Biden’s second try at student loan cancellation moves forward with debate over the plan’s details

WASHINGTON (AP) — President Joe Biden’s second attempt at student loan cancellation is moving forward as a group of negotiators meets to debate what a new proposal might look like. Fourteen people chosen by the Biden administration will meet Tuesday (Oct. 10, 2023) for the first of three hearings on student loan relief in a process known as negotiated rulemaking. Their goal is to guide the Education Department toward a proposal after the Supreme Court rejected Biden’s first plan in June. The negotiators all come from outside the federal government and represent a range of viewpoints on student loans.

WASHINGTON (AP) — President Joe Biden’s second attempt at student loan cancellation is moving forward with a round of hearings beginning Tuesday (Oct. 10, 2023) to negotiate the details of a new plan.

In a process known as negotiated rulemaking, 14 people chosen by the Biden administration will meet for the first of three hearings on student loan relief. Their goal is to guide the Education Department toward a proposal after the Supreme Court rejected Biden’s first plan in June.

The negotiators all come from outside the federal government and represent a range of viewpoints on student loans. The panel includes students and officials from a range of colleges, along with loan servicers, state officials and advocates including the NAACP.

Biden directed the Education Department to find another path to loan relief after the conservative court ruled that he couldn’t cancel loans using a 2003 law called the HEROES Act.

The latest attempt will rest on a sweeping law known as the Higher Education Act, which gives the education secretary authority to waive student loans — although how far that power extends is the subject of legal debate. The department is going through the negotiated rulemaking process to change or add federal rules clarifying how the secretary can cancel debt.

It’s unclear who will be eligible for forgiveness under the new plan and how much relief they would get. Those details will be decided after the administration takes input from the negotiators, who meet in a series of sessions scheduled to continue into December.

At the end of the process, negotiators will vote on a proposed rule drafted with input from their discussions. If they reach consensus on a proposal, the department will move forward with it. If they don’t, the agency will propose its own plan, which can be finalized after a public comment period.

The Education Department routinely uses negotiated rulemaking to enact federal regulation, and it’s required for any regulation related to student financial aid. It can be a long and painstaking process, and it often finishes without consensus among negotiators.

Biden has called for a new plan to help “as many borrowers as possible,” but it’s unclear whether it will be as expansive as his first proposal. That plan would have canceled up to $20,000 in federal student loans for borrowers with incomes below $125,000 or couples below $250,000.

Republicans rallied against the cancellation, saying it would add an unfair benefit for college graduates at the expense of taxpayers who didn’t attend college.

The administration plans to finalize the new rule sometime next year, but Education Secretary Miguel Cardona has declined to say if it will be in place before next fall’s presidential election. In a recent interview with The Associated Press, he said he’s working “as quickly as possible.”

He also noted that the court’s ruling “will have to factor in to the steps we take moving forward.”

Some legal analysts see the court’s decision as a rejection of any mass cancellation without action from Congress. The court concluded that the education secretary has power “to make modest adjustments and additions to existing provisions, not transform them.”

As a starting point for negotiators, the Education Department published an issue paper outlining some of the primary questions that will be up for debate. It offers few clues on the department’s vision for loan cancellation, but it identifies five groups of borrowers who may be in need of relief.

Negotiators are being asked how the agency should help:

— Borrowers whose interest grows so much that their balances exceed what they initially owed;

— Those who are eligible for loan cancellation under existing income-driven repayment plans but have not applied for those programs;

— Those who borrowed loans to attend college programs that didn’t lead to jobs with enough earnings to repay their loans;

— Borrowers with older loans taken out before Congress created benefits meant to ease the burden of student debt;

— Those who face hardships “that the current student loan system does not adequately address.”

It also asks negotiators to discuss the types of factors that would merit loan cancellation. The paper notes that, when deciding whether to collect on debt, some other federal agencies consider whether it “would be against equity and good conscience,” or if it would “impose financial hardship.”

At a White House briefing last week, Biden drew attention to the problem of ballooning interest. Many college graduates have been making payments for years, he said, “but because of interest, they still owe more than they originally borrowed.”

“My administration is doing everything it can to deliver student debt relief to as many as we can, as fast as we can,” Biden said.

The negotiators meet virtually for two-day sessions starting Oct. 10, Nov. 6 and Dec. 11.

UNDATED (AP)- Two conservative groups are asking a federal court to block the Biden administration’s plan to cancel $39 billion in student loans for more than 800,000 borrowers.

In a lawsuit filed Friday (Aug. 4, 2023) in Michigan, the groups argue that the administration overstepped its power when it announced the forgiveness in July, just weeks after the Supreme Court struck down a broader cancellation plan pushed by President Joe Biden.

It asks a judge to rule the cancellation illegal and stop the Education Department from carrying it out while the case is decided. The suit was filed by the New Civil Liberties Alliance on behalf of the Mackinac Center for Public Policy and the Cato Institute.

The Education Department called the suit “a desperate attempt from right wing special interests to keep hundreds of thousands of borrowers in debt.”

“We are not going to back down or give an inch when it comes to defending working families,” the department said in a statement.

It’s part of a wave of legal challenges Republicans have leveled at the Biden administration’s efforts to reduce or eliminate student debt for millions of Americans. Biden has said he will pursue a different cancellation plan after the Supreme Court decision, and his administration is separately unrolling a more generous repayment plan that opponents call a “backdoor attempt” at cancellation.

