Cancellation of the student loan has been blocked. Now what?

By WILLIAM CHITTENDEN
The conversation

1. Why was Biden’s student loan forgiveness program stalled?

It was ruled unconstitutional. The decision was made on November 10, 2022, by Judge Mark Pittman of the U.S. District Court for North Texas, who ruled that the Higher Education Student Aid Opportunities Act of 2003 – or hero – “does not provide the executive branch with a clear decision.” Congressional authorization” for a student loan forgiveness program. He added that the program was “an unconstitutional exercise of the legislative power of Congress and must be rescinded.”

The judge’s ruling bars any student loans from being forgiven “until a final verdict is rendered” in the case. Technically, this could be taken to the Supreme Court, but it could also be settled at the level of the Court of Appeal.

In a separate case, on November 14, a three-judge panel of the United States Court of Appeals for the 8th Circuit temporarily blocked the program until the case was resolved by the court. The 8th Circuit covers seven states, including Missouri, which is one of several Republican-led states seeking to block the program.

Both rulings effectively block Biden’s plan to forgive up to $20,000 in student loans per borrower.

2. Can it be unlocked?

Both court decisions could be overturned. The Biden administration has argued that the Heroes Act of 2003 allows the Secretary of Education to forgive student loans to people affected by the pandemic.

The Biden administration has already filed a notice of appeal of Pittman’s Nov. 10 ruling.

On Nov. 18, the Biden administration asked the Supreme Court to overturn the Court of Appeals order blocking student loan forgiveness. The Supreme Court has asked the plaintiffs in the case to provide their response by November 23, 2022.

It’s unclear how the full court might rule. However, in two previous cases, Judge Amy Coney Barrett rejected attempts to block the student loan forgiveness plan.

3. What kind of relief can student borrowers get in the meantime?

Currently, student loan payments are suspended but are expected to resume in January 2023. The Biden administration may extend the payment suspension beyond December 2022. However, in August 2022 – when the last extension of the payment suspension was announced – the White House said it was supposed to be the last expansion.

Despite the decline in widespread student loan forgiveness, some borrowers may still qualify for one or more targeted student loan forgiveness programs. These groups include borrowers who attended a school that closed. Student loans can also be canceled for those who are totally and permanently disabled. Students who have been defrauded by their school – for example by being misled about graduate placement rates or the true cost of attending the school – may also be eligible.

In November 2022, the Biden administration released new rules to make it easier to forgive student loans in bankruptcy. If a student borrower can prove that their expenses equal or exceed their income, student loan debt can be eliminated in the event of bankruptcy.

William Chittenden is associate professor of finance at Texas State University.

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