Student Loan Forgiveness: 26M Have Now Applied, But Will Lawsuits and GOP Pushback Block the Plan?
About 26 million federal student loan borrowers have applied for forgiveness under the Biden administration’s debt relief program, the White House announced on Wednesday. When and if those borrowers get their relief remains an open question, however, as the program continues to get tangled up in the courts.
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According to the White House announcement, 16 million applications will have been approved by the end of this week. Although the U.S. Department of Education appears ready to begin cancelling up to $20,000 in student loan debt per approved borrower, nothing can be done until a number of lawsuits — many of which have been prompted by Republican opposition to the plan — are settled.
“Rather than easing the burden of loan debt for tens of millions of Americans, Republican officials have sued to prevent those hardest hit from the pandemic from getting relief,” the White House said. “If Republican officials get their way, tens of millions of Americans’ monthly costs will rise dramatically when student loan payments resume next year.”
Those lawsuits include one filed by six Republican-led states in the 8th Circuit Court of Appeals. That suit alleges that the student loan relief program, unveiled in August, oversteps Biden’s authority and would hurt both tax revenues and private loan issuers. The case is currently on appeal, meaning the Education Department can’t move forward with relief until it is settled, Business Insider reported.
The delay could mean that federal student borrowers might have to resume payments in January 2023 — when the current repayment pause expires — without the loan forgiveness they applied for. But if the delay does last that long, chances are the Biden administration will extend the pause, said Steven Muszynski, CEO at Splash Financial, a student loan refinancing marketplace.
“It wouldn’t be surprising to see the government attempt to further extend the student loan repayment pause if loan cancellation is blocked by the courts,” Muszynski told GOBankingRates in an email statement.
At least five other lawsuits seeking to block the plan have also been filed — and more continue to pop up.
Earlier this week, two borrowers in Indiana asked the U.S. Supreme Court to halt the student-loan relief plan on the grounds that the administration is overstepping its authority and forcing them to pay higher state taxes, Bloomberg reported.
That emergency filing was submitted to Justice Amy Coney Barrett, who recently rejected a similar suit filed by a taxpayers group in Wisconsin. Barrett handles emergency matters from the Chicago-based 7th U.S. Circuit Court of Appeals, which last week refused to block the program.
So far none of the lawsuits have been successful. However, they have managed to throw a wrench into the Biden administration’s plans to proceed with debt relief ahead of the student loan payment pause. This will only add to the confusion many borrowers feel right now, Muszynski said.
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“Borrowers could see more confusion at some point,” he told GOBankingRates. “It is possible communication between the government and the loan servicers will be poor, which may cause delays or processing errors. People should pay attention to whether the correct cancellation amount is applied to their account.”
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This article originally appeared on GOBankingRates.com: Student Loan Forgiveness: 26M Have Now Applied, But Will Lawsuits and GOP Pushback Block the Plan?