The Biden administration announced July 14 that it would soon forgive loans for 804,000 borrowers enrolled in income-driven repayment plans. The plans have long offered cancellation after borrowers make 20 or 25 years of payments, but “past administrative failures” resulted in inaccurate payments counts that set borrowers back on their progress toward forgiveness, the department said.

The new action was announced as a “one-time adjustment” that would count certain periods of past nonpayment as if borrowers had been making payments during that time. It moved 804,000 borrowers across the 20- or 25-year mark needed for cancellation, and it moved millions of others closer to that threshold.

It’s meant to address a practice known as forbearance steering, in which student loan servicers hired by the government wrongly pushed borrowers to go into forbearance — a temporary pause on payments because of hardship — even if they would have been better served by enrolling in one of the income-driven repayment plans.

Under the one-time fix, past periods in forbearance were also counted as progress toward Public Service Loan Forgiveness, a program that offers cancellation after 10 years of payments while working in a government or nonprofit job.

Biden’s action was illegal, the lawsuit says, because it wasn’t authorized by Congress and didn’t go through a federal rulemaking process that invites public feedback.

“No authority allows the Department to count non-payments as payments,” the lawsuit says. It adds that the action came in “a press release that neither identified the policy’s legal authority nor considered its exorbitant price tag.”

The conservative groups say Biden’s plan undercuts Public Service Loan Forgiveness. The Mackinac Center and Cato Institute say they employ borrowers who are working toward student loan cancellation through the program. They say Biden’s action illegally accelerates progress toward relief, diminishing the benefit for nonprofit employers.

“This unlawful reduction in the PSLF service requirement injures public service employers that rely on PSLF to recruit and retain college-educated employees,” the suit alleges.

The Cato Institute previously sued the administration over the cancellation plan that was struck down by the Supreme Court. The Mackinac Center is separately challenging Biden’s pause on student loan payments, which is scheduled to end this fall with payments resuming Oct. 1.

WASHINGTON (AP) — A sharply divided Supreme Court has ruled that the Biden administration overstepped its authority in trying to cancel or reduce student loan debts for millions of Americans. Conservative justices were in the majority in Friday’s (June 30, 2023) 6-3 decision that effectively killed the $400 billion plan that President Joe Biden announced last year. Borrowers are on the hook for repayments that are supposed to resume in the fall. The court held that the administration needs Congress’ endorsement before undertaking so costly a program and rejected arguments that a bipartisan 2003 law dealing with student loans provided the authority Biden claimed.

WASHINGTON (AP) — A sharply divided Supreme Court on Friday (June 30, 2023) effectively killed President Joe Biden’s $400 billion plan to cancel or reduce federal student loan debts for millions of Americans.

The 6-3 decision, with conservative justices in the majority, said the Biden administration overstepped its authority with the plan, and it leaves borrowers on the hook for repayments that are expected to resume in the fall.

Biden was to announce a new set of actions to protect student loan borrowers later Friday, said a White House official. The official was not authorized to speak publicly ahead of Biden’s expected statement on the case and spoke on condition of anonymity.

The court held that the administration needed Congress’ endorsement before undertaking so costly a program. The majority rejected arguments that a bipartisan 2003 law dealing with national emergencies, known as the HEROES Act, gave Biden the power he claimed.

“Six States sued, arguing that the HEROES Act does not authorize the loan cancellation plan. We agree,” Chief Justice John Roberts wrote for the court.

Justice Elena Kagan, wrote in a dissent, joined by the court’s two other liberals, that the majority of the court “overrides the combined judgment of the Legislative and Executive Branches, with the consequence of eliminating loan forgiveness for 43 million Americans.” Kagan read a summary of her dissent in court to emphasize her disagreement.

Roberts, perhaps anticipating negative public reaction and aware of declining approval of the court, added an unusual coda to his opinion, cautioning that the liberals’ dissent should not be mistaken for disparagement of the court itself. ”It is important that the public not be misled either. Any such misperception would be harmful to this institution and our country,” the chief justice wrote.

Loan repayments will resume in October, although interest will begin accruing in September, the Education Department has announced. Payments have been on hold since the start of the coronavirus pandemic more than three years ago.

The forgiveness program would have canceled $10,000 in student loan debt for those making less than $125,000 or households with less than $250,000 in income. Pell Grant recipients, who typically demonstrate more financial need, would have had an additional $10,000 in debt forgiven.

Twenty-six million people had applied for relief and 43 million would have been eligible, the administration said. The cost was estimated at $400 billion over 30 years.

Advocacy groups supporting debt cancellation condemned the decision while demanding that Biden find another avenue to fulfill his promise of debt relief.

Natalia Abrams, president and founder of the Student Debt Crisis Center, said the responsibility for new action falls “squarely” on Biden’s shoulders. “The president possesses the power, and must summon the will, to secure the essential relief that families across the nation desperately need,” Abrams said in a statement.

The loan plan joins other pandemic-related initiatives that faltered at the Supreme Court.

Conservative majorities ended an eviction moratorium that had been imposed by the Centers for Disease Control and Prevention and blocked a plan to require workers at big companies to be vaccinated or undergo regular testing and wear a mask on the job. The court upheld a plan to require vaccinations of health-care workers.

