Appeals Court Blocks Biden’s Student Debt Cancellation Plan

The future of the president's promise to eliminate hundreds of billions of dollars in debt for tens of millions of people was clouded by an injunction issued by a federal appeals court.

In a six-page order, three judges from the U.S. Court of Appeals for the Eighth Circuit unanimously blocked the government from canceling debts while the court considers a lawsuit brought by six Republican-led states.

The judges wrote that the case will affect the finances of millions of Americans.

Donald Trump appointed two of the judges. Bobby Shepherd was appointed by the former president.

The decision came about three weeks after the appeals court granted a temporary stay pausing President Biden's plan while it reviewed the states' lawsuit.

Nebraska, Missouri, Arkansas, Iowa, Kansas and South Carolina argue that Mr. Biden would deprive them of tax revenue. When debt is canceled, it's usually taxed as income, but Congress last year exempted student debt from being taxed. The states said that Mr. Biden would immediately reduce the pool of debt to discharge in the future.

The Missouri Higher Education Loan Authority is a quasi state organization that may well be an arm of the state.

The government pays loan servicers based on the number of customer accounts they handle, so loan cancellation would reduce the workload and earnings of the organization. Missouri gets some of its profits back to support higher education. The judges concluded that Mr. Biden's plan presented a threat to the financial health of Missouri.

Mohea has distanced itself from the case. The company's executives have previously stated that they were not involved in the decision to file the lawsuit.

The White House press secretary said in an email that the administration was confident in its legal authority for the student debt relief program.

Mr. Biden said in August that his plan would eliminate debt for people earning less than $125,000 a year and people who had received grants for low income families. It would be one of the most expensive executive actions in history with a price tag of $400 billion.

In the last five years, the Education Department has been the primary lender for Americans who borrow to attend college. More than 25 million borrowers have applied to have their student loan debt wiped out. 16 million applications have been approved but no debt has been canceled due to legal challenges.

The states are trying to stop Mr. Biden's proposal.

A Texas district court judge struck down Mr. Biden's action because it did not have clear congressional authorization. Two borrowers did not qualify for the maximum debt cancellation under Mr. Biden's plan.

The Education Department stopped taking applications after the ruling. The department tried to overturn the legal orders.

We will hold your application if you have already applied.

The judge ruled that Mr. Biden had overstepped his authority. The Justice Department appealed the decision of the judge.

The issue is expected to be taken up by the Supreme Court.

There were two previous challenges to the debt cancellation plan. She turned down a case last month. She rejected a complaint from borrowers. Lower courts had previously ruled that the challengers didn't have the right to file a lawsuit.

As 45 million federal student loan borrowers face a January deadline to resume payments, the issue is getting more urgent. The moratorium was extended eight times over the course of two presidencies.