Briefing

Everything to know about Biden's student loan forgiveness program

What it could mean for borrowers, and why it's stalled in the courts

​President Biden's student loan forgiveness program is off to quite a complicated start. First announced back in August, the administration's relief plan — which forgives up to $10,000 in federal student loans for borrowers earning under $125,000 a year, and up to $20,000 for Pell Grant recipients — has been met with a bevy of lawsuits in the months since, prompting the Education Department to halt applications. Here's where things stand:

What's going on in the courts?

In canceling student debt, Biden is relying on authority pulled from the 9/11-era HEROES Act, which gives the education secretary the power to relieve student loan requirements during periods of wartime or national emergency (the national emergency being COVID-19). But because the president used an executive order and circumvented Congress to do so, lawsuits have followed. 

In one instance, a federal appeals court in St. Louis in November blocked the relief program after six Republican-led states argued that Biden overstepped his authority and threatened their "future tax revenues" by implementing the plan, CNBC writes. A judge had previously decided against the states in question, saying they couldn't prove they were personally harmed by the order. But with the November injunction, the St. Louis appeals court decided one state — Missouri — had in fact been wronged by Biden's plan, and that "since at least one party likely has standing, we need not address the standing of the other states," per CNBC.

That ruling followed an earlier decision from Texas-based U.S. District Court Judge Mark Pittman, who struck down the relief program in the wake of an October challenge from the conservative Job Creators Network Foundation. That group, which filed its suit on behalf of two student loan borrowers, claimed the administration had violated federal procedure by not seeking public comment on the relief program before implementing it. "In this country, we are not ruled by an all-powerful executive with a pen and a phone," the judge wrote in his decision. Pittman's ruling rebuked the idea that the HEROES Act allows for widespread debt cancellation, and that wiping out debt was a valid and necessary response to the pandemic. He also said the move requires congressional authorization.

For its part, the White House has stood by its authority to implement the program and has decried the "baseless" lawsuits against it. "There's a whole lot of people affected and we're confident on the law," Biden said in early December.

Will this go to the Supreme Court?

The Supreme Court agreed to decide the fate of Biden's relief plan after the administration in November asked it to reverse the injunction issued by the appeals court in St. Louis. Oral arguments are set for the end of February, and the justices declined to unblock the program in the meantime. Their brief order included no reasoning and no dissents.

Lawyers for the challenging states believe the White House shouldn't be allowed to use the pandemic as justification for the program, while the administration is arguing against the states' standing. But according to higher education expert Mark Kantrowitz, the court is "more likely than not" to block the plan, he told CNBC. "The court's conservatives have been very aggressive in striking down the decisions of Congress and the president," added political science professor Gregory Caldeira. "I would not be surprised if the court invalidated the executive order."

Around the time of its November request, the administration separately asked the 5th Circuit Court of Appeals to review the Texas decision and put a hold on that order. But the court rejected the Education Department's request, thereby upholding Judge Pittman's order while challenges unfold. The Supreme Court will now also hear arguments in that case at the end of February.

When will payments restart?

Given the court challenges, the administration has once again extended the loan repayment pause, which was most recently set to lapse on Dec. 31, 2022. If the forgiveness program is revived before the end of June (when the Supreme Court's term usually ends), borrowers will have 60 days from that point until their payments resume. If not, payments will restart 60 days after June 30, 2023.

Per CNBC, the repayment pause has been extended seven times since it was first enacted by former President Donald Trump in March 2020.

Who is eligible for forgiveness?

Only borrowers making under $125,000 a year (and married couples or heads of households making less than $250,000 a year) are eligible for the maximum of $20,000 in federal loan forgiveness. Those "seeking debt relief can provide either their 2020 or 2021 incomes" when applying, CBS News writes; 2022 income will not apply, notes The New York Times. Further, only federal student loans, including PLUS loans, are eligible; neither private loans nor Federal Family Education Loans will qualify, the Times adds. Graduate loans qualify as well, though they are not eligible for the extra $10,000 offered to Pell Grant recipients, per The Washington Post

Current students can still qualify so long as their loans were disbursed by June 30, 2022.

How do I apply?

Most borrowers will have to apply for forgiveness through the Department of Education at StudentAid.gov. But the application is currently locked amid legal challenges.

In the meantime, "borrowers should sit tight," Kantrowitz told NextAdvisor. "It can take time for the cases to work their way through the courts." But you can get ahead by "staying informed," NextAdvisor continues. Sign up for updates from the Department of Education, or maybe research other possible debt relief programs, like Public Service Loan Forgiveness or Teacher Loan Forgiveness. The administration also initially said borrowers would have until Dec. 31, 2023, to apply, so those who have yet to submit an application might still have time once (and if) litigation concludes. 

Why is debt relief such a contentious issue?

Those in favor of widespread loan forgiveness claim that student debt delays and prevents borrowers from starting their lives — whether that means buying a house or having children — and also weighs more heavily on Black and Hispanic families, NerdWallet reports. Proponents also typically emphasize that "not all borrowers have degrees that boost earnings."

Those who argue against student debt cancellation often claim it is unfair to those who have already paid off their loans or didn't go to college. They posit that forgiveness tends to disproportionately benefit wealthy borrowers (those with the most debt often have a graduate degree or higher, leading to higher earnings) and fails to solve the underlying student debt crisis, per NerdWallet. Critics also worry about inflation, which they fear might worsen under Biden's policy. According to the Congressional Budget Office, the relief plan will cost roughly $400 billion over the next 30 years. 

Has the administration done anything else in the way of debt relief?

As another piece of its broader relief plan, the Education Department also recently introduced what it has described as a "student loan safety net" intended to keep borrowers from drowning in debt. The new proposal would revise the income-driven repayment plan known as REPAYE — under which borrowers' monthly payments are fixed to their income and household size, and loans are forgiven after a set number of years — in at least three big ways: (1) it would adjust down from 10 percent to 5 percent the amount of discretionary income borrowers must pay on their balance each month; (2) borrowers with original loans under $12,000 would be required to make monthly payments for just 10 years before cancellation, instead of the usual 20; and (3) unpaid interest would not accrue so long as borrowers meet their monthly payment. 

Update Jan. 11, 2023: This article has been updated throughout.

Recommended

Finance: Goldman loses its edge
Goldman Sachs logo.
Feature

Finance: Goldman loses its edge

Why are grad schools boycotting the U.S. News & World Report rankings?
University mascots.
Briefing

Why are grad schools boycotting the U.S. News & World Report rankings?

The fentanyl scourge
fentanyl.
Briefing

The fentanyl scourge

The rising price of true love
Dating app.
Feature

The rising price of true love

Most Popular

Yale honors Black girl who had the police called on her for spraying lanternflies
Spotted lanterflies
black girl magic

Yale honors Black girl who had the police called on her for spraying lanternflies

United States shoots down Chinese spy balloon over Atlantic Ocean
A suspected Chinese spy balloon over Montana.
99 Red Balloons?

United States shoots down Chinese spy balloon over Atlantic Ocean

McConaughey took movie role due to fortune teller's advice
Matthew McConaughey
how to cast a guy in one day

McConaughey took movie role due to fortune teller's advice