St. LOUIS (AP) — A federal appeals court issued an administrative stay Friday afternoon temporarily blocking President Joe Biden’s plan to write off billions of dollars in federal student loans, leaving the program in limbo just days after people started applying for loan forgiveness.
The Eighth Circuit Court of Appeals issued the stay while it considers a motion by six Republican-led states to block the program. The stay ordered the Biden administration not to act on the program while it considers the appeal.
It’s unclear what the decision means for the 22 million borrowers who already applied for relief. The Biden administration had vowed not to pay off any debt before Oct. 23 as it fought legal challenges, but the earliest it was expected to begin wiping out the debt was mid-November.
White House Press Secretary Karine Jean-Pierre encouraged borrowers to continue applying for relief, saying the court’s temporary order did not prevent applications or review applications .
“We will continue to move full speed ahead in our preparations to comply with this order,” he said in a statement. “And the Administration will continue to fight Republican officials who seek to block our efforts to provide aid to working families.”
The crucial question now is whether the problem will be resolved before Jan. 1, when federal student loan payments are expected to resume after being halted during the pandemic. Millions of Americans were expected to completely write off their debt under Biden’s plan, but now face uncertainty over whether they will have to start making payments in January.
Biden has said his previous extension of the pay break would be his last, but economists worry that many Americans have not recovered their financial position after the upheaval of the pandemic. If borrowers who were waiting for debt cancellation are asked to make payments in January, there are fears that many could fall behind on bills and default on their loans.
A notice of appeal to the U.S. Court of Appeals for the Eighth Circuit was filed Thursday afternoon, hours after U.S. District Judge Henry Autrey in St. Louis ruled that since the states of Nebraska, Missouri, Arkansas, Iowa, Kansas and South Carolina could not establish their legitimacy. , “the Court has no jurisdiction to hear this case.”
Separately, the six states also asked the district court for a preliminary injunction barring the administration from implementing the debt cancellation plan until the appeals process unfolds.
Nebraska Attorney General Doug Peterson, one of six attorneys general leading the effort to block the debt relief program, praised the court’s decision.
“We are pleased that the temporary stay has been granted,” Peterson said in a statement. “It is very important that the legal issues surrounding presidential power be analyzed by the court before transferring more than $400 billion in debt to American taxpayers.”
Speaking before Friday’s ruling at Delaware State University, a historically black university where most students receive federal Pell grants, Biden announced the number of applicants who have applied for loan relief during the week since their administration made their application available online.
The plan, announced in August, would write off $10,000 in student loan debt for those earning less than $125,000 or households with less than $250,000 in income. Pell Grant recipients, who typically demonstrate more financial need, will receive an additional $10,000 in debt.
The Congressional Budget Office has said the program will cost about $400 billion over the next three decades. James Campbell, a lawyer for the Nebraska attorney general’s office, told Autrey at an Oct. 12 hearing that the administration is acting outside its authority in a way that will cost states millions of dollars.
The write-off applies to federal student loans used to attend undergraduate and graduate school, along with Parent Plus loans. Current college students qualify if their loans were disbursed by July 1. The plan makes 43 million borrowers eligible for debt forgiveness, with 20 million who could wipe out their debt entirely, according to the administration.
The announcement immediately became a major political issue ahead of November’s midterm elections.
Conservative lawyers, Republican lawmakers and business-oriented groups have argued that Biden overstepped his authority by taking such sweeping steps without congressional consent. They called it an unfair government giveaway to the relatively wealthy at the expense of taxpayers who didn’t pursue higher education.
Many Democratic lawmakers facing tough re-election contests have distanced themselves from the plan.
Biden on Friday blasted Republicans who have criticized his relief program, saying “their outrage is misplaced and hypocritical.” He noted that some Republican officials had debt and loans forgiven to ease the pandemic.
All six states sued in September. Administration lawyers responded that the Department of Education has “broad authority to administer federal student financial aid programs.” A court document stated that the Higher Education Student Aid Opportunities Act of 2003, or HEROES Act, allows the secretary of education to waive or modify the terms of federal student loans during wartime or of national emergency.
“COVID-19 is an emergency,” the file said.
The HEROES Act was enacted after the terrorist attacks of September 11, 2001 to help members of the military. The Justice Department says the law allows Biden to reduce or erase student loan debt during a national emergency. Republicans argue that the administration is misinterpreting the law, in part because the pandemic no longer qualifies as a national emergency.
Justice Department attorney Brian Netter told Autrey at the Oct. 12 hearing that the fallout from the COVID-19 pandemic is still unfolding. He said student loan defaults have skyrocketed over the past 2 1/2 years.
Other lawsuits have also tried to stop the program. Earlier Thursday, Supreme Court Justice Amy Coney Barrett rejected an appeal by a group of Wisconsin taxpayers seeking to halt the debt cancellation program.
Barrett, who oversees emergency appeals in Wisconsin and neighboring states, had no comment on the rejection of the Brown County Taxpayers Association’s appeal. The group wrote in its filing with the Supreme Court that it needed an emergency order so the administration could begin paying off outstanding student debt as soon as Sunday.
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Associated Press reporter Darlene Superville contributed from Dover, Delaware.