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Biden hits pause on federal student loan payments again pending court ruling

The payments have been paused in hopes Supreme Court will lift injunction during this court session, White House says

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Light illuminates part of the Supreme Court building on Capitol Hill in Washington.

Light illuminates part of the Supreme Court building on Capitol Hill in Washington, Wednesday, Nov. 16, 2022. The Biden administration plans to ask the Supreme Court to reinstate the president’s student debt cancellation plan, according to a legal filing warning that Americans will face financial strain if the plan remains stalled in court when loan payments are scheduled to restart in January.

Patrick Semansky, Associated Press

President Joe Biden’s plan to extend student loan forgiveness is tied up in the courts, its fate uncertain. But those debtors can continue to pause their payments through June while the issue is sorted out.

“The U.S. Supreme Court is preparing to weigh in on the legal battle over President Biden’s student loan forgiveness program, which is currently blocked by two different rulings,” Time reported. “But, legal experts say that even if the court sides with the Biden Administration, there are still legal hurdles that will delay relief for borrowers.”

Proposed debt relief would give most who still owe on federal student loans up to $10,000 in debt forgiveness. Those who qualified for Pell Grants, which are for low-income students, would get up to $20,000. The amount could be less in both cases if students owe less, capped at the actual amount of their debt up to that limit.

The relief is income-capped, available to individuals who earned less than $125,000 in either 2020 or 2021 and married couples or heads of households with incomes below $250,000 in either of those years.

Those with student loan debt not held by the federal government would not get debt relief.

Federal student loan payments have been paused since March 20. Previously, Biden said the extension through 2022 would be the last.

Per CNN, “Borrower balances have effectively been frozen since then, with no payments required on most federal student loans. During this time, interest has stopped adding up and collections on defaulted debt have also been on hold.”

The New York Times said the Congressional Budget Office estimates the student loan forgiveness plan could cost $400 billion.

Fox Business cited a report from the nonpartisan Committee for a Responsible Federal Budget that said the latest extension could cost taxpayers an additional $40 billion.

Student loan payments are slated to resume 60 days after debt forgiveness begins or after the Supreme Court rules, which Biden hopes will be in the current term, according to the Department of Education. Absent a resolution by June 30, repayments will begin 60 days after that.

“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,” Education Secretary Miguel Cardona said in a written statement.

Court battles

Last week, Solicitor General Elizabeth Prelogar asked the Supreme Court to vacate an injunction on the debt-forgiveness program or, alternatively, hear the case quickly, during the current term, so that borrowers who would qualify under the plan know whether their debt will be forgiven.

This week, the U.S. Department of Education sent notices to students who had already applied and qualify if the plan moves forward. “We reviewed your application and determined that you are eligible for loan relief under the Plan,” the messages read. “We have sent this approval on to your loan servicer. You do not need to take any further action.”

The message continues, “Unfortunately, a number of lawsuits have been filed challenging the program, which have blocked our ability to discharge your debt at present. We believe strongly that the lawsuits are meritless and the Department of Justice has appealed on your behalf. Your application is complete and approved.”

It concludes with a promise to keep the applicant informed as the lawsuits are decided.

But the department has paused taking new applications for student debt relief pending the outcome of the legal challenges.

A Texas judge blocked the debt forgiveness program in early November and the 8th Circuit U.S. Court of Appeals issued a preliminary injunction on Nov. 14.

Time reported, “Legal experts say it’s hard to predict how the Supreme Court will rule, given the many complicated questions at play. The court could eventually rule on the legal merits of the student loan forgiveness program. However, right now, the court is only deciding whether to allow the Eighth Circuit’s injunction blocking the program to continue.”

The article said that the focus of the cases has largely centered on whether the six Republican-led states that sued have legal standing to sue. U.S. District Judge Henry Autrey initially dismissed the case on that basis, saying the “effect upon future taxation is uncertain.”

On appeal, the 8th Circuit decided that one of those states, Missouri, probably does have standing, as its Missouri Higher Education Loan Authority, which services student loans, will lose money if the debt is canceled and could be “an arm of the state of Missouri.” It didn’t rule on the merits, but granted the preliminary injunction.

Experts see many possible outcomes, including the possibility the forgiveness plan will be stopped as executive action overreach.

Meanwhile, White House press secretary Karine Jean-Pierre told media on Friday that “we are confident in our legal authority to carry out this program, and we won’t let these baseless lawsuits stop us.”

And Biden on Tuesday posed a video to Twitter, declaring confidence the plan is legal.