Court Ruling Throws WI Student Debt Relief Applicants Deeper In Limbo

WISCONSIN — Wisconsin residents who stand to gain relief from their student debts under President Joe Biden's plan were plunged deeper into limbo Thursday after a federal judge across the country struck down the student loan forgiveness program.

It leaves the application process paused, according to a note on the studentaid.gov website. Over 1 million Wisconsinites could benefit from the debt relief plan, including 412,700 recipients of Pell Grants. The Pell Grant program is meant for students who demonstrate greater aid needs.

“If you've already applied, we'll hold your application,” the note said, adding that updates will be posted on the website when they’re available.

Pell Grant borrowers could see up to $20,000 in student loan debt forgiven under the plan. Other borrowers could see up to $10,000 of their debt canceled if they earn less than $125,000 ($250,000 for married couples) a year.

Still unsettled is whether Wisconsin borrowers who expected to have their debt canceled will have to resume payments on Jan. 1, when the pause prompted by COVID-19 is set to expire. Economists worry that if the relief isn’t available, people who haven’t financially rebounded from the pandemic default on their loans.

Also unsettled is the state tax Wisconsinites may see if their debt ends up being forgiven.

The Justice Department has filed an appeal, White House Press Secretary Karine Jean-Pierre said Thursday.

“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,” Jean-Pierre said in a statement.

The program had been on hold since Oct. 21, when the U.S. 8th Circuit Court of Appeals granted an administrative stay, temporarily pausing the program while considering an injunction sought by six Republican-led states — Nebraska, Missouri, Arkansas, Iowa, Kansas and South Carolina — to block it.

In his ruling Thursday, U.S. District Judge Mark T. Pittman of the Northern District of Texas said the Biden administration didn’t follow proper procedures requiring public comment on the loan forgiveness program.

The ruling was in response to a lawsuit filed in October on behalf of two student loan borrowers by the conservative Job Creators Network Foundation. The borrowers disagreed with the criteria for the program, but said they weren’t given a chance to comment.

“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 wrote in his ruling.

He added: “The Court is not blind to the current political division in our country. But it is fundamental to the survival of our Republic that the separation of powers as outlined in our Constitution be preserved.”

The Associated Press contributed reporting.