Every week there seems to be a new development in the battle for student loan forgiveness, adding to the confusion. Let’s review the current status of student loan forgiveness and what’s next.
Current Status of Student Loan Forgiveness
Opponents of President Biden’s student loan forgiveness plan filed six lawsuits that seek to block forgiveness. Two of these lawsuits have been dismissed, two are still pending and two have been appealed.
The lawsuits filed by the Pacific Legal Foundation and Brown County Taxpayers Association have been dismissed due to a lack of legal standing. There are no appeals remaining in these cases.
The lawsuits filed by the Arizona Attorney General and by the Cato Institute are still pending. No rulings have yet been issued in these cases.
The lawsuit filed by the six state Attorneys General has been dismissed due to a lack of legal standing, but an appeal is pending in the 8th Circuit Court of Appeals. The court issued a temporary stay on October 21, 2022 and a preliminary injunction on November 14, 2022 while they consider the case. These prevent the U.S. Department of Education from discharging any federal student loans, but allow borrowers to continue to apply for forgiveness. The U.S. Department of Education appealed the preliminary injunction to the U.S. Supreme Court on November 18, 2022 and the six state Attorneys General filed a response on November 23, 2022.
The lawsuit filed by the Job Creators Network yielded a ruling on November 10, 2022 against the U.S. Department of Education, vacating the student loan forgiveness program. This prevents the U.S. Department of Education from discharging any federal student loans or collecting any new applications for forgiveness. The U.S. Department of Education took down the student loan forgiveness application. The U.S. Department of Education has appealed the ruling to the U.S. Court of Appeals for the 5th Circuit on November 17, 2022.
Because of these lawsuits, President Biden’s student loan forgiveness plan is currently blocked and borrowers are in limbo. The U.S. Department of Education is unable to discharge any loans until both appeals are successful. The U.S. Department of Education is unable to reopen the forgiveness application until the appeal of the Job Creators Network ruling is successful.
The U.S. Department of Education has notified 16 million borrowers that their applications for forgiveness have been approved, but the U.S. Department of Education is unable to discharge the student loans while the lawsuits are pending.
Extension of the Payment Pause and Interest Waiver
On November 22, 2022, the U.S. Department of Education announced an eighth extension to the payment pause and interest waiver while the appeals are pending. Collection activities are also suspended.
Repayment will restart 60 days after the court cases are resolved or June 30, 2023, whichever comes first. Thus, depending on when the courts rule, the restart of repayment will happen sometime from February 1 to September 1, 2023. The payment pause and interest waiver will have lasted from three years to three and a half years.
The June 30, 2023 date is at the end of the current session of the U.S. Supreme Court. The 60 day period is necessary so that the student loan servicers can provide six notices of the restart of repayment starting two months before the restart of repayment.
After crying wolf twice before – the fifth and seventh extensions were both labeled the “final extension” – the U.S. Department of Education did not label the eighth extension as a final extension.
What’s Next for Student Loan Forgiveness?
The most likely next events in the student loan forgiveness saga will include hearings (and later rulings) in the appeals of the lawsuits of the six state Attorneys General and the Job Creators Network.
There may also be rulings in the lawsuits by the Arizona Attorney General and the Cato Institute. These rulings are likely to be appealed.
After the new session of Congress starts on January 3, 2023, Republicans in the U.S. House of Representatives may file a lawsuit to block President Biden’s student loan forgiveness plan. This lawsuit will likely argue that only Congress has the power of the purse and that the president’s plan violates the separation of duties.
What Should Borrowers Do?
Borrowers should sit tight. There’s nothing they can do to affect the outcome of the lawsuits.
Borrowers may wish to start saving their monthly student loan payments to get used to the amount of money they will have to pay after the restart of repayment. They can save this money in a high-yield savings account. When repayment restarts, they can use the money to pay down their student loan debt, pay off other debt like credit cards, or build or bulk up their emergency fund.
Beware of student loan scams. Some scams will ask for money to help you qualify for forgiveness or expedite your application. Other scams will ask for your Social Security Number, FSA ID and other private information for identity theft purposes.
If you have questions about the status of the student loan forgiveness plan, visit StudentAid.gov or call your student loan servicer.