Note: Refer to this post for the most recent news about student debt relief.
The news of President Biden’s plan to grant federal student loan borrowers up to $20,000 in debt relief was thrilling, to say the least.
But after the filing of multiple lawsuits aimed at thwarting the administration’s efforts, that excitement has given way to uncertainty, confusion, and downright chaos.
In the past week alone, one court ruled that Biden’s forgiveness plan is unconstitutional and another extended an injunction that blocks the program from moving forward.
Borrowers want to know: Will student loan forgiveness still happen?
Despite the ongoing legal challenges and opposition from some conservative lawmakers, there’s still plenty of evidence that borrowers will receive forgiveness. But the road to relief will be more complex — and likely longer — than originally anticipated.
That in mind, here’s what to know about the state of student loan forgiveness today:
The legal opposition has major holes.
The 8th Circuit Court of Appeals on Monday extended an injunction it had previously issued against the program that blocks the Department of Education (ED) from administering relief indefinitely. This blow follows a ruling made last week by a federal judge in Texas that declared the program unconstitutional.
The good news, however, is that the lawsuits behind these actions have significant weaknesses.
The suit that resulted in the injunction argues that state-sanctioned agencies that are contracted to service federal student loans will face an unfair financial loss in revenue if Biden’s initiative is allowed to proceed — including MOHELA, a servicing agency based in Missouri, which is one of the states behind the lawsuit.
But despite the filing specifically referencing MOHELA as one of the potential victims of the relief plan, the agency may not agree with the argument the suit makes on its behalf: officials from MOHELA in early November clarified that the agency is not named as a plaintiff in the suit, and that it has no direct involvement with the case.
The case that ruled the forgiveness program unconstitutional has a similarly profound flaw: the plaintiffs’ argument may not have legal standing. The suit alleges that the Biden administration broke the law by not allowing the public to respond to a proposal for the relief plan before it went into effect, but as experts were quick to point out, the law in question allows the President to forgo rulemaking processes that typically require a notice and comment period.
It’s likely that one or both of these cases will ultimately be resolved in the Supreme Court, the process leading up to which could take months or even years. However, experts agree that if the lawsuits do reach the Supreme Court, their legal standings could be shaky enough to quickly send them both crumbling down.
There may be other paths to forgiveness.
While borrowers can no longer submit new applications for relief as a result of these legal developments, there’s no reason to believe that the 16 million applications ED has already received won’t be processed — or that borrowers will need to apply again — once the program is able to move forward.
But in the meantime, some borrowers may be able to have their debt forgiven through other means. Changes that will help borrowers get relief are still in the works for the Public Service Loan Forgiveness program and Income-Driven Repayment plans, and the legal challenges don’t impact other types of forgiveness, including disability discharge.
There’s no word on what this means for payment suspension — yet.
The uncertainty surrounding debt forgiveness intersects with another major moment for federal student loan borrowers: the fate of the nearly three-year pause on monthly student loan payments, which is currently scheduled to expire at the end of the year.
Lifting the payment freeze before borrowers’ accounts can be adjusted to reflect forgiveness would spark a litany of logistical challenges, including how to handle billing the millions of borrowers whose debt would be canceled in full under Biden’s plan.
Officials seem to be aware of this puzzle — and insiders have revealed ED is considering the possibility of extending the payment moratorium until the legal battles against forgiveness are resolved.
However, no official comments have been made yet, and previous extensions to payment suspension have historically been announced just days before the would-be expiration date. Until a final decision is made, borrowers should continue preparing to resume monthly payments in January.