ST. LOUIS (AP) — A federal appeals court issued an administrative stay late Friday that temporarily blocked President Joe Biden’s plan to cancel billions of dollars in federal student loans, throwing the program into limbo just days after it began seeking loan forgiveness Has.
The Eighth Circuit Court of Appeals issued the stay while reviewing a motion by six Republican-run states to block the program. The stay ordered the Biden administration not to address the program while it considers the appeal.
It’s unclear what the decision means for the 22 million borrowers who have already applied for the relief. The Biden administration had promised not to pay off any debt before Oct. 23 as it battled legal challenges, but was not expected to begin paying off debt until mid-November at the earliest.
White House Press Secretary Karine Jean-Pierre encouraged borrowers to continue applying for the relief, saying the court’s injunction did not prevent applications or the review of applications.
“We will go ahead with our preparations at full speed in accordance with this order,” she said in a statement. “And the administration will continue to fight Republican officials who sue to block our efforts to support working families.”
The key question now is whether the issue will be resolved before Jan. 1, when federal student loan payments are expected to resume after being suspended during the pandemic. Millions of Americans were expected to have their debt fully forgiven under Biden’s plan, but are now unsure if they need to start making payments in January.
Biden said his previous payment pause extension was the last, but economists worry many Americans may not have regained their financial footing after the turmoil of the pandemic. When borrowers who had been expecting debt relief are called on to make payments in January, there are fears many could default on the bills and default on their loans.
Late Thursday, hours after US District Judge Henry Autrey ruled in St. Louis, an appeal was filed with the Eighth US Circuit Court of Appeals that since the states of Nebraska, Missouri, Arkansas, Iowa, Kansas and South Carolina have failed to establish legal standing, “the Court has no jurisdiction to hear this case.”
Separately, the six states petitioned the district court for an injunction barring the administration from implementing the debt relief plan until the appeals process is resolved.
Nebraska Attorney General Doug Peterson, one of the six attorney generals leading efforts to block the debt relief program, commended the court’s decision.
“We are pleased that temporary residency has been granted,” Peterson said in a statement. “It is very important that the legal issues surrounding presidential powers be analyzed by the court before over $400 billion in debt is transferred to American taxpayers.”
Ahead of Friday’s decision at Delaware State University, a historically black university where the majority of students receive federal Pell Grants, Biden spoke about the number of applicants who applied for the loan relief in the week since his administration made their online application available.
The plan, announced in August, would eliminate $10,000 in student loan debt for those earning less than $125,000 or households earning less than $250,000. Pell Grant recipients, who typically have higher financial needs, receive an additional $10,000 in debt relief.
The Congressional Budget Office has announced that the program will cost about $400 billion over the next three decades. James Campbell, an attorney for the Nebraska attorney general’s office, told Autrey at an Oct. 12 hearing that the government is acting outside of its agencies in ways that will cost states millions of dollars.
The termination applies to federal student loans used to attend elementary and high schools, as well as Parent Plus loans. Current college students qualify if their loans are paid off before July 1. The plan would see 43 million borrowers eligible for some debt relief, with 20 million able to write off their debt entirely, the administration said.
The announcement immediately became a major political issue ahead of the November midterm elections.
Conservative attorneys, Republican lawmakers and pro-business groups have claimed Biden exceeded his powers by taking sweeping measures without congressional approval. They called it an unfair government giveaway to relatively wealthy people at the expense of taxpayers not pursuing higher education.
Many Democratic lawmakers facing tough re-election battles have distanced themselves from the plan.
Biden on Friday slammed Republicans who have criticized his aid program, saying, “Your outrage is false and hypocritical.” He noted that some Republican officials have been forgiven debt and pandemic-bailout loans.
The six states sued in September. Lawyers for the administration countered that the Department of Education has “broad powers to administer the state’s student finance programs.” A court filing states that the Higher Education Relief Opportunities for Students Act of 2003, or HEROES Act, allows the Secretary of Education to waive or modify the terms of federal student loans in times of war or a national emergency.
“COVID-19 is such an emergency,” the filing reads.
The HEROES Act was enacted after the September 11, 2001 terrorist attacks to help members of the military. The Justice Department says the law allows Biden to reduce or repay student loan debt during a national emergency. Republicans argue the government 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 making waves. 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 denied an appeal by a Wisconsin taxpayer group trying to stop the debt relief program.
Barrett, who oversees emergency appeals from Wisconsin and neighboring states, did not comment on denying the Brown County Taxpayers Association’s appeal. The group wrote in its Supreme Court filing that it needed an emergency order because the administration could begin canceling outstanding student debt as early as Sunday.
Associated Press reporter Darlene Superville contributed from Dover, Delaware.