The COVID-19 pandemic gave Americans many opportunities to see how times of crisis lead to government overreach. One such overreach was the U.S. Department of Education’s continual deferment of student loan payments. The Mackinac Center for Public Policy and the New Civil Liberties Alliance are challenging this unconstitutional extension in a lawsuit against the department.
The March 2020 CARES Act gave financial relief to borrowers by suspending monthly payment obligations for federal student loans. This was supposed to be a short-term solution, but the program is still in force. The suspension on interest accruals has so far cost taxpayers $150 billion.
The pause enacted by Congress was meant to last six months. President Donald Trump bypassed Congress and extended the pause for three months in September 2020. The Biden administration has followed suit by extending the pause another six times.
The most recent extension, announced in November 2022, came after the administration said it had granted a final extension. Payments are scheduled to resume in August.
The administration said it granted the latest extension because of uncertainties brought by lawsuits against its plan to cancel certain college loan debt. Several lawsuits, including one from the Pacific Legal Foundation and another from the Cato Institute, challenge the constitutionality of the plan. The U.S. Supreme Court will soon decide whether the administration can unilaterally forgive $400 billion in student loan debt.
Continuing to defer payments through executive action is unconstitutional as well as bad policy. Debt that individuals willingly take on should not be offloaded to taxpayers, whether through pausing repayments and interest accrual or through outright cancellation.
The Department of Education keeps changing its justification for continuing to defer loan repayments. The department relied on economic hardship provisions of the Higher Education Act of 1965 for the earliest extensions but later cited the HEROES Act of 2003. It then stopped citing legal authorities and quit publishing new extensions in the Federal Register.
The Mackinac Center is both the counsel and plaintiff in the lawsuit. The loan pause has a direct negative effect on nonprofit organizations by diluting the value of the Public Service Loan Forgiveness Program. This program, enacted in 2007, provides partial debt forgiveness to student loan borrowers who work ten years at 501(c)(3) nonprofit organizations and make consistent payments. Extending debt cancellation to all borrowers, regardless of where they work, weakens a benefit Congress intended exclusively for nonprofit organizations. By continuing the pause, President Biden is overriding a policy that was duly enacted by Congress, in favor of an executive branch fiat that violates the Constitution and is costing the taxpayers billions.
This isn’t the first time the Mackinac Center has stood up to unlawful power grabs during the pandemic. When the Michigan Occupational Safety and Health Administration announced excessive business penalties and fines, we took it to court and got the penalties rescinded. When the Michigan Department of Health and Human Services appeared to conceal the true number of COVID-19 deaths occurring in long-term care facilities, we worked with Pulitzer-Prize winning journalist Charlie LeDuff to challenge the department. This uncovered the truth that the department had been significantly undercounting deaths. We fought back when Gov. Gretchen Whitmer unilaterally imposed COVID-19 policies without the input of the Legislature. The Michigan Supreme Court struck down her powers and declared them unconstitutional.
Most recently, we protected taxpayers nationwide after the Michigan Education Association and its insurance affiliate wrongfully took $12.5 million in Paycheck Protection Program loans. These loans were meant to help small businesses harmed by the government-imposed shutdowns, not unions.
It’s nothing new for the government to exert additional powers during a time of emergency. But at some point, all emergencies must come to an end. We will continue to oppose executive overreach and hold the government accountable. It’s time bureaucrats and executive branch officials realize they can’t toss checks and balances aside simply because they believe there is a crisis.