A federal appeals court has put a temporary hold on President Joe Biden’s one-time federal student loan forgiveness plan, delaying—possibly permanently—the implementation of the widespread loan cancellation.
The order came from the 8th U.S. Circuit Court of Appeals in St. Louis in Nebraska v. Biden, a case brought by six Republican-led states. It hasn’t completely blocked the program; rather, the order means the Biden administration cannot discharge any student loans until the court officially rules on the injunction request.
There are currently multiple lawsuits challenging the legality of the federal forgiveness program and others that have been dismissed. Most recently, a suit filed by a Wisconsin taxpayer was dismissed by the Supreme Court last week.
The administration had previously promised not to discharge any debt under the widespread forgiveness plan until Oct. 23 at the earliest and said that automatic forgiveness would not occur until after Nov. 14. Now there is no official date as to when forgiveness can actually begin.
That said, the Office of Federal Student Aid is still encouraging borrowers to apply on its website. It will continue to review applications behind the scenes and “quickly process discharges” if and when it’s allowed to.
“Application is open, but debt discharge is paused,” the site reads. “As a result of a court order, we are temporarily blocked from processing debt discharges.”
At least 22 million borrowers have already applied for forgiveness, the White House said Friday.
In Nebraska v. Biden, states including Arkansas, Iowa, Kansas, Missouri, Nebraska, and South Carolina are arguing the one-time relief plan would harm their tax revenues and investment portfolios, among other injuries. Specifically, Missouri alleges that MOHELA, a student loan servicing company, would be hurt by the widespread loan cancellation.
The case was previously dismissed by a district court judge, who found that none of the states had standing; the plaintiffs immediately appealed that decision. The Biden administration has until Monday evening to file its response to the plaintiffs’ appeal. The states will then respond in turn on Tuesday.
Biden’s student loan forgiveness plan
At the end of August, Biden announced that borrowers with federal student loans could have up to $10,000 or $20,000 forgiven, depending on their income and status in school.
Those earning an adjusted gross income under $125,000 in 2020 or 2021 and who received a Pell Grant while in school can receive up to $20,000 in loan forgiveness; everyone else under the same income limits can get up to $10,000.
Conservatives are against the plan, saying it benefits wealthy people and that the Biden administration does not have the authority to cancel debt on its own.
An analysis by the Penn Wharton Budget Model found working and middle-income households would disproportionately benefit. Meanwhile, the richest Americans would be almost completely excluded, given the income cap. One-third of borrowers will have their debt completely eliminated, according to data from the U.S. Department of Education.
The application for President Joe Biden’s one-time student loan forgiveness program went live last week.
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