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- Conservative groups filed a lawsuit last week to block Biden's latest student-debt relief effort.
- The relief would discharge loans for over 800,000 borrowers on income-driven repayment plans.
- The groups argued the relief undermined their recruiting efforts through PSLF.
The Supreme Court might have decided the fate of President Joe Biden's first attempt at broad student-debt relief, but that doesn't mean the lawsuits are over.
On Friday, the New Civil Liberties Alliance — a nonprofit organization aimed at protecting constitutional freedoms — filed a lawsuit on behalf of conservative groups Cato Institute and the Mackinac Center for Public Policy to block Biden's latest effort to cancel student debt for borrowers on income-driven repayment plans.
Specifically, the Education Department announced in July that it would be automatically canceling $39 billion in student debt for 804,000 borrowers who have completed their required 20 or 25 years of payments on income-driven repayment plans. Due to a range of paperwork and administrative difficulties, many borrowers who had completed their qualifying payments have been stuck in repayment for years — and the department's latest action would finally give those borrowers relief, while refunding any overpayments.
However, the conservative groups argued in their lawsuit that the relief was illegal and overstepped the administration's authority, and they want the court to block it from being carried out. The Education Department pushed back.
"The Biden-Harris Administration is fighting every day to fix the broken student loan system and make sure borrowers get the relief they earned, need, and deserve," a department spokesperson told Insider on Friday. "This lawsuit is nothing but a desperate attempt from right wing special interests to keep hundreds of thousands of borrowers in debt, even though these borrowers have earned the forgiveness that is promised through income-driven repayment plans. We are not going to back down or give an inch when it comes to defending working families."
The department has already started notifying borrowers who qualify to have their loans forgiven in the coming weeks, writing in its email to borrowers that "you are now eligible to have some or all of your student loans forgiven because you have reached the necessary 240- or 300-months' of payments under IDR." Should this lawsuit progress, it risks throwing that relief off course.
What's in the latest lawsuit
This isn't the first lawsuit against student-debt relief for the New Civil Liberties Alliance. Back in October, it represented the Cato Institute in filing a lawsuit to block Biden's broad plan to cancel up to $20,000 in student debt for federal borrowers, which ended up getting struck down by the Supreme Court at the end of June in favor of a different lawsuit that also challenged the policy.
But there are similarities in the arguments from the October lawsuit, and the most recent one challenging the income-driven repayment relief. Both complaints referenced the impact the relief would have on recruiting incentives through the Public Service Loan Forgiveness program, which forgives student debt for government and nonprofit workers after ten years of qualifying payments. With the Cato Institute and Mackinac Center being nonprofits, the complaint said that PSLF "materially helps qualifying employers attract and retain borrower-employees who might otherwise choose higher-paying employment with nonqualifying employers in the private sector."
"Unlawful cancellation of student-loan debt reduces the amount of a borrower's PSLF-cancellable debt and thus reduces the amount by which PSLF benefits qualified employment," it said.
The group claimed that Biden's relief violated the Administrative Procedures Act and did not solicit necessary public feedback — however, the Education Department in January published its proposed rule on reforming income-driven repayment on the Federal Register, in accordance with the negotiated rulemaking process.
It's unclear how this lawsuit will impact debt discharges, but the administration has made no indication yet that the process will be halted.