What to know if you applied for the Biden student loan forgiveness program

Graduates at a community college commencement in East Rutherford, N.J., in 2018. (Seth Wenig/AP File)

The Supreme Court is set to hear oral arguments Tuesday on President Biden’s student loan debt relief plan, which aims to wipe out up to $20,000 of student debt for over 40 millions of Americans.

The existence of this program now depends on the High Court. The new justices, with a conservative 6-3 majority, will consider two cases challenging Biden’s plan, with a decision expected this summer.

The case of Biden v. Nebraska was carried by six Republican-led states: Arkansas, Iowa, Kansas, Missouri, Nebraska and South Carolina. They argue that Biden’s plan, expected to cost $400 billion, threatens a loss of tax revenue for every state.

A lower court had dismissed the lawsuit, saying that the states did not have standing to sue the federal government. But last November, a federal appeals court issued a national injunction, putting a hold on Biden’s program. The court of appeal said Missouri, one of six states, had standing to bring the suit on behalf of the Missouri Higher Education Loan Authority (MOHELA), which services federal student loans and grants. of state study. The sentence found that MOHELA will lose revenue if Biden’s program goes through go ahead.

The second case, Department of Education v. Brown, was filed by the Job Creators Network Foundation on behalf of two Texas student borrowers who do not fully qualify for debt forgiveness under Biden’s plan.

Plaintiffs in both cases argue that the Biden administration’s Department of Education exceeded its authority to provide one-time debt relief under a 2003 law.

Under the Heroes Act of 2003, the education secretary has the ability to modify student loan balances in the event of a national emergency. The Biden administration says the COVID-19 pandemic qualifies as such an emergency. But state GOP lawyers say the administration is using the pandemic as “a pretext to mask the president’s true goal of fulfilling his campaign promise to wipe out student loan debt,” according to the documents. of the court.

Meanwhile, the Biden administration has repeatedly said that borrowers continue to recover from the pandemic and that providing debt relief under the Heroes Act is legal. It’s the same authority that Biden and then-President Donald Trump used to pause student loan payments during the height of the pandemic. Biden extended the break for a sixth time until the end of June 2023.

“Forty-five million.” [Americans] owe a collective debt of $1.7 trillion in federal loans,” Natalia Abrams, president and CEO of the Student Debt Crisis Center, told Yahoo News. The 26 million Americans who applied for the program face uncertainty along with 16 millions who have had their applications approved.

In an effort to unpack what all of this means for borrowers going forward, Yahoo News spoke with Abrams and Cody Hounanian, executive director of the Student Debt Crisis Center. Some answers have been edited for length and clarity.

If the Supreme Court rules that the Biden administration’s student debt relief plan can be implemented, who will qualify and what kind of relief will they receive?

Natalia Abrams: Biden’s student debt cancellation plan that he proposed in August was to cancel $10,000 for all federal student loans that have loans from the Department of Education. Borrowers are eligible for this relief if their individual income is less than $125,000; $250,000 for married couples. There were some, what we call ED-held loans that were excluded – these were loans with older federal Family Education loans that were not held by the Department of Education.

A good rule of thumb is that if your loans weren’t part of the payment break during the COVID pandemic, then they probably won’t be part of the cancellation. However, loans held by ED are qualified. But in terms of federal loans, it includes Parent Plus Loans, graduate loans, high school loans – anyone with a direct loan is completely fine. Therefore, it is $10,000 in total, and then an additional $10,000, for a total of $20,000 if the borrower had a Pell Grant. Some borrowers never exhaust their Pell Grant, but even if you took a dollar of a Pell Grant, that means you will get an additional $10,000, equal to $20,000.

When should borrowers resume payments after Biden extends the break?

Abrams: Federal student loan payments will resume 60 days after a Supreme Court decision, or June 30, whichever comes first. And to our knowledge, if the decision comes on June 30, it would be 60 days later.

What if a borrower submitted their application before the program break and did not receive a letter?

Cody Hounanian: If you have submitted a request and have not received a communication, I would certainly encourage people to continue to monitor the messages they receive. Some of it is just the fact that the Department of Education and the student loan servicing companies have a bit of a monumental task – they have to communicate updates with tens of millions of people. So it happens in waves.

I’ll also add, while people are waiting for their approval letters and other communications related to all kinds of programs, we’re seeing from our supporters and borrowers everywhere that they’re getting letters in the mail, they’re getting phone calls. , they see on social media these opportunities to ask for programs, and these opportunities come from third-party companies that are often scams “get relief”.

How soon will the borrowers see relief if Biden’s plan is given the green light by the Supreme Court?

Abrams: I can be very quick after the decision. They have already approved 16 million loans, and we expect to see instant relief.

Hounanian: The whole reason that the department has processed these applications is precisely so that the Department of Education can immediately begin to cancel student debt once it clears these legal obstacles. So it will be soon.

Does the Biden administration have a plan B if the Supreme Court rules against the plan?

Hounanian: I’m not sure the administration itself has its own backup plan. I think they are steadfast in their fight now to protect the president’s plan as it is. But as advocates and part of a broad coalition that has been fighting for debt cancellation for many years, we have identified several ways in which the president can use different authorities to cancel student loan debt.

The president for his proposal chose to rely on legislation that allows him to issue relief due to the emergency aspect of the COVID-19 pandemic. But we also know that the president has the legal authority to cancel student loan debt largely through a settlement agreement, which is part of the Higher Education Act. So there are other opportunities.

What other options do borrowers have besides Biden’s student debt relief plan?

Hounanian: There are a host of other opportunities and programs available to borrowers that can help them access relief — and for some to have their entire student loan debt wiped out. We worked really hard this year to enroll borrowers in a public service loan forgiveness program that has been on the books for over a decade. This year it had an expanded set of rules that make it even easier for people to apply. It is something we will continue to spread awareness around.

There will be what are called adjustments of the account next year, that is to say that there are borrowers who will be closer to completing a repayment plan guided by income or public service loan forgiveness and will be able to access help immediately or sooner.

And there is also ongoing work on the repair of existing programs for borrowers totally and currently disabled, and those who have been victims of for-profit colleges. So there are a lot of opportunities.

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