The earlier programs were billed largely as public health measures intended to slow the spread of COVID-19. The loan forgiveness plan, by contrast, was aimed at countering the economic effects of the pandemic.

In more than three hours of arguments last February, conservative justices voiced their skepticism that the administration had the authority to wipe away or reduce student loans held by millions.

Republican-led states arguing before the court said the plan would have amounted to a “windfall” for 20 million people who would have seen their entire student debt disappear and been better off than they were before the pandemic.

Roberts was among those on the court who questioned whether non-college workers would essentially be penalized for a break for the college educated.

In contrast, the administration grounded the need for the sweeping loan forgiveness in the COVID-19 emergency and the continuing negative impacts on people near the bottom of the economic ladder. The declared emergency ended on May 11.

Without the promised loan relief, the administration’s top Supreme Court lawyer told the justices, “delinquencies and defaults will surge.”

At those arguments, Justice Sonia Sotomayor said her fellow justices would be making a mistake if they took for themselves, instead of leaving it to education experts, “the right to decide how much aid to give” people who would struggle if the program were struck down.

The HEROES Act — the Health and Economic Recovery Omnibus Emergency Solutions Act — has allowed the secretary of education to waive or modify the terms of federal student loans in connection with a national emergency. The law was primarily intended to keep service members from being hurt financially while they fought in wars in Afghanistan and Iraq.

Biden had once doubted his own authority to broadly cancel student debt, but announced the program last August. Legal challenges quickly followed.

The court majority said the Republican-led states had cleared an early hurdle that required them to show they would be financially harmed if the program had been allowed to take effect.

The states did not even rely on any direct injury to themselves, but instead pointed to the Missouri Higher Education Loan Authority, a state-created company that services student loans.

Nebraska Solicitor General James Campbell, arguing before the court in February, said the Authority would lose about 40% of its revenues if the Biden plan went into effect. Independent research has cast doubt on the financial harm MOHELA would face, suggesting that the agency would still see an increase in revenue even if Biden’s cancellation went through. That information was not part of the court record.

A federal judge initially found that the states would not be harmed and dismissed their lawsuit before an appellate panel said the case could proceed.

In a second case, the justices ruled unanimously that two Texans who filed a separate challenge did not have legal standing to sue. But the outcome of that case has no bearing on the court’s decision to block the debt relief plan.

NEW YORK (AP) — After three years, the pandemic-era freeze on student loan payments will end in late August 2023. It might seem tempting to just keep not making payments, but the consequences can be severe, including a hit to your credit score and exclusion from future aid and benefits. More than 40 million Americans will have to start making federal student loan payments again at the end of the summer under the terms of a debt ceiling deal approved by Congress. Millions are also waiting to find out whether the Supreme Court will allow President Joe Biden’s student loan forgiveness plan to go ahead. But payments will resume regardless of what justices decide.

NEW YORK (AP) — After three years, the pandemic-era freeze on student loan payments will end in late August 2023.

It might seem tempting to just keep not making payments, but the consequences can be severe, including a hit to your credit score and exclusion from future aid and benefits.

More than 40 million Americans will have to start making federal student loan payments again at the end of the summer under the terms of a debt ceiling deal approved by Congress.

Millions are also waiting to find out whether the Supreme Court will allow President Joe Biden’s student loan forgiveness plan to go ahead. But payments will resume regardless of what justices decide.

That means tough decisions for many borrowers, especially those in already-difficult financial situations.

Experts say that delinquency and bankruptcy should be options of last resort, and that deferment and forbearance — which pause payments, though interest may continue to accrue — are often better in the short term.

WHAT HAPPENS IF I DON’T MAKE STUDENT LOAN PAYMENTS?

Once the moratorium ends, borrowers who can’t or don’t pay risk delinquency and eventually default. That can badly hurt your credit rating and make you ineligible for additional aid and government benefits.

If you’re struggling to pay, advisers first encourage you to check if you qualify for an income-driven repayment plan, which determines your payments by looking at your expenses. You can determine this by visiting the Federal Student Aid website. If you’ve worked for a government agency or a non-profit organization, you could also be eligible for the Public Service Loan Forgiveness Program, which forgives student debt after 10 years.

Carolina Rodriguez, Director of the Education Debt Consumer Assistance Program at the Community Service Society of New York, emphasizes that anyone temporarily unemployed should be able to qualify for a $0 payment plan. And many others qualify based on income and family size.

“The repercussions of falling into delinquency can be pretty severe,” Rodriguez said. “The federal government can administratively intercept tax refunds and garnish wages. And it can affect Social Security, retirement, and disability benefits. Does it make financial sense at that point? Probably not.”

Rodriguez says her organization always advises against deferment or forbearance except once a borrower has exhausted all other options. In the long term, those financial choices offer little benefit, as some loans will continue to accrue interest while deferred.

Abby Shafroth, senior attorney and director of the Student Loan Borrower Assistance Project at the National Consumer Law Center, said that, of the two, deferment is generally a better option.

That’s because interest generally does not accrue on Direct Subsidized Loans, the subsidized portion of Direct Consolidation Loans, Subsidized Federal Stafford Loans, the subsidized portion of FFEL Consolidation Loans, and Federal Perkins Loans. All other federal student loans that are deferred will continue to accrue interest.

