Biden Could Have ‘Plan B’ If Court Stops Student Debt Forgiveness – More Repayment Delays

On Jan. 1, a temporary pause in federal student loan repayment ends — meaning millions of borrowers are preparing to repay loans after nearly three years of deferment.

While the Biden administration called the latest extension the “final one,” some experts predict the pause could be extended if legal uncertainty over a new student loan forgiveness plan continues.

On Friday, hours after President Joe Biden announced that 22 million people had applied for forgiveness, a federal appeals court issued an administrative stay that prevents the administration from doing away with the loans while it considers the program a challenge.

White House Press Secretary Karine Jean-Pierre declined to discuss the possibility of extending the repayment pause, but she also did not rule it out when asked by reporters Monday.

“I don’t want to get into hypotheticals and we have to let the process play out,” she said. “We’re not getting ahead of ourselves from here.”

DOVER, DELAWARE - OCTOBER 21: United States President Joe Biden arrives to deliver remarks on student debt relief at Delaware State University on October 21, 2022 in Dover, Delaware.  Yesterday, a federal judge ruled that six states that tried to block the president's student loan forgiveness program lacked standing.  (Photo by Anna Moneymaker/Getty Images)

President Joe Biden arrives to deliver remarks on student debt relief at Delaware State University on October 21. (Anna Moneymaker/Getty Images)

In August, the Biden administration announced a plan that would forgive $10,000 in student debt for people making less than $125,000 and an additional $10,000 for those who received Pell Grants, which go to borrowers with extreme financial need. The plan has sparked opposition from Biden’s opponents, who argue it is too expensive and exceeds Biden’s authority. Others argue that it doesn’t address the fundamental problems that make college so expensive. The plan has sparked several legal challenges.

The U.S. Court of Appeals for the Eighth Circuit is expected to rule on a lawsuit by six Republican-led states seeking to permanently block the program after a lower court dismissed the case for lack of standing — meaning a judge found that the states did not show. that the forgiveness plan hurt them.

“It is very important that the legal issues involving the president’s power be analyzed by the court before transferring over $400 billion in debt to American taxpayers,” Nebraska’s Republican Attorney General Doug Peterson said in a statement after the appeals court upheld Biden’s level.

Perhaps for the duration of his term as President’

If the legal issue continues, experts note that the administration will have the right to further extend the pause on refunds.

“While the Biden administration said this final extension is a final, final extension, this is not the first time they’ve said something was final,” student financial aid expert Mark Kantrowitz told Yahoo Finance.

The Biden administration could issue a temporary extension if the legal issues remain unresolved by January, he said. The break could continue if a judge ultimately rules against Biden.

“If they lose in court and the president’s loan forgiveness plan is blocked,” he says, “well, there’s really nothing stopping them from extending the student loan payment break and the interest waiver further, perhaps for the duration of his term as president.”

While opponents question Biden’s authority to forgive debt, it is more clear that the law allows him to issue the break on repayments. Both efforts stem from the Higher Education Relief Opportunities For Students (HEROES) Act, which allows the Secretary of Education to provide relief to federal student loan recipients in connection with a national emergency.

In the early days of the COVID-19 pandemic, then-President Donald Trump invoked the power to delay student loan repayments; Biden has continued to extend the deadline since taking office.

The Biden administration is also trying to use the HEROES Act to go ahead and forgive federal student loan debt. But Biden’s ability to forgive debt under that law is less clear, and some experts predict the government will lose if the Supreme Court weighs in on the plan.

‘Full steam ahead’…for now

Biden has offered minimal comment on the legal setback. He defended the effort and denounced Republican efforts to stop it during a stop Monday at Democratic National Committee headquarters.

U.S. President Joe Biden laughs at the Democratic National Committee headquarters ahead of the U.S. midterm elections, in Washington, U.S., October 24, 2022. REUTERS/Evelyn Hockstein

President Biden during an appearance at the Democratic National Committee headquarters in Washington in October. (REUTERS/Evelyn Hockstein)

The White House press secretary emphasized Monday that the administration will continue to accept applications for clemency and expressed confidence that it would be up and running soon.

Kyra Taylor, a proponent of forgiveness and a staff attorney focusing on student loans at the National Consumer Law Center, takes the administration at its word. “I think the administration will keep moving,” she said. Unless a court actually rules on the program, she said, “It’s full steam ahead.”

Ben Werschkul is the Washington correspondent for Yahoo Finance.

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