While President Biden’s debt forgiveness plan faces legal challenges, the White House has postponed payments and interest.
As President Joe Biden’s plan to cancel up to $20,000 per eligible borrower faces numerous legal challenges, the moratorium on federal student loan payments has been extended once more.
Payments were previously set to resume on Jan. 1; however, Biden stated in a video statement that the pause was being prolonged “to no later” than June 30, 2023, to allow the Supreme Court time to hear the case during this term.
Biden stated that it is unfair to expect the tens of millions of borrowers who qualify for relief to resume making payments on their student loans while the courts review the lawsuit.
The more than 45 million Americans who carry a total of $1 are the target audience for the program. 6 trillion in outstanding student loans. Cost estimates from the nonpartisan Congressional Budget Office put the total over 30 years at $400 billion.
Student loan payments have been on hold since March 2020. The moratorium was supposed to end in September 2020, but former President Donald Trump and Vice President Joe Biden each extended it by three more times.
Find out about federal student loan payments here, including which loans are suspended and what happens to defaulting borrowers.
When will student loan payments resume?
After multiple extensions since they were first paused in March 2020, student loan payments and interest are now slated to restart 60 days after legal challenges have been resolved, according to the US Education Department. Should the courts not reach their final rulings by June 30, payments would still resume 60 days later — on Aug. 29, 2023. Its always possible the moratorium will be extended again, but experts say that would only be a gambit to buy time, not a permanent solution to the student loan crisis.
The intent is “to make sure borrowers dont have the rug pulled out from under them, rather than an indefinite replacement for loan forgiveness,” an unnamed White House aide told The Washington Post.
What does Biden’s student loan forgiveness plan offer?
For those who earn less than $125,000 annually or married couples who earn less than $250,000 collectively, the program will forgive $10,000 in public student loans.
Federal Pell Grant recipients could receive an additional $10,000 in relief, for a total of $20,000 in forgiven student loan balances.
Which student loans are currently paused?
The moratorium on student loan payments and interest includes all federally held student loans, regardless of what company is servicing the loan. Eligible student loans include:
Student loans that are not eligible include:
If your student loans are eligible, payments and interest were automatically paused on March 13, 2020. If youre not sure whether your loan payments are paused or not, contact your loan servicer.
What are the legal challenges to the student loan forgiveness plan?
A Texas judge ruled this month that Vice President Biden’s proposal to forgive up to $20,000 in student loans for each qualified borrower constituted an unconstitutional exercise of “legislative powers” by the executive branch.
The Justice Department had originally argued that the Higher Education Relief Opportunities for Students Act of 2003 (the Heroes Act) gave the administration license to “alleviate the hardship that federal student loan recipients may suffer as a result of national emergencies.”
But on Nov. 10, Judge Mark Pittman ruled that the Heroes Act “does not provide the executive branch clear congressional authorization to create a $400 billion student loan forgiveness program.”
The White House appealed Pittmans ruling, but a federal appeals court issued an injunction against the plan during the appeals process.
There are also other legal hurdles: In September, Nebraska, Missouri, Arkansas, Iowa, Kansas and South Carolina filed suit, claiming Bidens plan threatened tax revenues from companies that invest in and service student loans.
At the time, Missouri Attorney General Schmitt said in a statement: “It will unfairly burden working-class families and those who chose not to take out loans or have paid them off with even more economic woes.” “At a time when many Americans are struggling to make ends meet, the Biden Administration’s unlawful order will only make inflation worse.” “.
District Judge Henry Autrey threw out the lawsuit on the grounds that the six states failed to establish legal standing in the case. But the attorneys general in the Republican-dominant states have already appealed. Another challenge, by the Wisconsin-based Brown County Taxpayers Association, was rejected by Supreme Court Justice Amy Coney Barrett on Oct. 20.
What happens to borrowers who were in default?
According to the US Department of Education, defaulting borrowers will automatically receive a “fresh start.” All defaulted accounts will be restored to good standing, and any delinquencies will be “cured,” enabling borrowers to fix their credit and gain access to initiatives like income-driven repayment plans and Public Service Loan Forgiveness, a program for student loan relief for those who work for the government or nonprofit organizations.
The federal student loan payment pause started in March 2020, and since then, collections on past-due debt have been suspended.
In an April 2022 statement, Secretary of Education Miguel Cardona said, “During the pause, we will continue our preparations to give borrowers a fresh start and to ensure that all borrowers have access to repayment plans that meet their financial situations and needs.”
Will student loans be paused again after August 2022?
Before payments resume, borrowers of federal student loans — as well as the courts — have more time to understand the debt forgiveness process. The payment pause has been extended through June 30, 2023.
Will student loans be paused again after December 2022?
In response to legal challenges regarding President Biden’s student loan forgiveness program, the Education Department declared that it is extending the current student loan pause into 2023. Due to the pandemic, all federal student loans held by the government stopped receiving payments and accruing interest in March 2020.
Will Biden extend student loan relief?
The student loan repayment moratorium will once more be extended, according to the Biden administration. While its promise of federal relief is still pending in court, the Biden administration is extending its student loan repayment pause, which was supposed to end at the end of the year, into 2023.
Are they postponing student loans again?
The White House has once more extended the student loan payment moratorium despite ongoing legal challenges.