Three months ago, with much fanfare, the Biden administration launched a plan to cancel some student debt. But last week, after 26 million borrowers filed requests for relief, two court rulings brought that to a halt.
A federal judge in Texas suspended the program last Thursday. On Monday, the U.S. Circuit Court of Appeals for the Eighth Circuit in St. Louis ruled against the program, extending a ban it placed on the program in October. The Texas federal judge ruled that the program was unlawful, saying it violated Congressional powers.
The plan would forgive $10,000 in student loan debt for borrowers earning less than $125,000 or households earning less than $250,000. Pell Grant recipients would be waived up to $20,000. The Budget Office of Congress appreciated that the program will cost $400 billion over the next 30 years.
A banner on the Department of Education’s Student Assistance website conditions that the debt relief program will not accept any applications for the time being. For those who have already applied, the statement said the department will keep those applications.
For college financial aid offices, many of which are understaffed, the lawsuits have prompted waves of questions and concerns from current students and alumni. The program’s constant stop-and-go has left borrowers feeling like “a political ping-pong ball,” a grant official said.
“We’re in a pretty complicated place, and even if we expected this stop-go nature, the fact that we’re right in the middle of it is causing a lot of confusion and anxiety among borrowers,” said Justin Draeger, president and chief executive of the National Association of Student Financial Aid Administrators or Nasfaa. “Trying to keep track of multiple lawsuits and the technical details only adds to the confusion.”
President Biden said in a speech on November 3 – a week before the program was suspended – that the administration was on track to cancel debt for 16 million borrowers. It’s in the air now.
Another key question is whether borrowers need to start making payments on their state student loans in January — something they haven’t had to do since the Biden administration suspended payments in March 2020.
“It just makes it difficult for financial aid offices to #1 put together any plan, but also, #2, to also answer questions from students,” said Aaron Basko, associate vice president of enrollment services at Lynchburg University. “Obviously they’re getting calls, and they really don’t have any answers, more than what’s in the headlines.”
With the payments start date looming, Draeger hopes the government will extend the pause as court decisions expire.
“To have these borrowers start making repayments and then have to go backwards and roll out those payments and then onboard — that complicates a complicated process,” Draeger said.
The Washington Post reported on Tuesday that the Biden administration is discussing extending the pause.
According to a recent survey of more than 31,000 borrowers by the Student Debt Crisis Center, a nonprofit that campaigns for debt relief, two-thirds said they had not recovered financially from the pandemic.
“This really shows us how persistent these financial obstacles are for student loan borrowers and why we need not just short-term relief, but long-term relief like extending the student loan payment pause and also permanent relief like debt relief,” said Cody Hounanian, executive director of the Student Debt Crisis Center.
Student debt relief had been on hold since October, when the US Circuit Court of Appeals for the Eighth Circuit temporarily blocked the program in response to a lawsuit by six Republican-led states.
The White House immediately appealed Thursday’s verdict. The administration has not announced whether it will appeal Monday’s verdict.
in one expression A White House official told the Associated Press after Monday’s decision that the Biden administration believes the program has legal authority and that “there is a need to help borrowers most in need as they recover from the pandemic.”
With court cases dragging on, borrowers are unlikely to know the fate of the program for weeks. Meanwhile, unless things change, loan payments will resume soon.
“What we are advising students is that unless there is another extension, they should be prepared to go into repayment in January,” said Kenneth Ferreira, who oversees student financial services at Franklin Pierce University.
Ferreira said he and other administrators tell students and alumni to keep an eye out for updates from the Department of Education and advise them to keep an eye out for emails from their financial aid offices.
“The last thing you want is to get into criminal status because you really know what’s currently uncertain,” Ferreira said.