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Biden extends student loan payment freeze. What to know as forgiveness stuck in courts

Susan Walsh/AP file

UPDATE: The Biden administration is extending the moratorium on student loan payments for the eighth time, President Joe Biden announced Nov. 22.

Payments will stay paused until no later than June 30, 2023, Biden said in a tweet.

“I’m confident that our student debt relief plan is legal. But it’s on hold because Republican officials want to block it,” Biden wrote.

“It isn’t fair to ask tens of millions of borrowers eligible for relief to resume their student debt payments while the courts consider the lawsuit,” he said in a video included in the tweet.

The original story is below.

The past few months have been a roller coaster for borrowers with student loan debt.

Since President Joe Biden announced his plan to forgive student debt for more than 40 million Americans, the plan has faced a series of legal challenges.

Most recently, the 8th Circuit Court of Appeals in St. Louis issued an injunction blocking the administration’s program. The injunction came just days after a federal judge in Texas struck down the plan in response to a separate lawsuit.

Now, the Department of Education has stopped accepting new applications for relief, weeks before the administration’s payment moratorium is set to expire and millions will be responsible for making payments on their loans for the first time since 2020.

However, the Biden-Harris administration is still hopeful that the plan will prevail.

Here’s what borrowers should know as the plan navigates legal limbo.

Is student loan relief canceled?

The short answer: no.

Some borrowers who applied for relief have been notified that they were approved. The Department of Education began alerting borrowers on Saturday, Nov. 19, Secretary of Education Miguel Cardona tweeted.

“We reviewed your application and determined that you are eligible for loan relief under the Plan. We have sent this approval on to your loan servicer,” Cardona wrote in an email to approved borrowers, per the email obtained by McClatchy News.

“Unfortunately, a number of lawsuits have been filed challenging the program, which have blocked our ability to discharge your debt at present. We believe strongly that the lawsuits are meritless, and the Department of Justice has appealed on our behalf,” Cardona wrote. “Your application is complete and approved, and we will discharge your approved debt if and when we prevail in court.”

The department said it will hold applications from the more than 26 million borrowers who have already applied for forgiveness. Of those who have applied, 16 million have already been approved for forgiveness, according to the White House.

Stalled in court

Biden’s plan to relieve borrowers is in the throes of several legal battles.

On Nov. 14, the 8th Circuit Court of Appeals issued its injunction blocking the administration’s program from going forward pending further court decisions, saying debt forgiveness would have an “irreversible impact.”

The plan was struck down on Nov. 10 by federal judge Mark Pittman in Texas in response to a separate lawsuit filed by borrowers in October.

In response to recent legal tumult, the administration asked the Supreme Court on Nov. 18 to allow the program to take effect despite legal challenges in an appeal submitted by Solicitor General Elizabeth Prelogar, CNN reported.

Prelogar said the district court’s analysis “does not suffice to support any injunction — much less a universal injunction prohibiting the government from implementing a critically important policy with direct and tangible effects on millions of Americans.”

“The Eighth Circuit’s erroneous injunction leaves millions of economically vulnerable borrowers in limbo, uncertain about the size of their debt and unable to make financial decisions with an accurate understanding of their future repayment obligations,” Prelogar wrote in the appeal, CNN reported.

What should borrowers do now?

There’s not much for borrowers to do but wait while the plan navigates the court system.

Originally, borrowers were told to expect relief within about six weeks of applying, meaning that relief could be distributed before the years-long repayment moratorium ends Dec. 31. Given recent legal challenges, that timeline could look different now.

Borrowers who applied for or are interested in applying for debt relief should subscribe for updates from the Federal Student Aid office, according to the department.

If the proposed plan goes through, borrowers who make less than $125,000 annually would see up to $10,000 of their debt canceled. Pell Grant recipients could see $20,000 in forgiveness.

For households, the income requirement to qualify for forgiveness is less than $250,000 annually. Any borrower whose income was below the cap in either 2020 or 2021 will qualify. Current students will qualify depending on their parents’ income.

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Even if you’ve paid off your student loans, you still might qualify for forgiveness