Civil group seeks revival of student loan forgiveness lawsuit

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(The Center Square) – The New Civil Liberties Alliance filed an opening brief this week with the U.S. Court of Appeals for the 6th Circuit, asking the court to bring back a lawsuit brought by the Mackinac Center for Public Policy against the U.S. Department of Education over student loans.

The lawsuit started in April 2023 under the Biden administration. The suit challenged the department’s decision to extend a federal pause on student loan interest accrual and payments beyond the six months originally authorized by Congress. 

According to NCLA, the Department of Education continued the policy for nearly three additional years without statutory authority, effectively forgiving 35 months of interest on student loans. 

NCLA estimates the cost to taxpayers was at least $175 billion. 

In 2024, a federal district court dismissed the case, ruling that the Mackinac Center lacked standing to sue. NCLA is asking the appeals court to reverse that decision and allow the case to proceed. 

The Mackinac Center argues that the department’s actions harmed public-service employers by undermining the Public Service Loan Forgiveness program. 

Established by Congress, PSLF allows qualifying employees to have their remaining student loan balances forgiven after 10 years of work with public-service employers, including nonprofits.

NCLA Senior Litigation Counsel Russ Ryan said the policy reduced incentives for borrowers to pursue loan forgiveness through public-service employment. “Nonprofits like Mackinac are harmed every time the Department of Education illegally forces taxpayers to bail out student loan debtors,” Ryan told The Center Square.

Ryan also said taxpayers bear the financial burden of the policy. “Taxpayers should care because the department is forcing them to pay off other people's student loans, which is especially unfair to taxpayers who never went to college, or who have already responsibly paid off their own loans, or who depleted their life savings to pay for college instead of taking out loans."

NCLA also argues that the Department of Education's actions violated the Constitution’s appropriations clause by canceling debt without congressional authorization and distorted the labor market in ways that conflicted with Congress’s design for the PSLF program.

“Governmental agencies cannot blithely ignore the law without expecting to answer for the harm their unlawful actions cause organizations like the Mackinac Center,” said Daniel Kelly, senior litigation counsel at NCLA, in a statement. “We trust the Court of Appeals will make that clear to the Department of Education.”

The department has not yet publicly responded to the appeal. The 6th Circuit will determine whether the Mackinac Center has standing to challenge the policy and whether the case can move forward in district court.