WASHINGTON — The Department of Education announced Tuesday that it is extending the pandemic-era pause on federal student loan repayments until June 30, while legal challenges to the student debt relief program of administration are being argued in court.
The agency said if the student debt relief program was not in place by June 30 and the litigation was still pending in court, student loan repayments would begin 60 days after that.
“Payments will resume 60 days after the Department is allowed to implement the program or the litigation is resolved, giving the Supreme Court an opportunity to resolve the case during its current term,” said the department in a statement. “If the program has not been implemented and the dispute has not been resolved by June 30, 2023, payments will resume 60 days after that.”
Earlier, the administration said the pandemic-era hiatus would expire on New Year’s Eve. Two lawsuits blocking the Biden plan, including one brought by six GOP-led states, have been appealed by the Justice Department, but it’s unclear how long the legal process could take.
We are extending the payment pause because it would be deeply unfair to ask borrowers to pay debt that they would not have to pay, were it not for the baseless lawsuits by Republican officials and special interests.
– US Secretary of Education, Miguel Cardona
President Joe Biden, in a Tuesday Tweetersaid the extension will “give the Supreme Court time to hear the case in its current term.”
“I am confident that our student debt relief plan is legal,” he said on Twitter.
Prior to the announcement, more than 200 advocacy groups had urged Biden to extend the hiatus.
In a Monday letterthe groups argued that if student loan repayments restart, it would be a financial setback for borrowers, especially at a time of record inflation.
“We, the 225 undersigned organizations, urge you to immediately extend the payment pause until your administration is able to fully implement debt relief for all eligible borrowers and continue to use all legal authorities available to you to effect this relief,” according to the letter.
“We cannot allow these blatantly political lawsuits to throw millions of borrowers into financial disaster,” the letter said. “Throwing millions of borrowers back into repayment while the status of debt relief remains uncertain is a recipe for disaster and will lead to widespread confusion and drive borrowers to failure.”
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Most of the organizations that signed the letter include labor groups like the AFL-CIO, legal organizations like the ACLU and NAACP, and debt cancellation advocacy groups like the Debt Collective and the Student Debt Crisis Center.
The Trump administration implemented the pause on student loan repayments due to the coronavirus pandemic and the Biden administration has extended it several times.
A federal appeals court issued a national injunction which prevented the Biden administration from implementing its student debt relief plan following the challenge of the six GOP-led states – Nebraska, Missouri, Arkansas, Iowa, Kansas and South Carolina.
The Biden administration has asked the United States Supreme Court to overturn the nationwide injunction.
“The erroneous Eighth Circuit injunction leaves millions of economically vulnerable borrowers in limbo, uncertain about the size of their debt and unable to make financial decisions with an accurate understanding of their future repayment obligations,” the statement wrote. Solicitor General Elizabeth Prelogar in the case in the United States. Supreme Court.
Late August, Biden announcement it would forgive up to $20,000 in federal student loan debt for Pell Grant borrowers and up to $10,000 for all other borrowers with incomes below $125,000 for an individual and $250,000 for a household .
The program would only apply to current borrowers, not future ones, and income levels for the 2020 and 2021 tax years would be taken into account. Student borrowers who have private student loans would not be eligible.
State attorneys general who launched the legal challenge argued that the loan relief program threatened those states’ future tax revenue and that the plan exceeded the authority of Congress.
The three-college judge for the St. Louis 8th Circuit Court of Appeals implemented the injunction “until further order of this court or the Supreme Court of the United States.”
Following the decision, White House press secretary Karine Jean-Pierre said the White House believed it had the legal authority to carry out the program.
“The administration will continue to fight these baseless lawsuits brought by Republican officials and special interests and will never stop fighting to support America’s working and middle class,” she said in a statement.
26 million candidates
Over 26 million student borrowers have applied to the program and 16 million have been accepted, according to the Ministry of Education.
The Nonpartisan Congressional Budget Office found that the program would add $400 billion to the national deficit over 30 years. The agency found that the pause in federal student loan repayments cost $20 billion from September to December 2022.
Adam Looney, senior fellow at the Brookings Institute – a left-leaning think tank – said while the cost seems high, for borrowers who qualify, it’s an average monthly savings of around $59.
Looney was previously senior economist for public finance and fiscal policy on former President Barack Obama’s Council of Economic Advisers, and was an economist at the Federal Reserve Board.
“It’s like a tax cut,” Looney said of student borrowers who would qualify for debt relief.
The Biden administration stopped accepting requests for student debt relief after a second decision from a Texas federal judge who separately ruled that the program was illegal.
In Fort Worth, U.S. District Judge Mark Pittman, appointed by former President Donald Trump, ruled the program was an “unconstitutional exercise of the legislative power of Congress.” It ruled in favor of two borrowers, backed by a Conservative advocacy group, who took up the challenge.
The Ministry of Justice has already appealed this decision.
Pittman wrote in his opinion that “[w]he program is good public policy not the role of this Court to determine.
Sabrina Calazans, outreach director at the Student Debt Crisis Center, said ahead of Tuesday’s announcement that the Biden administration should resume its pause on student loan repayments. The center also signed the letter to the White House from more than 200 organizations.
“We advocate an extension of the payment pause until student debt forgiveness is applied to borrowers’ accounts,” she said. “We believe borrowers should be able to get their debt forgiven and not have to make payments until that happens because they have been promised that relief.”
Calazans, who has student loan debt herself — federal and private loans — and is a first generation student, said the break in repayments had been a lifeline for her and her family. The break did not include private loans, which she has, so she had to continue those payments throughout the pandemic.
“People were struggling before the pandemic started,” she said of student loan debt. “It was already a crisis that people were dealing with before, so it’s been around for a long time, not just recently.”
Calazans said student borrowers who have applied to the Department of Education for debt relief are starting to receive emails that their student debt forgiveness applications have been approved, but the lawsuits are blocking it.
“People are excited about the prospect of having their debt canceled – whether in whole or in part – and now that hope they had is suddenly stopped for now because of the stalling of this plan,” he said. she declared. “Borrowers are in this bind.”
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The Ministry of Education has sent emails to student borrowers who have applied for and been approved for the Debt Relief Program with the subject line: “Your application for student loan debt relief has been approved. »
However, the body of the email reads: “Unfortunately, a number of lawsuits have been filed challenging the program which has blocked our ability to repay your debt at this time.
“We strongly believe that the lawsuits are without merit, and the Department of Justice has appealed on our behalf,” according to the email. “We will retain your claim information and continue our review of your eligibility if and when we prevail in court. We will keep you posted as there are new developments.