Biden extends student loan payment freeze as debt forgiveness program stalls in court

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Dive Brief:

  • The U.S. Department of Education announced Tuesday it will extend a moratorium on student loan borrowers’ monthly payments, citing the Biden administration’s plan to forgive mass amounts of debt being held up in court. 
  • The pandemic-era freeze, which the Trump administration first put in place, was due to expire Dec. 31. Now, it will continue until the Education Department is allowed to implement the debt relief program or lawsuits against the debt forgiveness effort are resolved.
  • Payments are now set to resume 60 days after one of two events — either the courts allowing the debt forgiveness program to start clearing balances or June 30, 2023, whichever comes first, the Education Department said.

Dive Insight:

The White House had intended to wind down the repayment moratorium by the end of the year. It had grown deeply unpopular among conservatives, who said it was expensive and that the effects of the pandemic had waned enough that the pause was no longer necessary.

Republicans pointed to an interview President Joe Biden did in September in which he declared “the pandemic is over.”

However, this was all before lawsuits halted Biden’s loan forgiveness program, which would wipe away $10,000 in debt for individual borrowers earning up to $125,000. Those who received federal Pell Grants — a proxy for low-income status — would get up to $20,000 in relief. 

Recent court rulings temporarily blocked the plan and suggested the Education Department overstepped its authority to grant loan forgiveness. 

The department justified its ability to wipe clean debts with a 2003 law called the Higher Education Relief Opportunities for Students, or HEROES, Act.

It allows the education secretary to change federal financial aid structures during national emergencies. The pandemic qualified as such an emergency, the administration said. 

“Callous efforts to block student debt relief in the courts have caused tremendous financial uncertainty for millions of borrowers who cannot set their family budgets or even plan for the holidays without a clear picture of their student debt obligations, and it’s just plain wrong,” Education Secretary Miguel Cardona said in a statement Tuesday.

Cardona said it would be “deeply unfair” to ask borrowers to make payments that wouldn’t be required but “for the baseless lawsuits brought by Republican officials and special interests.”

The Education Department has approved 16 million borrowers for the broad loan forgiveness, it said Tuesday. More than 26 million have given the department information necessary to be considered for relief.

The agency alerted some borrowers they were approved for debt forgiveness but told them the court rulings had sidelined it. 

Last week, the Biden administration requested the U.S. Supreme Court reinstate the loan forgiveness initiative.

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