US President Joe Biden’s plan to forgive federal student loans, first announced in August, has been blocked by two legal challenges, clouding the financial future of millions of American students and graduates.
Biden said Tuesday he was confident the plan was legal and announced new, temporary relief for borrowers that could mean their next loan payment isn’t due until August 2023.
WHAT’S THE LATEST NEWS?
On November 22, Biden announced that he would extend the Covid-19 pandemic-era pause on student loan payments until June 30, 2023 at the latest. The pause will allow the U.S. Supreme Court to consider his administration’s requests to overturn lower court orders to block it. plan affecting Department of Education borrowings.
The payments will resume 60 days after the pause ends, Biden said.
WHAT HAPPENS NEXT WITH THE COURT CASES?
The Biden administration has asked the Supreme Court to delay a Nov. 14 decision by the St. Louis, Missouri-based 8th U.S. Circuit Court of Appeals that upheld a request for an injunction by the Republican-led states of Arkansas, Iowa, Kansas and Missouri. , Nebraska and South Carolina. The states are due to respond to the request by Wednesday.
It is also asking a federal appeals court in New Orleans to set aside a separate Nov. 10 ruling by a Texas judge appointed by former President Donald Trump that declared the debt relief plan illegal. The administration has said it will ask the Supreme Court to intervene if the 5th U.S. Circuit Court of Appeals denies the request.
WHO IS ELIGIBLE FOR LOAN FORGIVENESS?
The program forgives $10,000 of federal government debt for individuals earning less than $125,000, couples earning less than $250,000, and $20,000 of debt owed by Pell Grant holders, who are primarily lower-income borrowers.
WHAT IS THE STATUS OF APPLICATIONS?
About 26 million Americans have applied for student loan forgiveness since August, and the U.S. Department of Education has already approved requests from 16 million. The government stopped accepting new applications on Nov. 11 after a Texas judge blocked Biden’s order.
Borrowers who have not yet applied can subscribe to the federal website for updates.
WHAT ARE VOTERS SAYING?
American voters support debt relief by a narrow margin; About 15% of voters say the plan would affect them, an Economist/YouGuv poll found.
The six Republican-led states suing to block Biden’s executive order say he has stepped outside of Congress’s authority, and the plan threatens future tax revenue and money earned by state agencies that invest in or service student loans.
Deep South states will benefit the most per borrower from Biden’s order, according to research by the New York Federal Reserve, including South Carolina, one of six courts:
Financial advisors warn that some states may treat student loan debt that is forgiven as taxable income.
WHY IS US STUDENT DEBT SO HIGH?
The cost of higher education in the United States has skyrocketed over the past three decades, doubling at private four-year colleges and universities and rising even more than at public four-year schools, according to a study by the nonprofit College Board. Student loan balances nearly quadrupled from 2006 to 2019.
U.S. borrowers have about $1.77 trillion in student debt, according to the latest data from the Federal Reserve. Most of it is owned by the federal government.
Economists estimate that Biden’s student loan forgiveness plan could add $300 billion to $600 billion to the federal debt.
Reporting by Heather Timmons and Nate Raymond; Editing: Josiah Kao
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