Last-minute changes to Biden’s student loans make it harder to challenge in court: Experts

The sudden decision to remove more than 700,000 borrowers from President Biden’s $400 billion student loan handout could make it harder for opponents of the policy to challenge it in court, and some say the change appears to have been made for just that reason.

Shortly after Biden’s policy was announced, officials said loan forgiveness would only apply to borrowers who consolidated their debt under the Department of Education. This last-minute change left more than 700,000 borrowers ineligible for the handout because their loans are still managed by private companies.

Just before that change was announced, Nebraska and five other states filed a lawsuit arguing that their finances would be adversely affected by the handout. Those states argued they had the right to sue because millions of dollars in public pension funds are invested in private companies that administer many of those student loans, and that Biden’s program would hurt those companies and lead to lower returns.

Legal experts told Fox News Digital that by making loans administered by these companies ineligible for forgiveness, the Biden administration may have stripped the six states of any standing in court and likely helped the policy survive an early court challenge.

WHITE HOUSE PROPOSES BIDEN DISTRIBUTION OF STUDENT LOANS of 500 billion. USD WILL BE PAID WITH A DEFICIT

The White House's decision to remove more than 700,000 borrowers from President Biden's student loans could end up making legal challenges more difficult.

The White House’s decision to remove more than 700,000 borrowers from President Biden’s student loans could end up making legal challenges more difficult.
(Paul Morigi/Getty Images for We the 45m)

“By getting rid of the privately backed loans, they probably cut off the right to sue certain investors, financial institutions and state governments who could claim they would be adversely affected by the proposal,” said Jack Fitzhenry, a legal policy analyst at the Cultural Heritage Foundation.

“This makes it much more difficult for states and companies that manage the privately held debt to sue over lost revenue,” Fitzhenry said.

Policy experts said this is not the first time the White House has revised the parameters of the handout in response to legal attacks. One of the first legal challenges filed against the distribution was from a borrower who had to pay taxes on the distribution because their country of residence considers debt forgiveness as income.

STATE AGS WALLS LEGAL CHALLENGE TO BIDEN’S DISTRIBUTION OF STUDENT LOANS of DKK 500 billion. USD

Biden first announced in August that he plans to forgive between $10,000 and $20,000 for borrowers who make less than $125,000 annually.

Biden first announced in August that he plans to forgive between $10,000 and $20,000 for borrowers who make less than $125,000 annually.
(Bonnie Cash/UPI/Bloomberg via Getty Images)

“When that lawsuit was filed, there was no indication that borrowers could opt out on the official website set up to provide information,” said Beth Akers, a senior fellow at the American Enterprise Institute. “After the lawsuit, the website was updated to say you could opt out, and that may be enough to remove the lawsuit.”

The White House has revised the handout proposal several times since Biden first announced plans in August to forgive up to $10,000 for borrowers making less than $125,000 a year and up to $20,000 for people in families making less than $250,000.

The revisions have been heavily criticized by policy experts, some of whom have argued that the administration seemed unprepared to roll out the program. Now, some say the White House’s tactics may be more strategic than meets the eye.

STUDENT LOAN DISTRIBUTION COSTS COST MORE THAN $400 TRILLION: CBO

Political pundits don't, this isn't the first time the White House has revised the parameters of the handout in response to legal attacks.  (iStock)

Political pundits don’t, this isn’t the first time the White House has revised the parameters of the handout in response to legal attacks. (iStock)

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“I think it’s a mistake to look at all the apparent chaos and conclude that none of it is intentional,” Fitzhenry said. “Not all of it is intentional, but at least some of it appears to be strategic. They’re fine-tuning the proposal in real time to make sure it works.”

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