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Student loan cancellation status now that courts have blocked it: what next?

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President Joe Biden speaks on October 17, 2022 at the South Court Auditorium in the Eisenhower Executive Office Building in Washington, D.C. about the student loan relief plan. Source: Alex Wong/Getty

When the Biden administration announced in August 2022 that it would forgive up to $20,000 in student loans per borrower, it said it was to give families “breathing room” as they recover from the economic crisis caused by the pandemic. Preparing to repay the loan. But two federal courts recently blocked President Joe Biden’s student loan support program, calling it unconstitutional. Here, William Chittenden, a professor of finance at Texas State University, explains why and what’s in store for student loan borrowers still hoping their loans can be forgiven.

1. Why was Biden’s student loan cancellation program blocked?

It was found 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 Relief Opportunity for Students Act of 2003 — or the HEROES Act — “does not release the executive branch of Congress . permission for a student loan forgiveness program”. He further stated that the program was “an unconstitutional exercise of Congressional legislature and should be vacated.”

The judge’s ruling prohibits student loan forgiveness “pending a final ruling” in the case. Technically it can go to the Supreme Court, but it can also be resolved at the court level.

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

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

2. Can it be unblocked?

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

The Biden administration has already filed a notice to appeal against Pittman’s November 10 decision.

On November 18, the Biden administration asked the Supreme Court to overturn an appeals court order blocking student loan forgiveness. The Supreme Court has requested the litigants in the case to respond no later than November 23, 2022.

It is not clear how the full court might rule. However, in the latter two cases, Judge Amy Coney Barrett has thwarted efforts to block the student loan forgiveness plan.

3. What kind of exemption can student loan borrowers get during this period?

Currently, student loan payments are paused, but are scheduled to resume — either 60 days after the end of the lawsuits against the program, or 60 days after June 30, 2023, whichever comes first. The Biden administration could extend the payment freeze beyond December 2022. However, in August 2022, when the most recent extension of the payment freeze was announced, the White House said it would be the last extension.

Despite the setback of widespread student loan forgiveness, some borrowers may still qualify for one or more targeted student loan forgiveness programs. These groups include borrowers who attend a closed school. Student loans can also be forgiven for those who are completely and permanently disabled. Students who have been deceived by their school — such as being deceived about graduate job placement rates or the true cost of attending the school — may also qualify.

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In November 2022, the Biden administration issued new rules to make it easier to forgive student loans in bankruptcy. If a student loan borrower can prove that their expenses are equal to or greater than their income, the student loan debt may qualify for forgiveness in bankruptcy.

William Chittenden, associate professor of finance, Texas State University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Also see:

Republicans want Biden to reverse $10,000 student loan cancellation, but we’re fighting back

OP-ED: President Biden’s student loan forgiveness is important, but more needs to be done for black women

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Source: newsone.com

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