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. The administration announced its 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 — in August. It also extended the repayment moratorium, which was set to expire at the end of August, until Dec. 31. According to the Congressional Budget Office, the relief plan will cost roughly $400 billion over the next 30 years. Forty-three million borrowers are said to be eligible for some forgiveness, "with 20 million who could get their debt erased entirely," The Associated Press writes. The White House says 26 million people have thus far applied for forgiveness, and 16 million have been approved.

But the program has been met with a bevy of lawsuits in the months since, prompting the Education Department to halt applications. And though many of those who had already applied for forgiveness have been notified of approval, the administration has said it can only discharge their debts "if and when we prevail in court." Here's where things stand:

What's going on in the courts?

You might be wondering how Biden has the authority to cancel student debt without approval from Congress. And it's complicated. The president is actually employing 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. And in this case, the national emergency is COVID-19. But because Biden is circumventing Capitol Hill, lawsuits have followed. 

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 that his plan threatens their "future tax revenues," CNBC writes. The panel's injunction puts the relief program on pause until the same court or another one issues a final ruling on the matter. A judge initially decided against the states in question, saying they couldn't prove they were "personally harmed" by Biden's executive order, as Vox explains. But with its injunction, the appeals court decided one state — Missouri — had in fact been wronged by the plan, and that "since at least one party likely has standing, we need not address the standing of the other states," per CNBC

This injunction followed an earlier decision from Texas-based U.S. District Court Judge Mark Pittman. He struck down the relief plan in the wake of an October challenge from the conservative Job Creators Network Foundation, which filed its suit on behalf of two student loan borrowers. They claimed the administration had violated federal procedure by not seeking public comment on the 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, or wiping out debt was a valid and necessary response to the pandemic. He also said the move required congressional authorization.

For its part, the White House stands by its authority to implement the program and calls the lawsuits "baseless." 

Will this go to the Supreme Court?

The administration has officially asked the Supreme Court to reverse the injunction issued by the appeals court in St. Louis, per a Nov. 18 filing. The government also separately asked the 5th Circuit Court of Appeals to review the Texas decision and unblock that ruling. 

The administration is hoping a ruling from the high court will allow the program to take effect as legal challenges unfold. But per AP, even those who support the plan are concerned about its chances before the court's conservative majority — should the emergency appeal make it that far. At this stage, notes The Wall Street Journal, the court "won't be giving full consideration to whether the debt relief program is legal, but practically speaking, the court's decision on the administration's request could determine the fate of [Biden's] signature program." Justice Amy Coney Barret denied two other requests to block the program without explanation.

The timeline of any decision(s) on the matter isn't clear.

When will payments restart?

Given the court challenges, the administration has again extended the 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," higher education expert Mark Kantrowitz told NextAdvisor. "It can take time for the cases to work their way through the courts." You can get ahead by "staying informed," NextAdvisor continues. Sign up for updates from the Department of Education, or maybe even 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 this 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 arguing against student debt cancellation often claim that it is unfair to those who have already paid off their loans or didn't go to college. They argue 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 are also worried about inflation, which they fear might worsen under the new policy.

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

In June, the Education Department announced it would cancel $6 billion in loans from about 200,000 borrowers who claimed they were misled and defrauded by their college. And the administration also previously approved $26 billion in loan forgiveness for "about 1.3 million borrowers, including public service employees and defrauded students," CNBC writes.

Update Nov. 29: This article has been updated throughout.

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