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The Supreme Court agreed yesterday to decide whether the Biden administration had overstepped its authority with its plan to wipe out billions of dollars in student debt, the New York Times reported. The justices put the case on an unusually fast track, saying that they would hear arguments in February. In the meantime, though, they left in place an injunction blocking the program. The court’s brief order gave no reasons and did not note any dissents. The court acted after the Justice Department filed an emergency application asking the justices to lift the injunction, which had been issued by the U.S. Court of Appeals for the Eighth Circuit, in St. Louis, at the request of six Republican-led states. The program, which forgives up to $20,000 in debt for millions of federal borrowers, has set off a flurry of legal battles, but the one filed by the six states — Nebraska, Missouri, Arkansas, Iowa, Kansas and South Carolina — may represent the most serious threat. The states have said that Mr. Biden’s proposal exceeds his executive authority and would deprive them of future tax revenue. Since March 2020, most borrowers have been able to skip payments under a coronavirus relief measure that began under President Donald J. Trump and was extended multiple times, including under President Biden. Last week, the Biden administration again extended the pause on payments, pushing them until as late as September. Nearly 26 million borrowers have applied to have some of their student loan debt erased. While the government has approved 16 million applications, no debt has been canceled yet. The Education Department, which owns and manages the government’s $1.5 trillion student debt portfolio, has stopped accepting applications in light of the legal challenges.

A federal appeals court yesterday declined to put on hold a Texas judge's ruling that said President Joe Biden's plan to cancel hundreds of billions of dollars in student loan debt was unlawful, Reuters reported. The U.S. Court of Appeals for the Fifth Circuit rejected the Biden administration's request to pause a judge's Nov. 10 order vacating the $400 billion student debt relief program in a lawsuit pursued by a conservative advocacy group. The decision by Fort Worth, Texas-based U.S. District Judge Mark Pittman was one of two nationally that has prevented the U.S. Department of Education under the Democratic president from moving forward with granting debt relief to millions of borrowers. The administration has asked the U.S. Supreme Court to similarly lift an order by the U.S. Circuit Court of Appeals for the Eighth Circuit that, at the request of six Republican-led states, had barred it from cancelling student loans. A three-judge panel of the 5th Circuit in Wednesday's brief order declined to put Pittman's ruling on hold while the administration appealed his decision, but the court directed that the appeal be heard on an expedited basis.

President Joe Biden announced that his administration would extend the pandemic-era pause in student loan repayments through June 30 amid legal challenges to his college debt-forgiveness plan, Bloomberg News reported. Payments now set to resume Jan. 1 won’t be required again until 60 days after court challenges to Biden’s loan forgiveness plan are settled. If the litigation is not resolved by June 30, payments will resume 60 days after that, the Education Department said in a statement. A federal appeals court last week blocked the administration from carrying out Biden’s plan to cancel as much as $20,000 in debt for some borrowers. “I’m confident that our student debt relief plan is legal,” Biden said in a tweet. “But it’s on hold because Republican officials want to block it.” The decision followed a ruling earlier this month from a federal judge in Texas finding the plan unlawful. The Department of Education has stopped accepting applications for loan forgiveness, thrusting millions of Americans into financial limbo. The fresh pause in loan payments would alleviate uncertainty for borrowers as the administration asks the Supreme Court to review lower-court orders preventing implementation of Biden’s debt-cancellation plan, the Education Department said.

The Biden administration’s decision to make it easier to discharge student loans in bankruptcy could offer a new safety valve for debtors who have exhausted other options for getting out from under heavy debt loads, the Wall Street Journal reported. The move, announced Thursday, comes as President Biden’s broader plan for mass student-debt cancellation is in limbo after being blocked by two separate federal courts. That plan calls for canceling up to $20,000 in debt for borrowers under certain income thresholds. It would render up to 20 million people free of debt, around half of all student-loan borrowers, if courts allow it go forward. The bankruptcy changes set specific requirements for borrowers to prove that they are experiencing economic distress. Government lawyers will assess a borrower’s ability to repay their loans based on a set formula — whether expenses equal or exceed a debtor’s income — and other considerations, such as retirement age, disability, educational attainment and job history. The scope of its impact will depend on how the new rules are applied by judges, lawyers and student-loan borrowers across the country in individual bankruptcy cases. Over time, the handling of these cases could differ depending on which party controls the White House. Read more. (Subscription required.)