“Forbearance allows you to postpone payments without it being held against you, but interest does accrue. So you’re going to see your balance increase every month.”

WHAT ABOUT DECLARING BANKRUPTCY?

For most student loan borrowers, it’s still very difficult to have your loans discharged, or canceled, through bankruptcy. Borrowers must prove a very hard standard of financial circumstances, called “undue hardship.”

“That doesn’t mean people shouldn’t look into it,” Rodriguez said. “But they may not be successful at discharging their loans.”

For borrowers who show that level of financial strain, chances are they have other options, Rodriguez said.

She advises that borrowers make sure they are speaking to a bankruptcy attorney who understands student loan bankruptcy, which requires a different proceeding than other types of bankruptcy.

Shafroth, of the NCLC, says that new guidance on student loan bankruptcy has been coming out in recent years.

“Though it is difficult to get your loans discharged through the bankruptcy process, an increasing number of borrowers are eligible to get their loans discharged that way,” she said. “A lot of people write that off as ‘there’s no way,’ it’s impossible.’ But it’s increasingly possible.”

WHAT HAPPENS WHEN A LOAN GOES INTO DEFAULT?

When you fall behind on a loan by 270 days — roughly 9 months — the loan appears on your credit report as being in default.

“At that point, it’s not just behind, it’s in collections,” Shafroth said. “That’s when you become ineligible to take out new federal student aid. A lot of people go into default because they weren’t able to complete their degree the first time. This prevents them from going back to school.”

Once a loan is in default, it’s subject to the collection processes mentioned above. That means the government can garnish wages (without a court order) to go towards paying back the loan, intercept tax refunds, and seize portions of Social Security checks and other benefit payments.

WHAT ARE OTHER OPTIONS IF I CAN’T MAKE PAYMENTS?

Shafroth said that many borrowers may still be eligible to have loans canceled via a patchwork of programs outside of the Biden administration’s proposed debt relief program.

“If your school closed before you could complete your program, you’re eligible for relief. If your school lied to you or misrepresented the outcome of what your enrolling would be, you can file a borrower defense application, and request your loan be canceled on that basis,” she said. “If you have a disability, you can sometimes have your loans canceled on that basis.”

Shafroth encourages borrowers to look at the Student Aid website to see what their options might be before missing payments.

WHAT IF MY LOANS WERE IN DEFAULT BEFORE MARCH 2020?

Under the Biden administration’s Fresh Start program, borrowers with federal student loans who were in default before the pause have a chance to become current.

Borrowers who were in default will not be subject to collection processes or have wages garnished through about August 2024, or roughly one year after the payment freeze ends. These borrowers have also been granted permission to apply for federal student loans again, to complete degrees. Lastly, these defaulted loans are now being reported to credit bureaus as current.

That said, borrowers must take action if they want to stay out of default after this year-long leniency period ends.

To eliminate your record of default, you should contact the Education Department’s Default Resolution Group online, by phone, or by mail, and ask the group to take the loans out of default via the Fresh Start policy. In four to six weeks, any record of default will be removed from your credit report, and the loans will be placed with a loan servicer. This will also give you access to income-driven repayment plans and Public Service Loan Forgiveness, if applicable.

WHAT IF I WAS BEHIND ON PAYMENTS OR DELINQUENT BEFORE MARCH 2020?

The Fresh Start program also applies to borrowers who were delinquent prior to the payment pause. Those accounts will be considered current, and borrowers will have the option to enroll in income-driven repayment plans that can lower bills to as little as $0, or to apply for deferment, forbearance or bankruptcy.

UNDATED (AP)- The U.S. has approved more than $42 billion in federal student loan debt forgiveness for more than 615,000 borrowers in the past 18 months as part of a program aimed at getting more people to work in public service jobs, the U.S. Department of Education said this week (May 12, 2023).

The Public Service Loan Forgiveness program is open to teachers, librarians, nurses, public interest lawyers, military members and other public workers. It cancels a borrower’s remaining student debt after 10 years of public interest work, or 120 monthly payments.

The program is separate from President Joe Biden’s student debt relief plan, which would wipe away or reduce loans for millions of borrowers regardless of what field they work in. The U.S. Supreme Court is currently considering whether that plan can go ahead.

The Public Service Loan Forgiveness program, known as PSLF, was launched in 2007, but stringent rules meant that more than 90% of applicants were rejected, the Department of Education said in 2019.

In October 2021, the government temporarily relaxed the requirements, making it easier for people to apply and be approved. Those relaxed requirements ended in October 2022. However, borrowers who want to increase their payment count have another opportunity to do so. They can apply for the one-time account adjustment until the end of the year.

Through the one-time account adjustment, borrowers with direct loans through the William D. Ford program will have similar benefits to those that were available under the limited PSLF waiver. Borrowers who do not have direct loans can consolidate and receive PSLF credit for prior payments as part of this adjustment, as long as they submit a consolidation application by the end of 2023.

One of the people who benefited from the PSLF waiver was Beth Bourdon, an assistant public defender in Orlando, Florida.

Bourdon had about $57,000 of student loans forgiven in February 2022. Previously, because her loans had been acquired through the Family Federal Education Loan Program, Bourdon didn’t qualify for relief. But when the waiver took effect in October 2021, she successfully applied.

