Student Loan Forgiveness Has Been Approved, Here’s What’s Next
Student Loan Forgiveness applications have been approved for many; however, the Supreme Court is set to rule on the case by June 2023.
The United States Department of Education has approved more than 16 million people for federal student loan forgiveness. Their applications were sent to loan servicers last week. The Biden administration gave a state-by-state breakdown of the number of successful applicants. However, the sweeping debt relief program is on hold until the U.S Supreme Court decides its fate.
In August 2022, President Joe Biden announced student loan forgiveness for up to $20,000 in student loans. The program aims to relieve tens of millions of borrowers from financially crippling debt. But Republicans and conservative groups brought several legal challenges against the plan, forcing the application portal to be closed.
Still, more than 26 million people applied for student loan forgiveness while applications were open. Others were deemed automatically eligible by the administration, CNBC reports. “These borrowers could be benefitting from the program right now were it not for lawsuits brought by elected officials and special interests,” a White House fact sheet said.
One legal challenge the student loan forgiveness is facing was brought by a coalition of Republican states. They argue that the President’s plan would deprive them of revenue by encouraging borrowers with commercially-held loans (administered by quasi-state entities) to consolidate into the government’s direct loan program, Forbes reports.
But the Biden administration disputes their concerns as speculative. Still, more than 60 percent of the 26 million applicants have had their loans sent to servicers for discharge. That figure mirrors the population, with California, Texas, Florida, and New York having the highest student loan forgiveness approvals.
Even Republican-leaning states saw significant student loan forgiveness approval figures, with Ohio, Indiana, South Carolina, and Louisiana leading the list along with Texas and Florida. A further 305,000 applications were approved in Missouri, one of the leading states that filed suit challenging the Biden administration’s debt relief program.
The Supreme Court is set to hear arguments over President Biden’s student loan forgiveness plan on February 28. A decision should be issued by June. But the administration may not have a backup solution if the program is struck down. We’re not deliberating or considering any other approach,” Deputy Director of the National Economic Council, Bharat Ramamurti told Yahoo News.
“Our lawyers and team are confident in the legal authority underpinning the initiative,” Ramamurti continued. However, borrower advocates suggested alternatives if the student loan forgiveness program is not approved. This includes extending the ongoing student loan payment pause, revamping income-driven repayment plans, and reissuing the program under a different legal authority.
To be eligible for student loan forgiveness, a person’s annual income must have fallen below $125,000 (for individuals) or $250,000 (for married couples or heads of households), the Student Federal Aid website says. Anyone that received a Pell Grant in college and meets the income threshold will be eligible for up to $20,000 in debt relief.
Folks who did not receive a Pell Grant in college and meet the income threshold will be eligible for up to $10,000. That’s because student loan forgiveness relief is capped at the amount of a person’s outstanding debt.