Biden to Extend Student Loan Pause as Court Battle Over Forgiveness Drags On

President Joe Biden announced his administration would extend the pause on federal student loan payments while the White House wages legal fights to save his plan to cancel portions of student debt. 

“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,” said the president in a Twitter video.

The student loan payment pause was set to expire on January 1, a date set before the president’s debt-cancelation plan was stalled by legal challenges. The pause will extend until 60 days after the resolution of the lawsuit. If it still needs to be resolved by June 30, payments are set to resume 60 days later. 

President Biden’s plan promises individuals with incomes less than $125,000 or households earning less than $250,000 to receive $10,000 in federal student debt forgiveness. Recipients of Pell Grants are eligible for an additional $10,000 in relief.

Greater than 26 million people have already applied for the debt relief program, with 16 million approved. However, the Education Department stopped processing applications after a Texas federal judge struck down the plan. 

Last week, the Justice Department asked the Supreme Court to investigate and reinstate Biden’s debt cancelation plan. The administration says allowing the court to resolve the case in its current term is its reason for extending the pause. 

“I’m completely confident my plan is legal,” said the president. 

The decision was announced a day after more than 200 advocacy groups urged him to extend the pause, warning that a “financial catastrophe” would be caused if payments were restarted in January for millions of borrowers. 

The administration has argued that Americans continue to struggle with financial stress stemming from the pandemic. Without the cancelation plan, the number of people who have fallen behind on student loans could reach historic levels.

The White House warned extended the payment pause could cost several billion dollars per month in revenue. Simultaneously, the White House warned extending the payment pause would cost several billion per month in lost revenue. According to the General Accountability Office, the loan moratorium has reportedly already cost the government more than $100 billion in lost interest and payments. 

The administration didn’t address the announcement’s costs but blamed GOP members challenging the plan. 

“Callous efforts to block student debt relief in the courts have caused tremendous financial uncertainty for millions of borrowers who cannot set their family budgets or even plan for the holidays without a clear picture of their student debt obligations,” said Miguel Cardona, Education Secretary. “It’s just plain wrong,” continued Cardona. 

Critics oppose further extensions

Critics, including the Committee for a Responsible Federal Budget, oppose further extensions, saying it could raise the risk of economic recession and worsen inflation. 

At the same time, supporters of Biden’s plan cheered the action, saying it provides a needed cushion for working-class Americans. 

“This extension means that struggling borrowers will be able to keep food on their tables during the holiday season — and the coming months — as the administration does everything it can to beat back the baseless and backward attacks on working families with student debt,” said executive director of the Student Borrower Protection Center, Mike Pierce.

The legality of the wide-reaching debt cancelation has been questioned since before Biden took office. Supporters of the move say federal law already gives broad flexibility to the Education Department to cancel student loans. In contrast, opponents say only Congress can cancel debt on such a large scale. 

When announcing the plan, the administration invoked the HEROES Act of 2003; a law put in place post-September 11 meant to help military members. The Justice Department maintains the law offers sweeping authority to relieve or cancel debt during a national emergency. The president has said relief is needed to help Americans fully recover from the pandemic. 

A Texas federal judge struck down that rationale this month, saying the president overstepped his power. District Court Judge Mark Pittman, former President Donald Trump appointed, wrote that the HEROES Act “does not provide the executive branch clear congressional authorization to create a $400 billion student loan forgiveness program,” Pittman.

The Justice Department has asked an appeals court in New Orleans to suspend the order issued by Pearson while the administration appeals. The department is asking separately for the Supreme Court to overrule a St. Louis federal court that halted Biden’s plan in response to a lawsuit filed by six Republican-led states.