A new lawsuit was filed on Thursday to lift the three-year student loan payment suspension for borrowers.
In Michigan’s federal district court, the New Civil Liberties Alliance filed the action on behalf of the Mackinac Center, a think tank for free markets.
Since March 2020, when the COVID-19 pandemic first broke out, about 43.5 million borrowers have had their federal student loan payments suspended. The Education Department has repeatedly extended the hiatus under presidents Joe Biden and Donald Trump.
People hold signs during a Cancel Student Debt rally outside the US Department of Education in Washington, DC, on April 4, 2022. – Demonstrators gathered to call on US President Joe Biden to wipe out all student debt, as the student loan payment pause, put into place during the Covid-19 pandemic, is set to expire on May 1. (Photo by Stefani Reynolds / AFP) (Photo by STEFANI REYNOLDS/AFP via Getty Images)
New Student Loan Payment Lawsuit Eyes Lifting Pause
The action questions the department’s authority to keep prolonging the pause without getting consent from Lawmakers. The embargo, during which debtors have not accumulated interest, allegedly cost taxpayers more than $150 billion, according to the lawsuit.
Sheng Li, the NCLA’s litigation attorney, said in a statement that Congress may suspend student loan repayment obligations and eliminate accumulated interest because Congress has to pass a law to give such debt relief at the start of the pandemic.
The NCLA specifically claims that the loan repayment suspension harms NGOs and other public-service organizations that benefit from the federal Public Service Loan Forgiveness program.
The program cancels their debts for those employed in qualifying public service positions for at least ten years. Nevertheless, the NCLA asserts that “suspending repayment responsibilities is an unconstitutional type of debt relief that significantly weakens the incentives PSLF offers.”
The lawsuit claims that the pause harms the plaintiff, a charity that depends on PSLF.
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Previous Lawsuits
Forbes said that President Biden’s most recent extension of the student loan pause was challenged in court last month by SoFi, a significant private student debt refinancing firm.
The administration prolonged the student loan moratorium in reaction to the Supreme Court dispute over the government’s separate student debt forgiveness scheme, according to SoFi, making Biden’s current extension illegal rather than connected to the pandemic emergency.
Millions of debtors’ federal student loan debt of up to $20,000 might be erased under this approach. SoFi claims that since fewer borrowers are interested in refinancing their federal student loans while they have a zero percent interest rate and no payments required, the hiatus has decreased its revenues and profits.
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