“I kept checking and re-checking the site, and one day I went and the balance was zero,” Bourdon said. “Two days later I got the official letter.”

With the exception of one two-year period, Bourdon has worked in public interest law since 2005. She said she made payments of about $417 every month from June 2008 to October 2021, when she consolidated her loans and applied for PSLF.

“Public defenders, we don’t get paid a lot,” she said. “When people’s student loans hit, they’re faced with a really hard decision. Can I remain doing this job I love or will I have to go to a civil firm to try to make money? The PSLF helps try to retain talented people who would otherwise go somewhere else.”

Bourdon said the cancellation gives her “breathing room.”

She added that she personally talked about 10 people she knows through the process of applying for forgiveness via the waiver, and that several have already received cancellation.

“It’s so great — knowing how relieved I was, for my friends to have that kind of relief too,” she said.

Starting July 1 of this year, the Education Department will implement changes designed to make the PSLF application process easier. Some of the changes were previously included in the waiver.

Here’s what you need to know if you want to apply:

WHO QUALIFIES?

If you are or were previously employed at least 30 hours per week with the following types of organizations, you qualify:

— Government organizations at any level (U.S. federal, state, local, or tribal). This includes the U.S. military, all work in public education, and full-time volunteer work with AmeriCorps and the Peace Corps.

— Any not-for-profit organization that is tax-exempt under Section 501(c)(3) of the Internal Revenue Code.

— If you work for a not-for-profit organization that is not tax-exempt, you may still qualify for PSLF if the organization provides certain types of qualifying public services such as emergency management, legal aid and legal services, early childhood education, service to individuals with disabilities or the elderly, public health, including nurses and nurse practitioners, public library and school library services, and public safety such as crime prevention and law enforcement.

To demonstrate that your job in public service qualifies you for forgiveness, you’ll file an employer certification form with your servicer, listing jobs you’ve held.

You must have direct loans or consolidate other federal student loans into a direct loan. You must also make 120 qualifying payments or 10 years of payments.

WHICH STUDENT LOANS ARE ELIGIBLE?

Any federal student loan received under the William D. Ford Federal Direct Loan program is eligible.

If you have either a Federal Family Education Loan (FFEL) or a Federal Perkins Loan, you’ll need to consolidate those into direct loans with your servicer. Payments made on these loans before you consolidated them do not count as qualifying PSLF payments.

Private student loans are not eligible.

HOW CAN I APPLY?

You can apply to the program using the PSLF help tool. If you want to do it manually, you can print and mail a PSLF form.

HOW CAN I CONSOLIDATE MY DEBT INTO A DIRECT LOAN?

First, visit studentaid.gov to see if you have loans made under the Federal Family Education Loan or Perkins Loan Program. Those are the loans you’ll consolidate.

Next, apply online or by mail. The process is free and takes about six weeks to complete, but you can submit the Public Service Loan Forgiveness form after consolidation is complete.

WHAT COUNTS AS A QUALIFYING PAYMENT?

A qualifying monthly payment is a payment that you made after Oct. 1, 2007, while you were employed by a qualifying employer.

The 120 qualifying monthly payments don’t need to be consecutive. For example, if you have a period of employment with a non-qualifying employer, you will not lose credit for prior qualifying payments.

WHAT ABOUT THE PAYMENT PAUSE?

Student loan payments are currently paused because of the COVID pandemic.

Payments are set to resume, along with the accrual of interest, 60 days after the current Supreme Court case about student loan forgiveness is resolved. If the case hasn’t been resolved by June 30, payments will start 60 days after that.

Borrowers will get credit toward PSLF for payments they would have made during the pause as long as they meet all other qualifications for the program, according to the Education Department.

For the qualifying payments to show in your account, you must submit a PSLF form that certifies your employment during the pause.

HOW MANY PEOPLE ARE CURRENTLY IN THE PROGRAM?

As of mid-April of this year, more than 615,000 borrowers have qualified for forgiveness under the limited PSLF waiver, which ended in October. Some borrowers who submitted their applications prior to the end date may continue to have their applications processed from the waiver period.

WHO CAN I CONTACT IF I HAVE QUESTIONS?

If you have a specific question about your application, it’s best to call or email a representative.

For general questions about student loans, the Federal Student Aid Information Center (FSAIC) hosts a contact center that allows borrowers to live chat, call or email.

WASHINGTON (AP) — The Supreme Court says the Biden administration program to cancel student loans will remain blocked for now, but the justices have agreed to take up the case in late winter. The court’s decision to hear arguments relatively quickly means it is likely to determine whether the widespread loan cancellations are legal by late June 2023. That’s about two months before the newly extended pause on loan repayments is set to expire. The administration had wanted a court order that would have allowed the program to take effect even as court challenges proceed. But as a fallback, it suggested the high court hold arguments and decide the issue.

WASHINGTON (AP) — The Supreme Court on Thursday (Dec. 1, 2022) said the Biden administration program to cancel student loans will remain blocked for now, but the justices agreed to take up the case in late winter.

The court’s decision to hear arguments in about three months means it is likely to determine whether the widespread loan cancellations are legal by late June.

That’s about two months before the newly extended pause on loan repayments is set to expire.

The administration had wanted a court order that would have allowed the program to take effect even as court challenges proceed. But as a fallback, it suggested the high court hold arguments and decide the issue.

