The Biden administration will make it easier for students defrauded by for-profit schools to get federal student loan forgiveness under new rules set to go into effect on July 1, setting up a speedier path for debt relief for potentially hundreds of thousands of borrowers, the Wall Street Journal reported. Students who have been misled by schools about job prospects or are victims of other types of fraudulent behavior and aggressive recruiting will be able to have their federal debt discharged in full by the Education Department. The new regulations, known as Borrower Defense to Repayment, complete a reversal of a Trump administration rule that slowed discharges and provided partial relief to borrowers whose claims were approved. The new rules will make it easier for borrowers to file claims for relief as groups, a change that borrower advocates expect will boost the number of recipients of debt forgiveness without burdening them with a detailed and lengthy application. The overhauled program “will end the bureaucratic nightmares of the past,” said Education Secretary Miguel Cardona.
In roughly two months, millions of consumers who borrowed to take out federal student loans will need to dig a little deeper into their pockets to cover another bill for $150 to $300 a month or maybe even more, depending on what they owe, according to a commentary in the Detroit Free Press. Right now, many consumers should be calculating how they're going to hand over more money in 2023 after the payment pause on most federal student loans ends in December. Payments — which have not been required for nearly three years — are scheduled to resume in January. For nearly three years, millions of borrowers with federal student loans have had one less bill to pay each month. They've seen repeated extensions granted since the moratorium on student loan payments began in March 2020 as part of pandemic-related relief efforts. Could another such extension take place? Maybe but it's not in the cards yet. The Biden administration announced an ambitious but controversial federal student loan forgiveness program in late August. A simple online application was officially launched Oct. 17 by the U.S. Department of Education at its website StudentAid.gov. But the massive student loan forgiveness program was quickly put on hold after a temporary stay was issued by a federal appeals court on Oct. 21.
President Joe Biden said that his administration would prevail in lawsuits challenging his student debt relief plan and predicted that applicants would start getting checks within two weeks, Bloomberg News reported. “We’re going to win that case,” Biden said in an interview with NewsNation, a cable outlet. “I think in the next two weeks you’re going to see those checks going out.” The president’s anticipated timing coincides closely with midterm congressional elections on Nov 8. Democrats are counting on the debt relief program to boost turnout among young voters and people of color in the election, in which polls suggest Biden’s party will lose control of at least one chamber of Congress. A federal appeals court temporarily blocked the White House’s plan to forgive as much as $20,000 in debt per borrower last week, siding with six Republican-led states that have challenged the plan. The decision prevents the administration from dispersing relief while the 8th US Circuit Court of Appeals in St. Louis weighs an injunction request. The case was dismissed by a federal district court judge, but revived on appeal. The ruling does not prohibit borrowers from applying for relief through the Department of Education. More than 22 million Americans had already applied for the program, the president said last week.
Days before the deadline for applicants to take advantage of a set of temporary rule exceptions to the government’s student loan forgiveness program for borrowers who work in public service, the Education Department moved to make some of the changes permanent — but not until next year, the New York Times reported. That staggered timetable is likely to create months of messiness. Last year, the Biden administration made sweeping but temporary fixes to Public Service Loan Forgiveness, the long-troubled relief program that allows government and nonprofit workers to have their remaining federal student loan debt eliminated after they’ve made a decade of payments. The government gave borrowers one year to apply for the rule waiver. That period ends on Monday. Borrowers calling to seek help from their loan servicer have recently run into hold times that can exceed nine hours. More than 100 Democratic lawmakers in Congress urged the Biden administration this month to extend the waiver deadline until next year. Instead, the Education Department said on Tuesday that it was sticking with Monday’s deadline but would make some elements of the waiver’s rule changes permanent. Those adjustments, however, will not take effect until July 2023, because federal rule-making policies prohibit the department from putting them into effect sooner. Read more.
In related news, a temporary pause on federal student loan repayments is set to expire on Jan. 1 — meaning millions of borrowers are bracing to repay loans after a nearly three-year reprieve. While the Biden administration called the latest extension the "final" one, some experts predict that the pause could be extended if the legal uncertainty over a new student loan forgiveness plan continues, YahooFinance.com reported. On Friday, hours after President Joe Biden announced that 22 million people had applied for forgiveness, a federal court of appeals issued an administrative stay that bars the administration from dispensing with the loans while it considers a challenge to the program. White House Press Secretary Karine Jean-Pierre declined to discuss the possibility of extending the repayment pause, but she also didn't rule it out when reporters raised questions on Monday. If the legal logjam continues, experts note the administration would have a right to further extend the pause on repayments. “While the Biden administration said that this final extension is a final, final extension, that isn't the first time they said that something was final," student financial aid expert Mark Kantrowitz told Yahoo Finance. The Biden administration might issue a temporary extension if the legal questions remain unsettled by January, he said. The pause could continue if a judge ultimately rules against Biden. “If they lose in court and the president's loan forgiveness plan is blocked," he says, "well nothing stops them really from extending the student loan payment pause and interest waiver further, maybe for the duration of his tenure as president.” Read more.
