What’s next for student debt relief?

United States Court of Appeals for the Eighth Circuit has blocked the plan

Biden announced the loan cancellation program in August. Under its terms, many borrowers who earned less than $125,000 during the pandemic should receive up to $10,000 in student loan forgiveness. Borrowers who received Pell Grants, federal grants that target low-income college students, may receive as much as $20,000 in debt forgiveness.

Apply for Student Loan Debt Relief
Despite the current pause, the application is open. Apply Online Now. Apply today (but no later than Dec. 31, 2023). The U.S. Department of Education will determine your eligibility and will contact you if they need more information. Your loan servicer will notify you if and when your relief has been processed.

Proposed Amounts of Student Debt Cancellation
The plan would forgive up to $10,000 in federal student debt for individuals making less than $125,000 a year and married couples making less than $250,000 a year. Additionally, the student loans of income-eligible individuals who received Pell grants would be reduced by up to $20,000.

It is estimated that roughly 95 percent of borrowers will qualify for the program based on their 2020 or 2021 income. The Biden administration has limited relief to borrowers earning under $125,000 for individuals or $250,000 for couples. The plan to reduce student loans by $10,000 would completely wipe out balances for 29.0% of those with student debt

Impact of the Pandemic on Student Loans
In the previous administration, President Donald Trump ordered then-Secretary of Education Betsy DeVos to temporarily suspend payments “on student loans held by the Department of Education,” in order to alleviate some of the financial strain on student loan borrowers caused by the pandemic. Federal law permits the secretary to suspend payments for up to three years for borrowers experiencing “economic hardship.”

Now that the most severe phase of the pandemic appears to be over, the Biden administration plans to resume student loan payments in January 2023, It coupled that resumption of payments with permanent student loan forgiveness for many borrowers.

The Political Debate about Student Loans
The case now before the U.S. Court of Appeals for the Eighth Circuit was brought by six states, that are arguing the plan will cost them future tax revenue. The six Republican-led states argue that Biden overstepped his authority in announcing this debt-relief plan.

Regardless of what happens in this case, there are sure to be more legal challenges in the future. Lawsuits thus far have attacked the shaky legal justification for Biden’s policy. His administration has said the President has the authority to cancel student debt under the Higher Education Relief Opportunities for Students (HEROES) Act of 2003, which gives the Education Department the ability to change student financial assistance programs during a “national emergency.” The Biden Administration says the COVID-19 pandemic is such an emergency.

What’s Next in the Fight Over Student Loan Forgiveness?
Any potential debt cancellation—was put on hold, as a federal appeals court considers one of several legal challenges brought against the Biden Administration’s policy, which will affect 40 million borrowers. Legal experts are skeptical that this case—or the others—will ultimately prevail in court and reverse the student loan forgiveness program.

Legal challenges are likely to continue for months—possibly halting the process again. However, once borrowers begin receiving debt relief, it will become much harder to reverse, legal experts say.