval from Congress,” Hanson said.
What did the courts say?
US District Court Judge Mark Pittman blocked the program earlier this month.
Pittman, a Trump-appointed Texas judge, argued that “the separation of powers enshrined in our constitution” should be maintained.
“And under the interpretation of the HEROES Act, the court holds that there is no ‘unambiguous approval of Congress’ for the Secretary’s proposed program,” he wrote in a 26-page statement on the case brought by Brown and Taylor.
Four days later, U.S. Circuit Court justices — two appointed by Trump and another by former President George W. Bush — backed Missouri’s claim that the program would cause financial damage to the state.
“This unexpected financial downturn will prevent or delay Missouri from funding higher education at its public colleges and universities,” they wrote in a Nov. 14 restraining order.
Related: Student loan payments were frozen for two years. So the break helped 6 Michiganders.
The Biden administration responded by taking the matter to the US Supreme Court.
This is the third time judges have been asked to consider the fate of the student debt relief program.
Judge Amy Coney Barrett, in charge of the emergency motions, denied the first two motions from challengers. This time, the Republican-majority court gave opponents until Wednesday, Nov. 23 to respond to the Biden administration’s request to lift the injunction.
“The Eighth Circuit’s flawed injunction leaves millions of economically vulnerable borrowers in limbo, uncertain about the amount of their debt and unable to make financial decisions with an accurate understanding of their future repayment obligations,” wrote US Attorney General Elizabeth Prelogar in a 40- side report court records.
What next for borrowers?
Meanwhile, student loan repayments are expected to begin on Jan. 1, 2023. About 58% of borrowers said they will struggle to make those payments in a September survey by research and insights firm Morning Consult.
“It’s a bit worrying just having to factor that back into my spending and things like that,” Davidson said. “But we will find out.”
Related: 6 things you should know about the student debt relief plan
The rising cost of tuition has brought student debt relief to the fore in recent years.
A poll by the Cato Institute, a libertarian think tank, found that 64% of Americans support a $10,000 forgiveness plan with income caps. And Morning Consult found that most voters support the Biden plan because it’s more popular with Democrats than Republicans.
“I think it’s part of our consciousness now in a way that maybe wouldn’t have been possible five years ago,” Hanson said.
But if the Biden plan fails in court, Hanson says it will likely be an uphill battle trying to get legislation through Congress. After the midterm elections, the Democrats control the US Senate and the Republicans control the US House of Representatives.
More about MLive:
Whitmer appoints first black woman to Michigan Supreme Court
Protection of same-sex marriage could mean another voting initiative in Michigan
An engineering lab at the University of Michigan creates tiny origami-inspired robots, boats and bridges