Biden’s plan promises $10,000 in federal student debt forgiveness to those with incomes of less than $125,000, or households earning less than $250,000. Pell Grant recipients, who typically demonstrate more financial need, are eligible for an additional $10,000 in relief.

The Congressional Budget Office has said the program will cost about $400 billion over the next three decades.

More than 26 million people already applied for the relief, with 16 million approved, but the Education Department stopped processing applications last month after a federal judge in Texas struck down the plan.

The Texas case is one of two in which federal judges have forbidden the administration from implementing the loan cancellations.

In a separate lawsuit filed by six states, a three-judge panel of the 8th U.S. Circuit Court of Appeals in St. Louis also put the plan on hold, and that case is before the Supreme Court.

The moratorium had been slated to expire Jan. 1, a date that Biden set before his debt cancellation plan stalled in the face of legal challenges from conservative opponents.

The new expiration date is 60 days after the legal issue has been settled, but no later than the end of August.

Conservative attorneys, Republican lawmakers and business-oriented groups have asserted that Biden overstepped his authority in taking such sweeping action without the assent of Congress. They called it an unfair government giveaway for relatively affluent people at the expense of taxpayers who didn’t pursue higher education.

The administration has argued that the loan cancellations are legal under a 2003 law aimed at providing help to members of the military. The program is a response to “a devastating pandemic with student loan relief designed to protect vulnerable borrowers from delinquency and default,” the Justice Department said in court papers.

The law, the HEROES Act, allows the secretary of education to “waive or modify any statutory or regulatory provision applicable to the student financial assistance programs … as the Secretary deems necessary in connection with a war or other military operation or national emergency.”

In putting the program on hold, the 8th Circuit panel said there was little harm to borrowers because repayments have been suspended. Allowing the cancellations to proceed before a definitive court ruling would have had än “irreversible impact,” the appeals court said.

U.S. District Judge Mark Pittman, an appointee of former President Donald Trump, issued a more sweeping ruling in which he found that such a costly program required clear congressional authorization.

The justices also will confront an important procedural question, whether anyone who has sued faces any legal or financial harm.

The 8th Circuit judges, two Trump appointees and one judge selected by former President George W. Bush, determined there might be financial costs to the Missouri Higher Education Loan Authority, and said that was enough.

In the Texas case, Pittman wrote that plaintiffs Myra Brown and Alexander Taylor could file their lawsuit, though neither faces financial harm. Brown is ineligible for debt relief because her loans are commercially held, and Taylor is eligible for just $10,000 and not the full $20,000 because he didn’t receive a Pell grant.

But Pittman said it was enough that the government did not take public comments on the program, meaning neither person had a chance to provide input on a program they would be at least partially excluded from.

WASHINGTON (AP) — The Biden administration is moving forward with an overhaul of several student debt forgiveness programs, aiming to make it easier for borrowers to get cancellation if they are duped by their colleges or if they put in a decade of work as public servants. The Education Department on Monday (Oct. 31, 2022) finalized a package of rules that it proposed earlier this year. The new rules take hold in July and are separate from President Joe Biden’s sweeping student debt forgiveness plan, which has been held up in court amid a legal challenge. Education Secretary Miguel Cardona said his agency is “fixing a broken system and putting borrowers first.”

WASHINGTON (AP) — The Biden administration is moving forward with an overhaul of several student debt forgiveness programs, aiming to make it easier for borrowers to get relief if they are duped by their colleges or if they put in a decade of work as public servants.

The Education Department on Monday (Oct. 31, 2022) finalized a package of rules that it proposed earlier this year. The new rules take hold in July and are separate from President Joe Biden’s sweeping student debt forgiveness plan, which has been held up in court amid a legal challenge from Republican-led states.

Education Secretary Miguel Cardona called it a “monumental step” that will make it faster and simpler to get debt relief. “The Biden administration is fixing a broken system and putting borrowers first,” Cardona told reporters on Monday.

Chief among the changes is a revamp of a program known as borrower defense, which offers debt forgiveness to students whose colleges make false advertising claims or otherwise commit fraud. The program aims to help the victims of predatory for-profit colleges, but it has been bogged down by complex rules and political battles, resulting in a mounting backlog of applications.

The new policy clarifies that the Education Department can review claims from individual borrowers or it can grant forgiveness to huge swaths of students from the same college, if it has been found to have committed fraud. The department can pursue such “group discharge” claims on its own or in response to requests from states or nonprofit legal groups.

It’s a reversal from Trump-era policies that eliminated group discharges and made it harder for individuals to qualify for relief. The new rule cements the department’s ability to erase debt for thousands of borrowers in a single action, as the Biden administration has already done for those who attended ITT Tech, Corinthian Colleges and other for-profit college chains.

In a major shift, the federal government will also be able to force colleges to cover the cost when their students are granted loan cancellation because of fraud. Those costs have typically been passed to taxpayers, prompting complaints from conservative critics who say the program too freely cancels debt at the public’s expense.

“We’re putting students ahead of special interests,” said Cardona, adding that his agency will go after “shady schools” that leave students with heavy debt and “useless” college degrees.

The rules were embraced by student advocates but blasted by an industry group representing for-profit colleges. The group said the rules will deprive schools of due process protections, and it questioned how closely the department reviewed the more than 5,000 public comments responding to its initial proposal.

