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The on-again, off-again Biden student loan forgiveness plan is truly on the rocks. Even with the several issues putting the proposal to a halt, there is an additional not-so-distant problem for Biden’s proposal that has not been brought to light. With this upcoming issue on the horizon, the Biden’ student loan forgiveness proposal is in serious jeopardy of ever being implemented.

If you are waiting for the final decision on the student loan debt, what should you do?

Federal Courts

A couple of federal courts have ruled that the forgiveness program is unconstitutional.

Federal Judge Mark Pittman said in his decision to put the student loan forgiveness program on hold, “In this country, we are not ruled by an all-powerful executive with a pen and a phone. Instead, we are ruled by a Constitution that provides for three distinct and independent branches of government.” Pittman stated that Biden’s student loan forgiveness program is “an unconstitutional exercise of Congress’s legislative power and must be vacated.”

The Biden administration is working through two separate federal appeals courts – the 5th and 8th Circuit Appeals Courts -- to try and allow the program to proceed, with one being appealed to the U.S. Supreme Court. However, the chances of success for the Biden administration is close to “0%”.  

The Argument of Standing

Several student loan advocates have argued that Judge Pittman has errored in his ruling by failing to recognize the issue of standing – or the ability of a plaintiff to demonstrate harm from Biden’s loan forgiveness directive. This has been a hard one to address for many plaintiffs. But several states have sued and the Court has found them – so far – to have “standing.”

Biden’s Response

Biden’s press secretary, Karine Jean-Pierre, issued a scathing statement following Judge Pittman’s ruling, “We strongly disagree with the District Court's ruling on our student debt relief program. The President and this Administration are determined to help working and middle-class Americans get back on their feet, while our opponents – backed by extreme Republican special interests – sued to block millions of Americans from getting much-needed relief."

The final say is not going to be up to the Biden administration. It will be up to the Courts. There are two more problems that will drive the final nails in this proposal. They are next year’s Congress and past actions.

Past Actions

Democrat-led governments have won in Court blocking transfer of funds from the Department of Defense to building the wall.

In December 2019, Federal Judge David Briones blocked the Trump administration from transferring $3.6 Billion in funds from the Department of Defense to the Homeland Security, in thanks to a lawsuit brought by a democratic-led county. The Judge said that reallocating military funds to building the wall  via emergency proclamation was illegal.   

In February 2020, the Trump administration notified Congress it was transferring $3.8 billion from the Department of Defense to Homeland Security to continue to build the southern wall. Many members of Congress charged the administration with working outside the bounds of the law. Rep. Adam Smith, chairman of the House Armed Services committee stated,

Today’s reprogramming request confirms once again that the President is obsessed with fulfilling a campaign promise at the expense of our national security. This admin has already stolen billions from the DoD for the President’s vanity wall, and today they are doubling down.”

If previous Courts have blocked the transfer of a few billions of dollars in funds in previous cases, how can the Biden administration think that the Courts will now look away asking for $420 billion in funds to transfer to cover student loan debt? That is a problem.

Republican Congress

The Republican Congress will take control of the U.S. House of Representatives on January 3, 2023. The Republicans have come out against this forgiveness of student loan debt. The question of standing will no longer be a concern – as Congress is responsible for approving funding bills. The only remaining question for the Courts, is will they approve a transfer of $420 billion without the express approval of Congress? Very unlikely.

The Biden administration created this problem, and it will have to most likely eat this one. The promises of cancelling debt will most likely never happen.

If you have student loan debt, the best advice is to put money aside in a savings account as if you are paying your student loan debt. Wait for the final Court’s decision. If the Court through some miraculous decision grants the forgiveness, then you have extra money to put towards a house or something else.

If, and most likely when, the Courts rule against the student loan forgiveness program, you can pay down your debt faster by applying what you have saved up, and pay it towards the debt. Don’t wait until the ruling to start paying down your debt. Put those monies into a separate account and pay it if the Court’s rule against it and after the final verdict is in.  

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