WASHINGTON — The Department of Education announced Tuesday that it was extending the pause during the pandemic for federal student loan repayments until March 30.
The agency said if the student debt relief program is not implemented by June 30 and if the lawsuit is still pending in court, student loan payments will begin 60 days after.
“Payments will resume 60 days after the department authorizes it to implement the program or resolve the litigation, giving the Supreme Court an opportunity to resolve the case during its current term,” the ministry said in a statement. “If the program is not implemented and the litigation is not resolved by June 30, 2023, payments will resume 60 days thereafter.”
Earlier, the government had said the break during the pandemic would expire on New Year’s Eve. Two lawsuits blocking the Biden plan, including one by six GOP-led states, have been appealed by the Justice Department, but it’s unclear how long the court case could take.
“We are extending the pause in payments because it would be deeply unfair to require borrowers to pay a debt they would not need to pay were it not for the baseless lawsuits from Republican officials and special interests,” U.S. Secretary of Education Miguel Cardona said in an explanation.
President Joe Biden, on a Tuesday tweetsaid the extension will “give the Supreme Court time to hear the case in its current term.”
“I am confident that our student debt relief plan is legal,” he said on Twitter.
Prior to the announcement, more than 200 advocacy groups had urged Biden to extend the hiatus.
In a letter Monday, the groups argued that a resumption of student loan repayments would represent a financial setback for borrowers, particularly at a time of record-high inflation.
“We, the undersigned 225 organizations, urge you to immediately extend the payment pause until your administration is able to fully implement debt relief for all eligible borrowers and continue to use all legal powers at your disposal to enforce it.” Realize relief,” reads the letter.
“We cannot allow these patently political lawsuits to plunge millions of borrowers into financial disaster,” the letter said. “Forcing millions of borrowers back into repayment while the state of debt relief remains uncertain is a recipe for disaster and will lead to widespread confusion and cause borrowers to fail.”
Most of the organizations that signed the letter include task forces like the AFL-CIO, legal organizations like the ACLU and the NAACP, and debt relief advocacy groups like the Debt Collective and the Student Debt Crisis Center.
The Trump administration instituted the pause on student loan repayments due to the coronavirus pandemic, and the Biden administration has extended it multiple times.
A federal appeals court issued a statewide injunction preventing the Biden administration from going ahead with its student debt relief plan after the six GOP-run states — Nebraska, Missouri, Arkansas, Iowa, Kansas and South Carolina — were challenged.
The Biden administration has asked the US Supreme Court to lift the nationwide injunction.
“The Eighth Circuit’s flawed injunction leaves millions of economically vulnerable borrowers in limbo, uncertain about the amount of their debt and unable to make financial decisions with an accurate understanding of their future repayment obligations,” Attorney General Elizabeth Prelogar wrote in the filing to the United States supreme court.
In late August, Biden announced that he would pay up to $20,000 in federal student loan debt for Pell Grant borrowers and up to $10,000 for all other borrowers with incomes less than $125,000 for an individual and $250,000 dollars for a household.
The program would only apply to current borrowers, not future ones, and income levels for tax years 2020 and 2021 would be considered. Student loan borrowers who have private student loans would not be eligible.
The state attorneys general who initiated the legal challenge argued that the loan relief program threatens those states’ future tax revenues and that the plan overrides the authority of Congress.
More than 43 million Americans have student loan debt, and the Federal Reserve estimates that total U.S. student loan debt is more than $1.76 trillion.
The three-member judge of the 8th Circuit Court of Appeals in St. Louis granted the injunction “pending further orders from this court or the United States Supreme Court.”
These judges are Bobby E. Shepherd and Ralph R. Erickson, both appointed by President George W. Bush, and L. Steven Grasz, a nominee by President Donald Trump.
After the decision, White House Press Secretary Karine Jean-Pierre said the White House believes it has legal authority to implement the program.
“The administration will continue to fight these baseless lawsuits by Republican officials and special interests and will never stop fighting to support working Americans and the middle class,” she said in a statement.
26 million applicants
More than 26 million student loan borrowers have applied to the program, and 16 million have been accepted, according to the Department of Education.
The bipartisan Congressional Budget Office found the program would increase the federal deficit by $400 billion over 30 years. The agency found that pausing federal student loan repayments cost $20 billion from September to December 2022.
Adam Looney, a senior fellow at the Brookings Institute — a left-leaning think tank — said that while the cost may seem high, there are average monthly savings of about $59 for borrowers who qualify.
Looney was previously senior economist for public finance and tax policy at former President Barack Obama’s Council of Economic Advisers and economist at the Federal Reserve Board.
“It’s like a tax cut,” Looney said of student borrowers who would qualify for debt relief.
The Biden administration stopped accepting applications for student debt relief after a federal judge in Texas issued a second ruling that separately found the program unlawful.
In Fort Worth, US District Judge Mark Pittman, an appointee to former President Donald Trump, ruled that the program was an “unconstitutional exercise of Congressional legislative power.” He ruled in favor of two borrowers, backed by a conservative advocacy group that brought the challenge.
The Ministry of Justice has already appealed against this verdict.
Pittman wrote in his opinion that “[w]Whether the program constitutes good public policy is not for this court to determine.”
Sabrina Calazans, the outreach director for the Student Debt Crisis Center, said ahead of Tuesday’s announcement that the Biden administration should resume its pause on student loan repayments. The center also signed the letter to the White House from more than 200 organizations.
“We are advocating an extension of the payment pause until student debt relief is applied to borrowers’ accounts,” she said. “We believe borrowers should be able to get their debt forgiven and not have to make any payments until then because they were promised that relief.”
Calazans, who has student loan debt herself — both federal and private — and is a first-generation college student, said the pause in repayments has been a lifeline for her and her family. The break didn’t include personal loans, which she has, so she’s had to continue making those payments during the pandemic.
“People were struggling before the pandemic started,” she said of student loan debt. “It’s been a crisis before that that people have dealt with, so it’s been around for a long time, not just recently.”
Calazans said student loan borrowers who have applied for debt relief from the Department of Education are getting emails that their student debt relief applications have been approved, but the lawsuits are blocking them.
“People are excited about the prospect of their debt being forgiven – whether it’s all or part of it – and now that hope that they had is now suddenly stopped because of the blocking of that plan,” she said. “Borrowers are in this limbo.”
The Department of Education has sent out emails with the subject line “Your application for student loan debt relief has been approved” to student loan borrowers who have applied and been approved for the debt relief program.
However, the body of the email reads: “Unfortunately, a number of lawsuits have been filed challenging the program which are currently preventing us from paying your debt.”
“We firmly believe the lawsuits are without merit and the Justice Department has appealed on our behalf,” the email said. “We will retain your application information and continue our review of your eligibility if and when we prevail in court. We will keep you informed if there are any new developments.”