Yesterday, a three-judge panel of the U.S. Court of Appeals for the Eighth Circuit granted a request to enjoin the Biden Administration’s federal student loan forgiveness program pending resolution of an appeal filed by state attorneys general of six states (Missouri, Arkansas, Nebraska, Iowa, Kansas, and South Carolina), whose challenge to the loan forgiveness plan had been dismissed in October for lack of Article III standing. That ruling solidified what had been an administrative stay entered without briefing.
Approaching the issue with self-described “great care,” the appellate panel held that the Missouri federal district court had likely erred in concluding that no plaintiff could demonstrate standing. Focusing specifically on the Missouri Attorney General’s claim, the court ruled that for standing purposes, the Attorney General was likely entitled to rely on allegations of harm to Missouri’s state-created loan servicing entity, which was not a party to the action. The court observed that the loan servicing entity may constitute an arm of the state, which would allow the state attorney general to sue directly on its behalf, and that in the alternative, the state attorney general had credibly alleged that the financial impact of the Administration’s loan forgiveness plan would prevent or delay funding for Missouri’s public colleges and universities, which in turn would constitute a financial harm to the State of Missouri itself. (The loan servicer has publicly noted its lack of affirmative cooperation in the lawsuit.) The Eighth Circuit went on to conclude that so long as one plaintiff likely has standing, no further analysis of the other plaintiffs’ standing was necessary.
Having addressed the standing inquiry, the Eighth Circuit focused on the “balancing of the equities and the probability of success on the merits.” The panel observed that the debt forgiveness plan, if allowed to proceed, would have an “irreversible impact,” whereas an injunction would impose no harm because of, among other things, the ongoing student loan payment pause and suspension of interest (which is currently scheduled to expire on January 1, but which has been extended several times previously). The panel did not expressly address the potential merits of the plaintiffs’ claim that the administration lacked authority to proceed with the loan forgiveness program, but concluded it would be “impractical” to narrow or tailor the injunctive remedy as requested by the Biden Administration.
The Eighth Circuit’s stay is now one of two judicial orders prohibiting the Biden Administration from discharging federal loans pursuant to its loan forgiveness initiative. On November 10, a Texas federal district court found that the Secretary of Education had announced the loan forgiveness program without engaging in a mandatory notice-and-comment period, and that the Biden Administration had not made a heightened showing of “clear congressional authorization” for the program in light of its political and economic significance. The loan forgiveness program is now likely to be delayed until a merits ruling from both the Fifth and Eighth Circuits or a dispositive ruling from the Supreme Court, which will almost certainly take months to obtain.
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