Biden extends pause on student loan payments amid legal limbo for debt cancellation
The Education Department will postpone the restart of monthly student loan into the first half of next year.
President Joe Biden on Tuesday announced an extension of the pause on federal student loan payments and interest into the first half of 2023 as his plan to cancel student debt for tens of millions of Americans remains blocked in court.
The Education Department will postpone the restart of monthly student loan payments and interest until 60 days after the litigation is resolved or the administration is able to implement debt relief, whichever comes first. If the litigation is still unresolved by June 30, monthly payments will resume 60 days after that date, the department said.
Monthly payments and interest for tens of millions of borrowers had been set to resume after Jan. 1. But those plans were thrown into limbo after courts earlier this month blocked Biden’s student debt relief plan in response to lawsuits by Republican state attorneys general and a conservative group.
“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,” Biden said in a video announcing the decision.
Biden said the extension of the payment pause was designed to give the Supreme Court an opportunity to hear cases on the legality of his debt relief plan during its current term.
The Justice Department last week asked the Supreme Court to immediately reverse a lower court ruling and revive the debt relief program. The DOJ asked the court to take up the case if it rejects the emergency request for immediate intervention.
“Republican special interests and elected officials sued to deny this relief, even to their own constituents,” Biden said. “But I’m completely confident my plan is legal.
The White House had been under pressure from some Democrats and progressives to swiftly lift the cloud of uncertainty over whether payments would be resuming for borrowers in the coming weeks — especially ahead of the Georgia Senate runoff election.
“The impact this extension will have in the lives of those who have been targeted by predatory student loans cannot be overstated,” NAACP President Derrick Johnson said in a statement praising the administration’s decision.
“Borrowers are drowning under student loan debt and the Biden administration is throwing them a lifeline as we fight MAGA Republicans in court,” Senate Majority Leader Chuck Schumer said in a statement. “President Biden’s action gives millions of borrowers the breathing room they need.”
Republicans, who have fought to stop Biden’s debt cancellation plan, blasted the latest extension. Rep. Virginia Foxx, the top Republican on the House education committee, called the move “fiscal insanity” and accused the administration of using borrowers as “political pawns.”
“Since taking office, this administration has done everything in its power to run the federal student loan program into the ground,” Foxx said in a statement. “This may appease radical members of his party and left-wing advocacy groups on Twitter, but this disgraceful inaction by our commander in chief will have real, harmful repercussions for Americans.”
The Committee for a Responsible Federal Budget, which also opposes the debt relief plan, estimated that extending the payment pause until the end of August 2023 could cost an additional $40 billion.
Monthly payments and interest on most federal student loans have been frozen since Congress passed the CARES Act in March 2020. The Trump administration and then the Biden administration extended the payment pause a total of seven times.
The eighth and latest reprieve is somewhat more complicated because it’s tied not to a specific date but rather a set of possible scenarios that could play out over the coming months.
The Education Department said that the “payment pause” would end whenever the litigation over debt relief is resolved, debt relief is implemented, or it reaches June 30 — whichever happens first.
Borrowers will then have 60 days after the “payment pause” ends until interest again begins accruing on their loans and they’ll have to make monthly payments, according to an Education Department official.
Because borrowers’ monthly payment dates vary, the 60-day period “is the minimum time period before which a payment would be due,” a department spokesperson said. “There could be a range of due dates following the end of the 60-day period.”
Biden first announced in August his plan to cancel up to $20,000 of federal student debt for individuals earning below $125,000 or couples earning below $250,000.
Tens of millions of Americans filled out the application after it opened in October, and the Education Department has approved some 16 million borrowers for relief with an additional 10 million more in line for consideration.
But, after some early legal victories for the administration, two court rulings against the debt relief program over the past several weeks have cast significant uncertainty over its future.
A federal judge in Texas ruled that Biden’s plan was illegal and struck it down. The Biden administration has asked the 5th Circuit Court of Appeals to stop that decision.
In a separate case, the 8th Circuit Court of Appeals issued an injunction blocking the administration from implementing its debt relief program while it weighs a lawsuit from the Republican-led states. The Biden administration is asking the Supreme Court to dissolve that injunction.
Justice Brett Kavanaugh, who oversees emergency matters from the 8th Circuit, is weighing the administration’s request. He has asked the GOP states to respond by Wednesday at noon.