The Biden administration plans to cancel student loans in secret because it knows that doing so is illegal, and would be blocked by the courts if they knew what was happening. Courts can block the government from engaging in illegal activity in the future — by issuing an injunction against the government — but sometimes, courts won’t do anything about past violations of the law.
An economist describes this chicanery in Forbes:
Missouri and six other states have filed a lawsuit seeking to block the Biden administration from implementing its latest student loan cancellation proposal. While the administration has signaled its intention to forgive around $147 billion in loans for certain groups of student borrowers, it has not yet finalized the regulation authorizing such cancellation, meaning potential plaintiffs could not sue to block it.
However, the states now have documents in their possession showing that the administration plans to begin cancelling loans this week, even though the cancellation plan technically does not exist yet. That would allow the administration to get loan forgiveness out the door before federal courts could intervene to stop it—as previous cases indicated they almost certainly would.
After the Supreme Court blocked the Biden administration’s first attempt at mass loan cancellation, the president vowed to try again. In April, the Education Department published a draft version of what most saw as a successor policy to the first cancellation scheme. However, the successor plan targeted loan forgiveness at different groups of borrowers and relied on an alternate legal theory to justify why the administration could go around Congress. The April announcement was a proposed rule only. Federal agencies are required to seek public comment on proposed rules, then revise and finalize them months later. The proposed rule would have cancelled debt for several distinct groups of borrowers: those with significant interest accrual, those in repayment for long time periods, those who attended low-quality colleges, and those who might qualify for other loan-cancellation programs. The Education Department pegged the cost of the rule at $147 billion.
The final regulation could differ from the April proposal—and could theoretically include changes that affect its legality. For that reason, outside groups generally cannot file lawsuits to block federal regulations until they are finalized. The states’ latest lawsuit is an exception—because of a startling discovery described in the pages of their complaint….the states have “obtained documents proving that the Secretary is implementing this plan without publication and has been planning to do so since May.” At the end of May, the administration sent documents to student loan servicers “instructing those contractors to begin cancelling loan balances as early as September 3.”….“So if a servicing organization reports a set of balances to the Department on September 2 without error or if errors are resolved by then, loan servicing organizations will be required to “immediately” forgive loans as early as September 3,” the lawsuit alleges. “If servicing organizations take the full time allotted to resolve errors—until September 6—then ‘immediate’ forgiveness will begin as soon as September 7.”
The Education Department also drafted emails for servicers to send to borrowers after cancelling those debts. The emails would credit the “Biden-Harris administration” for the debt forgiveness. The lawsuit paints a picture of an administration that knows its plans for loan cancellation are illegal and would not survive judicial review. To get around that problem, officials planned to begin cancelling debts in secret, before (or almost immediately after) their official loan cancellation plan is published. That timeline would leave little to no opportunity for lawsuits to block the loan cancellation. There is good reason to think the latest scheme would fail to survive legal scrutiny. The administration’s previous attempt at mass cancellation collapsed after a Supreme Court ruling. An even more expensive student loan relief program, the SAVE plan, is currently blocked pending a final ruling from federal courts. The legal record has been clear: large-scale loan cancellation requires an act of Congress….The plaintiffs have asked the court to issue a preliminary ruling on their lawsuit by Friday.
Earlier, a watchdog group accused Education Secretary Miguel Cardona of violating federal law by sending a mass email attacking Republicans for questioning the legality of the Biden administration’s cancellation of student debt. Protect the Public’s Trust (PPT) called the email “glaringly political” and filed a complaint with the Office of Special Counsel (OSC) and the Education Department inspector general accusing the education secretary of violating the Hatch Act, which prohibits federal employees from using their office to engage in partisan political activities intended to influence the outcome of an election.
Several high-ranking members of the Biden-Harris administration have violated the Hatch Act. The OSC determined that Energy Secretary Jennifer Granholm and Secretary of Housing and Urban Development Secretary Marcia Fudge broke the law by wading into partisan politics while using public property.
On July 18, a federal appeals court in St. Louis blocked the Biden administration’s attempt to illegally write off billions of dollars in student loan debt — such as allowing certain borrowers to have their debt forgiven after ten years.
After the Supreme Court ruled last year that Biden’s attempt to cancel $500 billion in student loan debt was illegal, Biden canceled some of the same debt using new excuses, writing off billions more in student loans. In April, 17 states sued the Biden administration over its new plans to cancel student loans, arguing that Biden’s new plan was illegal, too.
An April 2024 report by the Committee for a Responsible Federal Budget estimates Biden’s student loan bailouts, put together, “will cost a combined $870 billion to $1.4 trillion.”
Canceling student loans is a bad idea. It encourages colleges to jack up tuition, by making it more attractive to take out big loans to cover college tuition. When students are willing to borrow more to go to college, colleges respond by raising tuition. The Daily Caller notes that “each additional dollar in government financial aid translated to a tuition hike of about 65 cents,” according to the Federal Reserve Bank of New York.
Canceling student loan debt is “regressive and unfair,” says Katherine Abraham, a former adviser to Obama who served as Commissioner of the Bureau of Labor Statistics during the Clinton administration. As Greg Price points out, “Only 37% of Americans have a 4-yr college degree, only 13% have graduate degrees, and a full 56% of student loan debt is held by people who went to grad school. Biden’s plan to cancel it would be like taking money from a plumber to pay the debt of a lawyer.” Even the liberal Washington Post called Biden’s student-loan bailout “a regressive, expensive mistake.”
Student loan forgiveness also is inflationary. Jason Furman, chairman of President Obama’s Council of Economic Advisers, called Biden’s plan to cancel student loans “reckless.” Furman said, “Pouring roughly half trillion dollars of gasoline on the inflationary fire that is already burning is reckless.” Biden’s student loan forgiveness will increase inflation, inequality, tuition, and the national debt.
The Wall Street Journal criticized Biden’s new plan to write off student loans after the Supreme Court ruled against his old plan, arguing that the new plan “will encourage colleges to raise costs, especially in graduate programs for which there are no federal loan limits. Who cares if students can’t repay? They will be forgiven one way or another.”
The Supreme Court’s 2023 ruling against Biden’s earlier loan-forgiveness plan was expected by most observers. Some of them accused Biden of currying favor with young voters by promising student loan forgiveness that he knew was illegal and would be struck down, thus giving them false hope. Biden sought to deny this, saying “I didn’t give any false hope. The Republicans snatched away the hope that they were given.”
But that was dishonest on Biden’s part. Earlier, he himself had admitted he lacked the power to forgive student loans en masse. The president said of student loan cancellation during a 2021 CNN town hall, “I don’t think I have the authority to do it by signing with a pen.”
Other Democratic Party leaders used to admit that Biden lacks the power to forgive student loans, the very ones denouncing today’s Supreme Court decision. On July 28, 2021, “then-Speaker of the House Nancy Pelosi explained: ‘People think that the President of the United States has the power for debt forgiveness. He does not. He can postpone. He can delay. But he does not have that power. That has to be an act of Congress.”
As journalist Charles Cooke noted in 2023, “Biden knew this was illegal. Everyone knew this was illegal. That he tried to do it anyway, in violation of his oath of office, remains a monumental disgrace.”
