Court Temporarily Blocks Biden’s Student Loan Forgiveness Plan — Here’s What It Means For Borrowers

Court Temporarily Blocks Biden’s Student Loan Forgiveness Plan — Here’s What It Means For Borrowers

After a series of court victories this week, a federal appeals court has temporarily blocked Biden’s student loan forgiveness plan. Here’s what it means for borrowers seeking relief.

Biden’s Student Loan Forgiveness Plan — How It Works

Biden’s student loan cancellation plan would forgive up to $20,000 in student loan debt for up to 40 million borrowers. To be eligible, borrowers must have earned less than $125,000 (or less than $250,000 if they are married) in either 2020 or 2021.

Following an abrupt change to eligibility rules in response to legal challenges, only government-held federal student loans are eligible for the student loan forgiveness relief. Commercially-held FFELP loans, which originally could qualify if consolidated, are no longer eligible as of September 29.

Court Blocks Biden’s Student Loan Forgiveness Plan Temporarily

The 8th Circuit Court of Appeals temporarily blocked Biden’s student loan forgiveness plan in an order on Friday.

“Appellants’ emergency motion for an administrative stay prohibiting the appellees from discharging any student loan debt under the Cancellation program until this Court rules on the appellants’ motion for an injunction pending appeal is granted,” said the court in a brief order.

The case involves a coalition of Republican-led states who filed suit in a Missouri federal district court seeking to stop Biden’s student loan forgiveness program from going into effect. The suit alleges that the states, as well as their associated FFELP lenders and servicers (including MOHELA, a major player now in the student loan space) will suffer financially as a result of the debt cancellation plan. A federal District Court judge had dismissed the suit, but the coalition of states appealed to the 8th circuit, seeking an emergency stay. The appeals court granted that stay, characterizing it as an “administrative stay.”

What the Court’s Ruling Means for Borrowers Seeking Student Loan Forgiveness

The 8th Circuit’s ruling is temporary, and only applies for a short period until the court considers the states’ request for a preliminary injunction. Briefing will be due next week on the matter, according to the court.

The temporary order may not be a great sign for the court’s view of the Biden student loan forgiveness plan, although it is too early to say what the court’s final position will be on the matter. The administration had planned on initiating student loan forgiveness under the initiative as early as October 23, according to prior court filings. But with briefing on the injunction not due until October 25, that timeline has effectively been frozen.

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The next step is the appeals court will decide whether or not to impose a preliminary injunction, which the coalition of Republican-led states is requesting. If the court decides against the injunction, the implementation of Biden’s student loan forgiveness plan can proceed. But if the court imposes an injunction, the loan forgiveness program would continue to be blocked while the legal proceedings continue. This could throw the future of the initiative into doubt.

Is The Student Loan Forgiveness Application Still Available?

The online application for student loan forgiveness is still live and active, and borrowers can still apply. The Education Department has not shut down the application portal as of this writing.

The administration can likely still collect applications during the stay. But the Education Department will not be able to implement any student loan forgiveness until (and unless) the stay is lifted. There is no way to know how the legal proceedings will play out.

Advocates for student loan borrowers expressed confidence that the program would proceed.

“Today, a judge ordered a stay on President Biden’s student debt cancellation plan… We want to be clear that this is part of the legal process. We are confident that the President’s student debt cancellation plan will remain and that borrowers will receive relief in due time,” said Cody Hounanian, executive director of the Student Debt Crisis Center, in a statement.

Further Student Loan Forgiveness Reading

In Reversal, Biden Administration Announces New Eligibility Limits On Student Loan Forgiveness

Applying For Student Loan Forgiveness? Don’t Make These 3 Mistakes

Biden Launches Student Loan Forgiveness Application, Says 8 Million Have Already Applied

Only Two Weeks Left To Apply For Student Loan Forgiveness Under Expiring Waiver Program

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