Biden Administration Faces Lawsuit Over Extension of Student Loan Payment Pause

The Biden administration is facing another legal challenge over extending the pause on federal student loan payments that was put in place due to the Covid-19 pandemic. The pause is scheduled to end later this year, but the plaintiffs in the latest lawsuit want the moratorium to end immediately.

The New Civil Liberties Alliance filed the lawsuit earlier this week on behalf of the Mackinac Center for Public Policy, a free-market think tank. In a similar lawsuit, private lender SoFi sued the Biden administration last month, also seeking to end the pause on payments.

Since March 2020, the moratorium has been extended eight times under both the Trump and Biden administrations to help people struggling due to the pandemic. The New Civil Liberties Alliance lawsuit argues that the Department of Education has unlawfully extended the pause, relying on an “ever-shifting foundation of purported legal justifications.”

The lawsuit alleges that the pause harms nonprofit employers, like the Mackinac Center for Public Policy, which normally use a federal debt relief program for nonprofit workers to help recruit employees. The pause, they argue, reduces the incentive the federal program, known as Public Service Loan Forgiveness, provides borrowers to work for a nonprofit.

The Department of Education has defended the pause, as well as a proposed one-time debt cancellation plan, and maintains that they are legal. In a statement sent to CNN, the agency said, “This lawsuit is an attempt by partisan special interest groups to put millions of borrowers at serious risk of financial harm. The Department will continue to fight to deliver relief to borrowers, provide a smooth path to repayment, and protect borrowers from industry and special interests.”

The Biden administration has tied the restart of federal student loan payments to the litigation over the forgiveness program. The US Supreme Court heard the case at the end of February, and the administration has set the payment restart date to 60 days after the Court issues its ruling, or in late August – whichever comes first. The justices are expected to rule in late June or early July, but a decision could come earlier.

If allowed to move forward, Biden’s student loan forgiveness program would cancel up to $20,000 for qualifying low- and middle-income borrowers. The lawsuit adds to the challenges that the Biden administration is facing as it seeks to provide relief to those impacted by the pandemic.