Federal Court Blocks Biden Student Loan Forgiveness Plan; Potential Extension Debt Freeze Brewing

After a federal appeals court blocked President Biden’s plan to cancel up to $20,000 in debt per borrower, White House officials are considering extending a pause on student debt payments.

Biden announced in August that his administration would implement student debt forgiveness, while at the same time ending a legally authorized period of delay on student debt payments that started amid the pandemic. Unfortunately, Biden’s plan has, thus far, been thwarted in the courts. The US Court of Appeals- for the 8th Circuit by a 3-0 vote on Monday “issued an injunction preventing the administration from going forward with discharging debt, and a Texas judge last week declared the program unlawful in a separate ruling,” according to the Washington Post.

While the Biden administration is committed to defending the program in court, a discussion amongst White House officials in recent days revealed the possibility of extending the debt freeze again if it isn’t feasible to move forward with the president’s initial program. Payments were scheduled to resume Jan. 1 in “conjunction with the loan forgiveness.”

No decisions have been made, and those briefed on the matter expressed that conversations were preliminary. The legally authorized period of delay is not expected to be indefinitely extended amid Biden’s tenure, according to those speaking on the condition of anonymity. But extending it would provide relief to those who have borrowed.

It’s not clear if the president has signed off on the idea or if he’s even been involved with the planning, although senior aides have spoken about the move.

“As the legal vulnerability has become clearer and clearer, the White House has been making increasingly firm plans to extend the loan repayment pause,” a person familiar with the matter said to the Washington Post. “The extension we’re likely to see is meant to make sure borrowers don’t have the rug pulled out from under them, rather than an indefinite replacement for loan forgiveness.”

In Biden’s original plan, the program would have impacted as many as 40 million borrowers, canceling up to $20,000 in student debt for those making less than $125,000 per year, or less than $250,000 for married couples.

According to the Congressional Budget Office, around $400 billion would be the cost of Biden’s plan, while according to The Committee for a Responsible Federal Budget, the debt pause would cost close to $50 billion per year.

Because of the court rulings, the Education Department isn’t accepting applications for relief. More than half of the eligible borrowers have signed up, according to the Washington Post.

Still, the administration maintained that the program will eventually be affirmed by the courts.

“We are confident in our legal authority for the student debt relief program and believe it is necessary to help borrowers most in need as they recover from the pandemic,” White House Press secretary Karine Jean-Pierre said in a statement on Monday following the ruling. “The Administration will continue to fight these baseless lawsuits by Republican officials and special interests and will never stop fighting to support working and middle class Americans.”

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