Biden will extend freeze on student loan payments

President Biden plans to extend the student loan payment freeze for up to eight months so that no interest accrues on the debts until a legal battle breaks out.

Amid the legal back and forth over the Biden administration’s plan, federal borrowers have been left in the dark about whether up to $20,000 of their debts will be erased. Payments were supposed to start again on January 1, but the White House will now push that date back to 60 days after the plan is approved by the court to go ahead, or 60 days after June 30 if the lawsuit is not resolved by then. .

Federal borrowers now have more than a three-year break to pay back their loans since the moratorium was first put into effect in March 2020.

“Hardly trying to block student debt forgiveness in the courts has created massive financial uncertainty for millions of borrowers who can’t determine their family budget or even plan the holidays without a clear picture of their student debt, and it’s just flat out wrong,” he said. he. Education Minister Miguel Cardona in a statement.

“We’re extending the payment pause because it would be highly unfair to ask borrowers to pay a debt they wouldn’t have to pay were it not for the unfounded lawsuits filed by Republican officials and special interests.”

Earlier this week, the Biden administration asked the Supreme Court to weigh in and quash an “improper injunction” against their plan.

The St. Louis-based 8th US 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 order would remain in effect 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 proceed.

The Ministry of Education is no longer accepting new applications. The department said it will hold applications from the more than 26 million borrowers who have already asked for forgiveness.

House Education and Labor Committee Republicans ripped into the expansion.

“This policy is costing taxpayers BILLIONS every month if it continues. A return to redemption is long overdue,” they wrote on Twitter.

Other Republicans attacked the renewal while Democrats celebrated.

“The Biden administration has just paused student loan repayments AGAIN. These kinds of reckless actions are part of the reason #Bidenflation is so bad,” wrote Rep. Lisa McClain, R-Mich, on Twitter.

A lower court on October 21 had dismissed the case filed by Nebraska, Missouri, Arkansas, Iowa, Kansas and South Carolina, arguing that they lacked legal standing.

The main obstacle for those seeking legal administration for the Biden administration’s plan is finding a plaintiff they can prove has been harmed by the policy.

The appeals court determined Monday that Missouri had legal authority to bring the case because a major loan manager headquartered in the state, Missouri Higher Education Loan Authority, or MOHELA, would lose revenue under the plan.

“And since at least one party probably has status, we don’t need to discuss the status of the other states,” the panel concluded.

Biden’s plan would forgive up to $20,000 in federal student debt for Pell Grant recipients and up to $10,000 for other student borrowers earning up to $125,000.

The average student loan balance is currently over $30,000.

The impartial Congressional Budget Office calculated in September that the debt cancellation would eliminate about $430 billion of the outstanding $1.6 trillion in outstanding student debt and benefit about 40 million people.

The plan led to a slew of legal challenges, most of which were unsuccessful. The Supreme Court rejected a request by a group of Wisconsin taxpayers to block the policy on multiple occasions.

In September, the nonpartisan Congressional Budget Office said the plan is expected to cost $400 billion over the next 30 years. Student loan debt has reached $1.73 trillion

The Department of Education had relied on a law known as the HEROES Act, under which Congress gave the president the power to erase or pause student loan debt in times of national emergency and named Covid-19 the emergency.

Republican-led states have said the program goes too far because the post-9/11 HEROES law was for emergencies such as a terrorist attack.

Education sec. Miguel Cardona said he wanted to process as many debt relief applications as possible before payments resume in January.

The Committee for a Responsible Federal Budget expects the student loan plan to cost taxpayers about $500 billion.