“The department has cut corners in a rush to ram through a punitive borrower defense rule with serious legal and regulatory flaws that could undermine the American education system,” said Jason Altmire, a former Democratic congressman and president and CEO of Career Education Colleges and Universities.

The overhaul also brings big changes to the Public Service Loan Forgiveness program, which was created by Congress as an incentive for government and nonprofit workers but has failed to deliver its promise because of notoriously complex rules.

Under the existing rules, teachers, nurses and other public workers can get the rest of their federal student debt erased after making 120 monthly payments. All payments must be made in full and within 15 days of their due date, otherwise they don’t get counted toward the 120 monthly payments.

The new rule erases the 15-day rule, allowing payments to count even if they are made late or in multiple installments. It also allows borrowers to make up to a year of payments in advance in a single sum, rather than making monthly payments.

Borrowers in certain situations will also be able to make progress toward debt forgiveness even if they aren’t making payments. Those who get their student loans paused for cancer treatment, military service or the Peace Corps, for example, will be treated as if they are still making monthly payments during that time.

More flexibility will also be added to a separate program offering debt cancellation to those with disabilities.

That program cancels federal student debt for people who are permanently disabled and unable to generate significant income. But many have been granted that relief later had their debt reinstated because they failed to submit paperwork during a three-year monitoring period.

The new rule will eliminate the monitoring period and make more types of disabilities eligible for cancellation.

Loosening the rules around existing debt forgiveness programs has been a priority for the Biden administration, which has already granted $38 billion in debt cancellation for defrauded students, public students and others. That doesn’t include Biden’s broad cancellation plan, which is estimated to cost about $400 billion.

A federal appeals court has temporarily blocked Biden’s plan, creating uncertainty for millions of borrowers who were told they would get up to $20,000 canceled. The Education Department has said it’s still processing applications even while it’s barred from erasing the debt. Cardona on Monday said his agency is moving “full steam ahead” with the plan.

WASHINGTON (AP) — The Supreme Court is taking up a partisan legal fight over President Joe Biden’s plan to wipe away or reduce student loans held by millions of Americans. The high court, with its 6-3 conservative majority, is hearing arguments on Tuesday (Feb. 28, 2023) in two challenges to the plan. So far, Republican-appointed judges on lower courts have blocked the plan. Arguments are scheduled to last two hours, but likely will go much longer. The Biden administration says 26 million people have applied and 16 million have been approved to have up to $20,000 in federal student loans forgiven. The program is estimated to cost $400 billion over 30 years.

WASHINGTON (AP) — The Supreme Court is taking up a partisan legal fight over President Joe Biden’s plan to wipe away or reduce student loans held by millions of Americans.

The high court, with its 6-3 conservative majority, is hearing arguments on Tuesday (Feb. 28, 2023) in two challenges to the plan, which has so far been blocked by Republican-appointed judges on lower courts.

Arguments are scheduled to last two hours but likely will go much longer. The public can listen in on the court’s website.

Twenty-six million people have applied, and 16 million have been approved to have up to $20,000 in federal student loans forgiven, the Biden administration says. The program is estimated to cost $400 billion over 30 years.

“I’m confident the legal authority to carry that plan is there,” Biden said on Monday, at an event to mark Black History Month.

The president, who once doubted his own authority to broadly cancel student debt, first announced the program in August. Legal challenges quickly followed.

Republican-led states and lawmakers in Congress, as well as conservative legal interests, are lined up against the plan as a clear violation of Biden’s executive authority. Democratic-led states and liberal interest groups are backing the Democratic administration in urging the court to allow the plan to take effect.

Without it, loan defaults would dramatically increase when the pause on loan payments ends no later than this summer, the administration says. Payments were halted in 2020 as part of the response to the coronavirus pandemic.

The administration says a 2003 law, commonly known as the HEROES Act, allows the secretary of education to waive or modify the terms of federal student loans in connection with a national emergency. The law was primarily intended to keep service members from being worse off financially while they fought in wars in Afghanistan and Iraq.

Nebraska and other states that sued say the plan is not necessary to keep the rate of defaults roughly where it was before the pandemic. The 20 million borrowers who have their entire loans erased would get a “windfall” that will leave them better off than they were before the pandemic, the states say.

Dozens of borrowers came from across the country to camp out near the court on a soggy Monday evening in hopes of getting a seat for the arguments. Among them was Sinyetta Hill, who said that Biden’s plan would erase all but about $500 of the $20,000 or so she has in student loans.

“I was 18 when I signed up for college. I didn’t know it was going to be this big of a burden. No student should have to deal with this. No person should have to deal with this,” said Hill, 22, who plans to study law after she graduates from the University of Wisconsin-Milwaukee in May.

Biden’s plan could meet a frosty reception in the courtroom. The court’s conservatives have been skeptical of other Biden initiatives related to the pandemic, including vaccine requirements and pauses on evictions. Those were billed largely as public health measures intended to slow the spread of COVID-19.

The loan forgiveness plan, by contrast, is aimed at countering the economic effects of the pandemic.

The national emergency is expected to end May 11, but the administration says the economic consequences will persist, despite historically low unemployment and other signs of economic strength.

