Student loan forgiveness: Republican opposition will face ‘difficult drudgery’ in court, experts say

The debate over whether President Biden can and should write off trillions in student loan debt is heating up, now that his legislative agenda appears to be running out of steam.

Congressional Republicans are already lining up to oppose any further measures to relieve federally-backed student debt borrowers, Rep. Virginia Foxx of North Carolina, the leading Republican in House Education and Labor Committee, released a statement last month lamenting the impact of the freeze on current collections on the budget deficit.

She said the third extension of Biden’s collection freeze — signed into law in December and expiring in May — will cost taxpayers $150 million and urged Biden to come up with a plan “that will address the challenges facing service companies. loans and borrower confusion, and provide a clear timeline for when student loan repayments will resume.

But Republicans in Congress may be powerless to stop the Biden administration if it decides to use the Secretary of Education’s broad power to waive student debt that belongs to the federal government. According to an analysis by Wilson Freeman, former counsel for the Congressional Research Service, federal courts “have generally … been less willing to allow individual legislators to seek redress for injuries to a chamber of Congress as a whole, from least in the absence of express authorization to do so from the legislature itself.

Harvard University’s Howell Jackson agreed in an interview with MarketWatch that it’s usually “hard work” for members of Congress to get the status needed to block executive actions before the federal courts, especially in the current case where Democrats, many of whom favor debt cancellation, control both houses of Congress.

Jackson said instead, “the most plausible parties to be granted standing in court are those who have an economic interest in the program as it is currently structured,” namely corporations. services that manage student loan payments in exchange for a fee per borrower.

These corporations, like the Oklahoma Student Loan Authority and the Missouri Higher Education Loan Authority, are sometimes quasi-governmental entities initially licensed by individual states but have grown to have a national footprint. Others, like


(ticker: NNI) are publicly traded private entities.

These companies manage the nearly $1.4 trillion in direct federal loans held by the government, which make up the vast majority of the Department of Education’s roughly $1.7 trillion student loan portfolio.

Scott Buchanan, executive director of the Student Loan Servicing Alliance, an industry group, however, says service companies are unlikely to sue the Department of Education, which is among the companies’ biggest customers.

“Our approach has always been that this is a partnership and the government is a client,” he said. “As long as the Ministry of Education recognizes that if they want to keep someone to manage the loans they have left, they will have to pay appropriate compensation for that. This would change the scale. People would have to be laid off, but the company would adapt. And the work would increase again rapidly because an untargeted discount would not meet the need for future students to continue to borrow new loans.

Indeed, one of the criticisms of blanket student loan debt forgiveness is that it would do nothing to help students who are about to take out a loan to go to school. Student loan managers will want the business these potential borrowers bring, Buchanan said, and suing the Department of Education wouldn’t be good for managers in the long run.

The issue becomes more complicated when it comes to two other major student loan programs: Perkins loans and the federal family education loan program, according to David Bergeron, who spent 35 years at the Department of Education and became Acting Assistant Secretary for Post-Secondary Education. under President Obama.

There are more than $200 billion in outstanding loans for these now-defunct loan programs, and canceling them would inflict losses on the banks and educational institutions that funded these loans.

“At this point, the pause in collections is not a big budget hit for these institutions because they still own the asset,” he said. “But if you write off hundreds of billions of dollars, how do you get the lenders whole? You have to bring money to the lenders, otherwise there is a revenue problem under the Constitution,” which prohibits the government from taking private assets without fair compensation.

Advocates of red tape argue that the statutes that authorized these programs provided for mandatory funding, including payments to parties who issued federally guaranteed loans.

Top Democrats, whose sense. Elizabeth Warren of Massachusetts and Senate Majority Leader Chuck Schumer of New York, urged the cancellation of administrative debt up to $50,000 of debt per borrower, and expressed confidence that this decision cannot be overturned by the courts.

Granted, Biden himself still doesn’t agree with the administrative cancellation of student loans. He said he would prefer that Congress authorize the cancellation of $10,000 of debt per student. Earlier this year, White House officials said they were reviewing Biden’s legal authority to write off student debt through executive action.

But congressional Democrats and liberal activist groups have kept the pressure on the president to change his mind, and with no chance of an evenly divided Congress passing the pardon through legislation, analysts believe Biden could use debt relief as a tool to motivate its base. ahead of what should be a tough midterm election for Democrats.

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