Federal Judge Approves Latest Biden Student Debt Forgiveness Plan

U.S. District Judge Thomas Ludington from the Eastern District of Michigan issued an order on Monday that dismissed a lawsuit against the Biden administration’s plan to cancel a staggering $39 billion in student loans for more than 800,000 borrowers.

The complaint, spearheaded by the New Civil Liberties Alliance on behalf of the Mackinac Center for Public Policy and the Cato Institute, argued the administration exceeded its authority when announcing the new debt forgiveness plan in July. However, Ludington concluded that these conservative groups lacked the proper legal standing to file the lawsuit.

In his 18-page order, Ludington noted, “But—even assuming that Plaintiffs’ alleged injury was sufficient—they have not adequately demonstrated a causal link between Defendants’ action and an identifiable injury.” Sheng Li, litigation counsel for the New Civil Liberties Alliance, countered, expressing disagreement with the court’s decision on legal standing and hinting at potential future legal steps.

Earlier this year, in a significant setback for the Biden administration, the Supreme Court ruled 6-3 against its initial plan to forgive $10,000 in student loan debt for specific borrowers without congressional approval. With Ludington’s ruling, the administration seems to have found another way to deliver on its promise, though through a different avenue.

The Saving on a Valuable Education (SAVE) Plan is central to this new initiative. Under SAVE, borrowers who might miss a monthly payment between October 1, 2023, and September 30, 2024, would not be labeled “delinquent” or referred to debt collection agencies.

While many borrowers stand to benefit, it’s clear that the plan addresses what the Biden administration calls “historical failures” where qualifying payments weren’t accurately considered, depriving many of a chance at debt relief. Existing income-driven plans allow borrowers to have their debt cleared after 20 or 25 years of consistent payments. The new policy, counting partial, late, or deferred payments, accelerates this timeline for hundreds of thousands.

Joe Biden said in a press release: “Because of errors and administrative failures of the student loan system, over 804,000 borrowers never got the credit they earned, and never saw the forgiveness they were promised.”

Nevertheless, the question remains: Is this the best path for America’s future? While assisting 800,000 borrowers is undoubtedly attractive to many high earners and college graduates who would benefit, critics argue the broader implications of such forgiveness. They ask who truly pays for these “gifts” and what message it sends about fiscal responsibility and the value of fulfilling contractual obligations.