In addition to the debate over the authority to forgive student debt, the court also will confront whether the states and two individuals whose challenge also is before the justices have the legal right, or standing, to sue.

Parties generally have to show that they would suffer financial harm and benefit from a court ruling in their favor. A federal judge initially found that the states would not be harmed and dismissed their lawsuit before an appellate panel said the case could proceed.

Of the two individuals who sued in Texas, one has student loans that are commercially held and the other is eligible for $10,000 in debt relief, not the $20,000 maximum. They would get nothing if they win their case.

A decision is expected by late June.

FEBRUARY 27, 2023:

WASHINGTON (AP) — The Supreme Court is about to hear arguments over President Joe Biden’s student debt relief plan. It’s a plan that impacts millions of borrowers who could see their loans wiped away or reduced. Republican-appointed judges have kept the Democratic president’s plan from going into effect. It’s unclear how the court will respond. The court is dominated 6-3 by conservatives. The justices have scheduled two hours of arguments in the case Tuesday (Feb. 28, 2023), though it’ll probably go longer. The public can listen in on the court’s website beginning at 10 a.m. Eastern. The court is hearing challenges by two students and by six Republican-led states: Arkansas, Iowa, Kansas, Missouri, Nebraska and South Carolina.

WASHINGTON (AP) — The Supreme Court is about to hear arguments over President Joe Biden’s student debt relief plan, which impacts millions of borrowers who could see their loans wiped away or reduced.

So far, Republican-appointed judges have kept the Democratic president’s plan from going into effect, and it remains to be seen how the court, dominated 6-3 by conservatives, will respond. The justices have scheduled two hours of arguments in the case Tuesday, though it will probably go longer. The public can listen in on the court’s website beginning at 10 a.m. EST.

Where things stand ahead of the hearing as well as what to expect:

HOW DOES THE FORGIVENESS PLAN WORK?

The debt forgiveness plan announced in August would cancel $10,000 in federal student loan debt for those making less than $125,000 or households with less than $250,000 in income per year. Pell Grant recipients, who typically demonstrate more financial need, would get an additional $10,000 in debt forgiven.

College students qualify if their loans were disbursed before July 1. The plan makes 43 million borrowers eligible for some debt forgiveness, with 20 million who could have their debt erased entirely, according to the Biden administration.

The White House says 26 million people have applied for debt relief, and 16 million people had already had their relief approved. The Congressional Budget Office has said the program will cost about $400 billion over the next three decades.

HOW DID THE ISSUE WIND UP AT THE SUPREME COURT?

The Supreme Court is hearing two challenges to the plan. One involves six Republican-led states that sued. The other involves a lawsuit filed by two students.

A lower court dismissed the lawsuit involving the following states: Arkansas, Iowa, Kansas, Missouri, Nebraska and South Carolina. The court said the states could not challenge the program because they weren’t harmed by it. But a panel of three federal appeals court judges on the U.S. Court of Appeals for the 8th Circuit — all of them appointed by Republican presidents — put the program on hold during an appeal. The Supreme Court then agreed to weigh in.

The students’ case involves Myra Brown, who is ineligible for debt relief because her loans are commercially held, and Alexander Taylor, who is eligible for just $10,000 and not the full $20,000 because he didn’t receive a Pell grant. They say that the Biden administration didn’t go through the proper process in enacting the plan, among other things.

Texas-based U.S. District Judge Mark Pittman, an appointee of President Donald Trump, sided with the students and ruled to block the program. Pittman ruled that the Biden administration did not have clear authorization from Congress to implement the program. A federal appeals court left Pittman’s ruling in place, and the Supreme Court agreed to take up the case along with the states’ challenge.

HOW DID BIDEN GET TO CANCEL THE DEBT?

To cancel student loan debt, the Biden administration relied on the Higher Education Relief Opportunities for Students Act, commonly known as the HEROES Act. Originally enacted after the Sept. 11, 2001, terror attack, the law was initially intended to keep service members from being worse off financially while they fought in wars in Afghanistan and Iraq. Now extended, it allows the secretary of education to waive or modify the terms of federal student loans as necessary in connection with a national emergency.

Trump, a Republican, declared the COVID-19 pandemic a national emergency in March 2020, but Biden recently announced that designation will end May 11. The Biden administration has said that the end to the national emergency doesn’t change the legal argument for student loan debt cancellation because the pandemic affected millions of student borrowers who might have fallen behind on their loans during the emergency.

WHAT ARE THE JUSTICES LIKELY TO ASK ABOUT?

Expect the justices to be focused on several big issues. The first one is whether the states and the two borrowers have the right to sue over the plan in the first place, a legal concept called “standing.” If they don’t, that clears the way for the Biden administration to go ahead with it. To prove they have standing, the states and borrowers will have to show in part that they’re financially harmed by the plan.

Beyond standing, the justices will also be asking whether the HEROES Act gives the Biden administration the power to enact the plan and how it went about doing so.

WHEN WILL BORROWERS KNOW THE OUTCOME?

It will likely be months before borrowers learn the outcome of the case, but there’s a deadline of sorts. The court generally issues all of its decisions by the end of June before going on a summer break.

Whether or not the debt gets cancelled, the case’s resolution will bring changes. While federal student loan payments are currently paused, that will end 60 days after the case is resolved. And if the case hasn’t been resolved by June 30, payments will start 60 days after that.