Could student loan forgiveness still happen this year? It’s possible
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When President Joe Biden announced a sweeping student debt cancellation plan over the summer, millions of Americans celebrated that their financial situation soon seemed to be improving.
But now the Biden administration finds itself unable to begin providing its relief due to a court-ordered suspension of its policy.
Here’s where forgiveness stands and what could happen next.
How we got here
On August 24, Biden announced that tens of millions of Americans would be eligible for student loan forgiveness: up to $20,000 if they received a Pell Grant, which is a type of assistance available to families in low income, and up to $10,000 if they didn’t.
Long before Biden — acting under pressure from consumer advocates and other Democrats — made his move, Republicans had criticized student loan forgiveness as a handout to affluent college graduates. They also argued that the president lacked the power to write off consumer debt himself without Congress.
Unsurprisingly, legal challenges poured in.
So far, at least six lawsuits have been filed against the president’s plan. A few of those lawsuits have already been thrown out for lack of so-called legal standing, a lame term that means a plaintiff must prove that forgiving a student loan would harm them to successfully challenge.
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That’s what happened initially to the legal challenge brought by six Republican-led states – Nebraska, Missouri, Arkansas, Iowa, Kansas and South Carolina, which accused the president of overstep his authority. U.S. District Judge Henry Autrey in St. Louis ruled that while the states raised “significant and significant challenges to the debt relief plan,” they ultimately lacked the legal standing to pursue the case.
However, the GOP-led states did not give up after their lawsuit was dismissed. They appealed and asked the court to suspend the president’s plan, which was to begin rolling out in October, while their claim was considered.
The 8th U.S. Circuit Court of Appeals granted the states’ emergency motion, leaving the Biden administration unable to begin canceling any student debt just yet.
What could happen next?
If the 8th U.S. Court of Appeals denies the six GOP-led states’ request to stop the pardon, they’ll likely appeal to the U.S. Supreme Court, higher education expert Mark Kantrowitz says . The highest federal court is likely to decline to take the case, however, Kantrowitz added. (He has already denied two other requests to suspend the president’s plan.)
If the appeals court finds the states have legal capacity, the case could drag on for months, experts say. If the US Department of Education loses, it will likely appeal to the Supreme Court.
Originally, the Ministry of Education said borrowers would receive a discount within six weeks of applying. The full application was launched on October 17 and within three weeks some 26 million people had applied for the aid. Loan officers had 15 days to apply the discount to a borrower’s account after being notified, Kantrowitz said.
Of course, this deadline is now disturbed by the legal reprieve.
If the temporary pause is lifted in the coming days, borrowers who have already applied for forgiveness or those who do so by Nov. 15 could still get the relief before federal student loan repayments resume in January. Payments have been suspended by a Covid pandemic-era relief policy since March 2020.
“If the discount is still on hold by the end of the year, the Biden administration is likely to extend the payment pause even further,” Kantrowitz said.
The outcome of the midterm elections could also impact what happens next.
If Democrats retain control of the House and win Senate seats, they could pass legislation canceling student debt. However, it seems more likely that Republicans will control the House and Democrats will take a majority in the Senate, Kantrowitz said.
“It will prevent Democrats from passing legislation to implement loan forgiveness if the courts permanently block the president’s plan,” he said.
For now, the Department of Education encourages borrowers to continue applying for forgiveness, although it notes that “we are temporarily restricted from processing debt discharges”.