President Joe Biden's plan to forgive Americans' student debt saw its most significant setback Thursday when a federal judge in Texas found the program unconstitutional and struck it down.
The Biden administration filed an appeal and vowed the program would survive the court challenge; however, the government's student loan portal has ceased accepting applications for now.
The Texas case is just one front in at least six legal efforts across the U.S. to kill Biden's plan to erase up to $20,000 in debt for some borrowers. The cases turn on the legal concept of standing, whether the plaintiffs can show the forgiveness program directly hurts them. Some experts say that if courts find that opponents have standing, they have a strong chance of ending the program before any forgiveness goes out.
"There's a good chance courts are going to look at this and say, the president overstepped his authority — spending is really the authority of the Congress,” Committee for a Responsible Federal Budget’s Marc Goldwein recently told Yahoo Live.
Here’s where things stand on the varied challenges faced by Biden’s effort.
The case from Texas that struck down the program (for now)
In August, the Biden administration announced its plan to forgive $10,000 of student debt for people making less than $125,000 and an additional $10,000 for those who received Pell Grants, which go to borrowers with extreme financial need. Biden's opponents contend it's too expensive, oversteps the President’s authority, and doesn't address the root problems that make college so expensive.
The case in Texas has blocked the program for now. Conservative advocacy group Job Creators Network Foundation, created by Home Depot co-founder Bernie Marcus, filed the lawsuit on behalf of two plaintiffs who say the plan's rules excluded them and they never got a chance to comment on the plan.
The conservative group's president, Elaine Parker, hailed the ruling. "We hope that the court’s decision today will lay the groundwork for real solutions to the student loan crisis,” she said.
A case from six Republican-led states that put the program on hold
The Biden administration also suffered a legal setback last month when a federal appeals court put a hold on the program and prevented the administration from dispensing the loans. That case is still pending in the U.S. Court of Appeals for the Eighth Circuit.
Nebraska Attorney General Doug Peterson — one state official behind the suit — praised that ruling, saying: “It’s very important that the legal issues involving presidential power be analyzed by the court before transferring over $400 billion in debt to American taxpayers.”
The case — which includes Nebraska, Missouri, Arkansas, Iowa, Kansas and South Carolina — makes its argument for standing by contending that Biden's plan threatens these states' future tax revenues. A lower court had dismissed the suit for a lack of standing, but the higher court reversed that decision.
Cases in progress from Arizona and the CATO institute
Arizona State Attorney General Mark Brnovich also has a pending lawsuit against the plan, which he contends is "unconstitutional" and "fundamentally unfair." The suit claims debt forgiveness will hurt the Attorney General’s Office, which relies on loan forgiveness incentives to recruit employees.
The suit also prominently cites Biden’s recent comment that the "pandemic is over” by saying that the remark undermines the legal case for the program itself.
The administration’s loan forgiveness plan is based on 2003's Higher Education Relief Opportunities For Students (HEROES) Act, which allows the Secretary of Education to grant relief to federal student loan recipients — but only in connection with a national emergency.
Another lawsuit was recently announced by the libertarian Cato Institute. It has yet another argument for standing, saying that the Biden plan will undermine the Public Service Loan Forgiveness program and will affect non-profits like Cato by making it less enticing to work there.
Cases from Wisconsin and Indiana
In two other cases, plaintiffs attempted to get the Supreme Court to issue an emergency ruling to block the debt forgiveness plan. The Supreme Court denied both of those requests.
One from Indiana was brought by two Indiana borrowers who claimed that forgiveness would impact their tax burden. A second case, this time from Wisconsin, also said taxpayers would be harmed.
Observers expect the Supreme Court will eventually weigh in on the relief plan. For now, the 26 million borrowers who have already applied for relief will have to keep waiting.
Ben Werschkul is a Washington correspondent for Yahoo Finance.
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