A student-loan lender's lawsuit to end the payment pause is 'doomed' — and a federal court should throw it out, Biden's Education Department says in a new legal filing
Student-loan lender SoFi filed a lawsuit to end the student-loan payment pause in March.
The Education Department filed its response on Monday night, asking a court to dismiss the case.
It said the extensions are legal under the HEROES Act to provide continued pandemic relief.
President Joe Biden's Education Department wants a federal court to throw out a lender's lawsuit to end the student-loan payment pause.
In March, SoFi — a student-loan refinancing company — sued the Education Department and asked the court to end the ongoing student-loan payment pause. Biden most recently extended the pause through 60 days after June 30 or 60 days after the Supreme Court issues a final decision on the legality of the president's plan to cancel up to $20,000 in student debt, whichever happens first. SoFi wrote in its complaint that Biden did not have the legal authority to continue extending the pause, and it also cited revenue loss to its refinancing business brought on by the continued relief.
"In essence, SoFi is being forced to compete with loans with 0% interest rates and for which any ongoing repayment of the principal is entirely optional," the bank wrote in its filing.
But on Monday night, the Education Department filed its response to SoFi's complaint — and it called SoFi's claims "doomed" and urged the District Court for the District of Columbia to dismiss the case.
"Like the wake of destruction left even after a hurricane stops spinning, the significant economic and personal harms that many had suffered over the prior two and a half years were not erased by the pandemic's easing," the department wrote. "Indeed, information considered by the Department showed that even in November 2022, the economic harms of the pandemic lingered, and the nascent recovery was fragile for many student-loan borrowers."
The department used the HEROES Act of 2003 to extend the pause and enact broad debt relief, which gives the Education Secretary the ability to waive or modify student-loan balances in connection with a national emergency. While SoFi said in its complaint that not all borrowers required continued pandemic relief, the department emphasized that financial impacts from the pandemic can be long-lasting and extend beyond the declaration of a national emergency.
Additionally, the department wrote in its complaint that it did consider "various alternatives" to the payment pause extension it ended up enacting. Some of those alternatives included extending the pause only for borrowers eligible for the targeted debt relief, only for the 26 million borrowers who already applied for the relief, or only for borrowers with balances below $10,000. For all of the potential options, the department determined that implementing a targeted extension would be difficult to implement and could result in errors, which is why it allowed all federal borrowers to partake in the latest extension.
While this case might not progress through the courts quickly enough to end the payment pause prematurely, Education Secretary Miguel Cardona confirmed during a Senate hearing last week that he is committed to restarting payments this year, making a further extension highly unlikely.
"We're confident, Senator, that the Supreme Court will rule in favor of the targeted debt relief, providing relief for millions of borrowers, and we want to make sure that the information that borrowers get is accurate. We do plan on making sure it's a smooth reentry to repayment," Cardona said, adding: "The emergency period is over, and we're preparing our borrowers to restart."
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