The political and legal battles over President Biden’s student loan forgiveness plan have hit their biggest roadblock yet with a temporary legal hold on the program, leaving borrowers in further limbo, The Hill reported. It has also opened up the potential for more opposition by Republicans, but the White House is vowing to fight back after a federal appeals court ruled on Friday that the program should be halted. Friday’s order from the U.S. Court of Appeals for the Eighth Circuit stops the administration from disbursing relief while the court considers a challenge from six Republican-led states. A federal district judge had dismissed the case a day before, ruling that the six attorneys general representing the states did not have standing to sue because they did not demonstrate that the policy directly harms their states. Biden on Monday also bashed Republican backlash against the plan, calling it extreme and touting the policy as a way to help working Americans bounce back after the COVID-19 pandemic. The order marks a temporary victory for Republicans until a larger panel can weigh in, but it could lead to more actions against student loan forgiveness, said Robert Moran, a former senior policy adviser in the Education Department under former President George W. Bush.
A federal appeals court on Friday temporarily halted President Biden’s student debt relief plan, preventing the government from moving forward with the debt cancellation it had said could start as early as next week, the New York Times reported. The U.S. Court of Appeals for the Eighth Circuit granted a stay in response to an appeal filed by six Republican-led states after a district court judge dismissed their case on Thursday for lack of standing. The action puts any debt cancellation on hold until the court can rule on the states’ request for an injunction preventing the government from discharging debts. The court set a Monday deadline for the government to submit its response to the states’ filing, and a Tuesday deadline for the states to respond. “The order does not reverse the trial court’s dismissal of the case, or suggest that the case has merit,” Karine Jean-Pierre, the White House press secretary, said late Friday. “It merely prevents debt from being discharged until the court makes a decision.” She encouraged borrowers to continue applying at studentaid.gov. Nearly 22 million people — more than half of all those expected to be eligible — have applied since the system opened late last week. The pause comes one day after Judge Henry E. Autrey of the Federal District Court in St. Louis rejected the states’ claim for lack of standing. “While plaintiffs present important and significant challenges to the debt relief plan,” Judge Autrey wrote, “the current plaintiffs are unable to proceed to the resolution of these challenges.” Read more.
In related news, President Biden said on Friday that 22 million Americans had applied for federal student loan relief since his administration opened the program this week, and he accused Republicans of hypocrisy for trying to block the initiative, the New York Times reported. The plan cancels $10,000 in debt for those earning less than $125,000 per year, or $250,000 per household, and $20,000 for those who received Pell grants for low-income families. For tens of millions of people, that level of relief would wipe out their federal student loan debt. The government plans to accept applications until Dec. 31, 2023. “In less than a week, just close to 22 million people have already given us the information to be considered for this life-changing relief,” Mr. Biden told a crowd at the university, where more than 75 percent of the students receive Pell grants. Read more.
Attempts to block President Biden’s student debt relief programs were dealt dual setbacks yesterday, as a federal judge in Missouri and Justice Amy Coney Barrett rejected challenges to the sweeping measure, one that could cost the government hundreds of billions of dollars, the New York Times reported. Judge Henry E. Autrey of the Federal District Court in St. Louis dismissed the more prominent of the two lawsuits, one brought by six Republican-led states. The suit accused Mr. Biden of overstepping his authority under a 2003 federal law that allows the education secretary to modify financial assistance programs for students “in connection with a war or other military operation or national emergency.” The plan cancels $10,000 in debt for those earning less than $125,000 per year, or $250,000 per household, and $20,000 for those who received Pell grants for low-income families. The nonpartisan Congressional Budget Office said last month that it estimated the plan’s price tag at $400 billion, and the Education Department followed a few days later with a similar estimate of $379 billion over the life of the program. Judge Autrey, who was appointed by President George W. Bush, did not rule on the larger issue in the lawsuit, which was brought by Nebraska, Missouri, Arkansas, Iowa, Kansas and South Carolina. Instead, he said the states had not suffered injuries of the sort that gave them standing to sue. “While plaintiffs present important and significant challenges to the debt relief plan,” the judge wrote, “the current plaintiffs are unable to proceed to the resolution of these challenges.” The states’ case was viewed as the most significant threat to Mr. Biden’s plan, and Judge Autrey’s ruling allowed the government to start discharging loans as soon as Sunday. More than 12 million people have applied for debt cancellation since the application portal opened late last week.
