Biden will extend freeze on student loan payments: White House puts fees on hold as it battles to save its $500 billion forgiveness program in lawsuits saying it as an abuse of power
- Payments were set to begin again January 1, though a legal back-and-forth left borrowers uncertain whether they were required to pay back debts
- The White House will now push that date back to either 60 days after the plan is given court-ordered approval to move forward or 60 days after June 30
- Earlier this week the Biden administration asked the Supreme Court to weigh in and do away with an ‘erroneous injunction’ against their plan
President Biden is planning to extend the pause on student loan payments by at most another eight months, keeping interest from accruing on the debts until legal battles play out.
Amid the legal back-and-forth over the Biden administration’s plan, federal borrowers have been left in limbo as to whether up to $20,000 of their debts will be erased. Payments were set to begin again January 1, but the White House will now push that date back to either 60 days after the plan is given court-ordered approval to move forward or 60 days after June 30 if the litigation has not been resolved by then.
‘Callous efforts to block student debt relief in the courts have caused tremendous financial uncertainty for millions of borrowers who cannot set their family budgets or even plan for the holidays without a clear picture of their student debt obligations, and it’s just plain wrong,’ said Secretary of Education Miguel Cardona in a statement.
‘We’re extending the payment pause because it would be deeply unfair to ask borrowers to pay a debt that they wouldn’t have to pay, were it not for the baseless lawsuits brought by Republican officials and special interests.’
Earlier this week the Biden administration asked the Supreme Court to weigh in and do away with an ‘erroneous injunction’ against their plan.
The St. Louis-based 8th U.S. Circuit Court of Appeals had issued a nationwide injunction temporarily barring the Biden administration from wiping out hundreds of billions of dollars in federal student loans, citing the ‘irreversible impact’ debt forgiveness would have.
The three-judge panel said the injunction would remain in place until ‘further order of this court or the Supreme Court,’ pending an appeal of a lower court decision to allow the student loan program to move forward.
The Education Department has now stopped accepting new applications for relief. The department said it will hold applications from the more than 26 million borrowers who have already applied for forgiveness.
A U.S. appeals court has extended a block on President Joe Biden’s plan to cancel hundreds of billions of dollars in student loan debt at the urging of six Republican-led states, a court filing on Monday showed
A lower court had on Oct. 21 dismissed the case made by Nebraska, Missouri, Arkansas, Iowa, Kansas and South Carolina, arguing they had no standing to sue.
The main obstacle for those looking to put forth a legal administration to the Biden administration’s plan has been finding a plaintiff they can prove has been harmed by the policy.
The appeals court determined Monday that Missouri had a legal standing to bring forth the case because a major loan servicer headquartered in the state, Missouri Higher Education Loan Authority, or MOHELA, would lose revenue under the plan.
‘And since at least one party likely has standing, we need not address the standing of the other states,’ the panel concluded.
Biden’s plan would cancel up to $20,000 in federal student debt for Pell Grant recipients and up to $10,000 for other student borrowers who make up to $125,000.
The average student loan balance is currently over $30,000.
The non-partisan Congressional Budget Office in September calculated the debt forgiveness would eliminate about $430 billion of the outstanding $1.6 trillion in outstanding student debt and about 40 million people would benefit.
The plan has attracted a whole host of legal challenges, most of which have been unsuccessful. The Supreme Court rebuffed a request from a Wisconsin taxpayers’ group to block the policy multiple times.
In September, the non-partisan Congressional Budget Office said the plan was expected to cost $400billion over the next 30 years. Student loan debt has reached $1.73 trillion
The Education Department had relied on a law known as the HEROES Act, where Congress gave the president the power to erase or pause student loan debts in time of national emergency and cited Covid-19 as the emergency.
Republican-led states have said the program is executive overreach because the post-9/11 HEROES Act was designated for emergencies like a terrorist attack.
Education Sec. Miguel Cardona said he wanted to process as many debt relief applications as they could before payments resume in January.
The Committee for a Responsible Federal Budget expects the student loan plan to cost taxpayers roughly $500 billion.