Court Temporarily Blocks Biden’s Loan Forgiveness Plan

Court Temporarily Blocks Biden’s Loan Forgiveness Plan

A federal appeals court temporarily blocked President Joe Biden’s student loan forgiveness plan on Friday, preventing any debt from being canceled. The 8th Circuit Court of Appeals issued the stay in response to a motion from six Republican-led states, which claim the Biden administration’s forgiveness plan is an overstep of executive powers.

About 22 million borrowers have submitted applications for student loan forgiveness, and debt cancellation was expected to begin in November.

In a separate event last week, Supreme Court Justice Amy Coney Barrett rejected a bid from a Wisconsin taxpayers association to block the forgiveness program.

There are at least seven legal cases challenging Biden’s student loan cancellation.

6 Republican-led States Suing Biden Administration

Arkansas, Iowa, Kansas, Missouri, Nebraska and South Carolina are suing the Biden administration to prevent student loan forgiveness for millions of borrowers.

In August, Biden issued an executive order instructing the Department of Education to cancel up to $10,000 in federal student loans for borrowers earning less than $125,000 (or $250,000 for those filing taxes jointly); borrowers who have Pell Grants can apply for up to $20,000 in debt cancellation.

The six states involved in the lawsuit argue that the administration doesn’t have the power to issue the order without Congressional approval. A federal district judge dismissed the lawsuit last week before the states appealed to the 8th Circuit Court on Friday. At that point, the temporary stay was issued.

“The order does not reverse the trial court’s dismissal of the case, or suggest that the case has merit,” said Karine Jean-Pierre, the White House press secretary, on Friday. “It merely prevents debt from being discharged until the court makes a decision.”

The federal government has until Monday to respond, and the six states have until Tuesday to submit their own response.

What Does This Mean for Borrowers?

While the Biden administration is temporarily barred from processing debt forgiveness, applications remain open and will continue to be reviewed. Borrowers should submit the short application as soon as possible. You can apply on the Federal Student Aid site by providing just a few pieces of personal information.

“We encourage eligible borrowers to join the nearly 22 million Americans whose information the Department of Education already has,” said Jean-Pierre. “[The temporary stay] does not prevent us from reviewing these applications and preparing them for transmission to loan servicers.”

While the Biden administration remains confident that forgiveness will eventually be allowed to move forward, legal delays have complicated its timeline. With student loan payments scheduled to resume in January 2023, millions of borrowers who are hoping for forgiveness may need to restart payments until the courts can resolve these issues.

Not sure if you’re eligible for student loan forgiveness? Use the Forbes Advisor forgiveness calculator to see if you qualify or review frequently asked questions about the program.

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