Biden admin to cancel $39 billion in student loan debt after judge tosses lawsuit

The Biden administration is set to move forward with canceling approximately $39 billion in student loan debt for long-term borrowers after a federal judge threw out a lawsuit against the plan on Monday.

A lawsuit filed by the Cato Institute and the Mackinac Center for Public Policy against the Department of Education, alleging that the administration overstepped its power, was dismissed this week for lack of standing.

Michigan District Judge Thomas Ludington ruled against the institutes' argument that the administration's plan to cancel loans for borrowers who have been making payments for 20 to 25 years is unconstitutional and violates the Administrative Procedure Act.

"But — even assuming that Plaintiffs' alleged injury was sufficient — they have not adequately demonstrated a causal link between Defendants' action and an identifiable injury," Ludington wrote in his order.

The Biden administration's federal student loan cancellation plan seeks to wipe out roughly $39 billion of debt for the 804,000 qualifying borrowers. The White House believes qualified borrowers will have their debt canceled within weeks.

In response to the judge's decision, Biden issued a statement vowing to "fight for hardworking families and to fix problems in the student loan system that have been failing borrowers for too long."

"Under these plans, if a borrower makes 20 or 25 years' worth of payments, they get the remaining balances of their loans forgiven. But because of errors and administrative failures of the student loan system that started long before I took office, over 804,000 borrowers never got the credit they earned, and never saw the forgiveness they were promised – even after making payments for decades," Biden stated.

He noted that borrowers who have been making payments "for over 20 years will start to see their student debt canceled." Approximately 614,000 borrowers are expected to receive complete forgiveness for the remainder of their debt.

ABC News reported that eligible borrowers started receiving emails on Monday with the subject line "Your student loans have been forgiven."

Secretary of Education Miguel Cardona said, "We are standing up for borrowers who did everything right, but whose progress toward forgiveness went uncounted due to past administrative failures that the Biden-Harris team has worked tirelessly to correct."

Sheng Li with New Civil Liberties Alliance, the legal group that filed the lawsuit on behalf of the institutions, told The Hill, "The district court did not rule on the merits of the case and instead said Cato and Mackinac were not the right parties to bring it."

"We disagree with the court's conclusion regarding legal standing and are reviewing legal options with our clients," Li added.

The administration has already canceled over $116 billion in student loan debt for 3.4 million borrowers.

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