Adding to the confusion, there seems to be a new development in the battle for student loan forgiveness every week. Let’s review the current status of student loan forgiveness and next steps.
Current status of student loan forgiveness
Opponents of President Biden’s student loan forgiveness plan have filed six lawsuits aimed at blocking the forgiveness. Two of those lawsuits have been dismissed, two are pending and two have been appealed.
The lawsuits filed by the Pacific Legal Foundation and the Brown County Taxpayers Association have been dismissed for lack of standing. In these cases, appeals are no longer possible.
The Arizona Attorney General’s and Cato Institute’s lawsuits are pending. No judgments have yet been rendered in these cases.
The lawsuit filed by the six attorneys general was dismissed for lack of standing, but is open for revision on May 8th Circuit Court of Appeals. The court issued a temporary stay on October 21, 2022 and a restraining order on November 14, 2022 while they review the case. These prevent the US Department of Education from paying off federal student loans, but still allow borrowers to apply for forgiveness. The US Department of Education appealed the injunction to the US Supreme Court on November 18, 2022, and the six attorneys general filed a response on November 23, 2022.
The lawsuit, filed by Job Creators Network, resulted in a November 10, 2022 ruling against the US Department of Education abandoning the student loan forgiveness program. This prevents the US Department of Education from paying federal student loans or making new applications for forgiveness. The US Department of Education has withdrawn the application for student loan forgiveness. The US Department of Education has appealed the verdict to the US Court of Appeals for May 5th Circuit on November 17, 2022.
Because of these lawsuits, President Biden’s student loan forgiveness plan is currently deadlocked and borrowers are in limbo. The US Department of Education cannot repay loans until both appeals are successful. The US Department of Education will not be able to retry the request for immunity until the appeal against the Job Creators Network ruling is successful.
The US Department of Education has notified 16 million borrowers that their forgiveness applications have been approved, but the US Department of Education is unable to pay student loans while the lawsuits are pending.
Extension of the payment break and interest waiver
On November 22, 2022, the US Department of Education announced an eighth extension of the payment pause and interest waiver pending appeals. Collection activities are also discontinued.
Repayment begins 60 days after the conclusion of court proceedings or June 30, 2023, whichever comes first. Depending on when the courts decide, the resumption of recovery will occur sometime between February 1 and September 1, 2023. The payment pause and interest waiver will have lasted three to three and a half years.
The date of June 30, 2023 comes at the end of the current session of the US Supreme Court. The 60-day period is required to allow student loan administrators to provide six notices of repayment resumption six months before repayment begins.
After the US Department of Education twice previously cried the wolf – the fifth and seventh expansions were both called the “final expansion” – has not designated the eighth expansion as the final expansion.
What’s Next for Student Loan Forgiveness?
Among the most likely next events in the student loan forgiveness saga are hearings (and subsequent rulings) in the appeals of the six attorneys general and Job Creators Network lawsuits.
There may also be judgments in the Arizona Attorney General and Cato Institute lawsuits. These judgments are expected to be appealed.
After the new session of Congress begins on January 3, 2023, Republicans can file a lawsuit in the US House of Representatives to block President Biden’s plan to forgive student loans. This lawsuit will likely argue that only Congress has power over the purse and that the president’s plan violates segregation of duties.
What should borrowers do?
Borrowers should hold on. There is nothing you can do to affect the outcome of the lawsuits.
Borrowers may want to start saving on their monthly student loan payments to get used to the amount of money they will have to pay after the repayment starts again. You can invest this money in a high-yield savings account. When repayments start again, they can use the money to pay off their student loan debt, pay off other debt like credit cards, or build or increase their emergency fund.
Beware of student loan scams. Some scammers ask for money to qualify for forgiveness or to expedite your application. Other scams ask you for your social security number, FSA ID and other private information for identity theft purposes.
If you have questions about the status of the student loan forgiveness plan, visit StudentAid.gov or call your student loan servicer.