Due to multiple lawsuits challenging the legality of President Joe Biden’s widespread student loan forgiveness plan, the U.S. Department of Education announced Tuesday it is once again extending the pause on federal loan payments and interest accrual until things get sorted out.
That will come as a relief to the tens of millions of borrowers who are left wondering what their student loan balance will be in January, when payments were set to resume.
When Biden announced his one-time cancelation plan in August, he also extended the COVID-19 payment pause for what his administration said would be the “final” time. But the legal challenges brought by conservative groups against cancelation changed that calculus.
“The extension will alleviate uncertainty for borrowers as the Biden-Harris Administration asks the Supreme Court to review the lower-court orders that are preventing the Department from providing debt relief for tens of millions of Americans,” the department said in a statement.
When, exactly, federal student loan bills will now be due is dependent on the U.S. Supreme Court. Payments will resume 60 days “after the Department is permitted to implement the program or the litigation is resolved,” the Department of Education said. “If the program has not been implemented and the litigation has not been resolved by June 30, 2023—payments will resume 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,” said U.S. Secretary of Education Miguel Cardona in a statement.
Currently, the U.S. Supreme Court is reviewing whether to hear Nebraska v. Biden, a case brought by six conservative states that claim Biden’s debt cancelation plan is unlawful. Separately, a federal judge in Texas also declared the program unlawful in Brown v. US Department of Education. The government is also appealing that decision.
The Biden administration opened applications for forgiveness last month, before the entire program was blocked. In that time, some 26 million people applied for the widespread loan cancelation, which could wipe away $10,000 to $20,000 in student loan debt per borrower. The administration began notifying the 16 million people whose applications were processed and approved this weekend. But it cannot institute any relief while the legal challenges are ongoing.
As the lawsuits have dragged out the forgiveness process, borrowers and consumer advocates have been vocal about the administration delaying payments restarting again to cause less confusion. For many borrowers, $10,000 to $20,000 in cancelation would completely erase their debt.
“Borrowers can use the additional time to ensure their contact information is up to date with their loan servicers and consider enrolling in electronic debit and income-driven repayment plans to support a smooth transition to repayment,” the department said.
Our new weekly Impact Report newsletter will examine how ESG news and trends are shaping the roles and responsibilities of today's executives—and how they can best navigate those challenges. Subscribe here.