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For decades, lawmakers shaped policy to benefit for-profit companies, nonprofits and state-affiliated organizations that earned money from the federal student-loan system, sometimes to the detriment of borrowers. Now, threats to these organizations’ bottom line could derail the Biden administration’s debt-cancellation plans, according to a MarketWatch.com analysis. In their lawsuit asking the court to strike down the debt forgiveness plan, six Republican-led states are arguing that they’ll be harmed by the cancellation program — and therefore have the right to sue over it — in part because it will cut into the revenue of state-affiliated entities that earn money from owning old student loans and servicing new ones. Attorneys representing the states cite potential harm to more than one of these entities as well as other claims as reasons why they have standing or the right to bring a lawsuit over the debt-cancellation plan. More than anything, it’s the risk to the financial interests of the Higher Education Loan Authority of the State of Missouri (MOHELA) that appears to have convinced a panel of appellate court judges in the 8th circuit to grant the states’ request to temporarily block the Biden administration’s program while they hear the case. The suit is one of many filed by opponents of the loan forgiveness plan, including one that led a north Texas judge to declare it unconstitutional earlier this month. But since the states filed their suit in September, advocates and critics of the Biden administration’s debt relief plan have been watching it closely both because of the high-profile nature of the plaintiffs and because their claim for standing is arguably the strongest. The Biden Administration plans to ask the Supreme Court to restore the debt relief plan, according to a recent legal filing. Officials at MOHELA, which services student loans on behalf of the federal government, have said they weren’t involved in the states’ decision to file the lawsuit. Still, the litigation is the latest example of how the interests of these state-affiliated organizations and nonprofits that earn millions of dollars through their participation in the student loan system can impact policy surrounding it — and the fate of millions of borrowers.

Roughly 360,000 student loan borrowers have had their applications for Public Service Loan Forgiveness approved under a temporary waiver aimed at making the program easier to access, resulting in more than $24 billion in relief, according to data published by the Department of Education Friday, MarketWatch.com reported. The debt cancellation comes as the White House’s broad-based debt relief program is mired in litigation. The waiver program is part of a suite of initiatives from the Biden administration aimed at making it easier for borrowers to take advantage of debt relief programs already available to borrowers under the law, including those attempting to make borrowers whole when they’ve been scammed by their schools. For years, borrowers and advocates complained that the promise of loan forgiveness to public servants, which was signed into law in 2007, has been too difficult to access. Under the Public Service Loan Forgiveness program, borrowers who work for the government and certain nonprofits are eligible to have their federal student debt canceled after 10 years of payments, but actually getting the debt discharged wasn’t straightforward. In the first years borrowers were eligible to have their debt canceled, the government rejected 99% of applications from borrowers. Though borrowers had worked in public service for at least 10 years and were making loan payments during that time, in some cases their federal loan wasn’t eligible for forgiveness, in others, they were using the wrong repayment plan and still, in other cases, they were making payments at the wrong time. Last year, the Biden administration announced that borrowers could apply to have some of these payments counted toward the 120 needed for relief under PSLF through the temporary waiver program.

The Biden administration on Thursday released new guidelines that will make it easier for economically distressed student loan borrowers to discharge their student debt in bankruptcy proceedings, the Wall Street Journal reported. The long-awaited guidelines from the Justice Department and Education Department set specific requirements for borrowers to prove that they are experiencing economic distress. The government will calculate whether a debtor’s expenses equal or exceed a debtor’s income, and if they do, the Justice Department will declare that the borrower is unable to pay their debts. The Justice Department will also assess whether a borrower’s present inability to pay will likely persist in the future, taking into account factors like retirement age, disability, long-term unemployment or if the borrower didn’t finish their degree. Under the current system, which the administration described as unnecessarily burdensome, the federal government often delves into borrowers’ financial history to show they haven’t demonstrated their economic hardship. “Today’s guidance outlines a better, fairer, more transparent process for student loan borrowers in bankruptcy,” said Associate Attorney General Vanita Gupta. The changes come as the Biden administration’s mass student debt cancellation plan has been blocked by two federal courts. That program, which would cancel up to $20,000 for borrowers who make under $125,000 or $250,000 for a married couple, relies on a different definition of economic hardship — namely, that the negative economic effects of the pandemic allow the administration to forgive debt on a broad scale. A federal judge in Texas has rejected that authority, and the Justice Department has appealed the ruling. Read more.(Subscription required.)

For more information, click here to read DOJ's press release.