What you need to know if you applied for Biden’s student loan forgiveness program

Candidates line up before the start of a community college commencement in East Rutherford, NJ, in 2018.

Graduates line up before the start of a community college commencement in East Rutherford, N.J., in 2018. (Seth Wenig/AP File)

President Biden’s student loan debt relief plan has been put on hold for now, leaving millions of Americans eligible for relief in limbo.

“Forty-five million [Americans] owe a combined $1.7 trillion in federal loan debt, Natalia Abrams, president and CEO of the Student Debt Crisis Center, told Yahoo News. Now 26 million Americans who applied for the program are left with uncertainty; 16 million of them have had their applications approved.

Since the relief plan was announced in August, opponents have filed several lawsuits challenging the program. On Nov. 14, a federal appeals court issued a nationwide injunction temporarily preventing the plan from taking effect in response to a lawsuit filed by a group of six Republican-led states.

If so, Arkansas, Iowa, Kansas, Missouri, Nebraska and South Carolina argue that Biden’s plan threatens a loss in tax revenue for each state. They also claim that the Biden administration’s Department of Education is overstepping its authority to provide one-time debt relief.

Under the Heroes Act of 2003, the Secretary of Education has the ability to waive or modify student loan balances in the event of a national emergency, such as the COVID-19 pandemic. But state attorneys said the Biden administration used the pandemic as “a pretext to mask the president’s true goal of fulfilling his campaign promise to erase student loan debt,” according to court documents.

The Biden administration filed a petition with the U.S. Supreme Court on November 18 to have the ban lifted, while various legal challenges worked their way through the lower courts. Last week, the high court did not completely strike down Biden’s student debt forgiveness plan, instead delaying its decision until February, when it will hear arguments on the program. The rollout of debt forgiveness remains blocked until then.

Meanwhile, the Biden administration has repeatedly said that borrowers are continuing to recover from the pandemic and that providing debt relief under the Heroes Act is legal. It’s the same authority that both Biden and former President Donald Trump have used to pause student loan payments during the pandemic since March 2020. Biden recently extended the pause for the sixth time until the end of June 2023.

In an effort to unpack what this all means for borrowers going forward, Yahoo News spoke with Abrams and Cody Hounanian, executive director of the Student Debt Crisis Center, to get some clarity. (Some answers have been edited for length and clarity.)

Yahoo News: If the Supreme Court rules that the Biden administration’s student debt plan can be implemented, who would qualify and what type of relief would they receive?

Natalia Abrams: Biden’s student debt cancellation plan, which he proposed in mid-August, was to cancel $10,000 for all federal student loan borrowers who have loans owned by the Department of Education. (Borrowers are eligible for this relief if their individual income is less than $125,000; $250,000 for married couples.) There were some what we call ED held loans that were excluded – these were borrowers with older FFEL loans [Federal Family Education Loan] which was not held by the Ministry of Education.

A good rule of thumb is that if your loans weren’t part of the payment break during the COVID pandemic, then they probably won’t be part of the cancellation. However, the defaulted ED-held loans qualify. But in terms of federal loans, that includes parent plus loans, graduate loans, undergraduate loans — anyone with a direct loan is just fine. So that’s $10,000 across the board and then another $10,000, so a total of $20,000 if the borrower had a Pell Grant. Some borrowers never used up their Pell Grant, but even if you took a dollar out of a Pell Grant, that means you would get an additional $10,000 equal to $20,000.

When will borrowers resume payments after Biden extends hiatus?

Abrams: [Federal student loan payments would resume] 60 days after a [Supreme Court] decision or June 30, whichever comes first. And as far as we know, if the decision comes on June 30, it will be 60 days after that.

What should borrowers know if they were among the 9 million people who applied for emergency aid and mistakenly received an email last month saying their application had been approved?

Cody Hounanian: I would give the same advice that we give to borrowers for a myriad of issues involving communication with both the Department of Education and their service center, and that is to continue to monitor the messages you receive from the Department of Education. These trusted messages from the Department of Education will come from a “dot gov” email address. They never come in the mail or over the phone from a third party. For those who received this erroneous message, they will receive a communication clarifying this. So keep the communication channels open between you, your student loan provider and the Ministry of Education. The best way to stay updated is to continue to monitor the communications you receive from these trusted sources.

What if a borrower submitted their application before the break in the program and has not yet received a letter?

Hounian: If you have submitted an application and you have not received a communication, I would definitely encourage people to continue to monitor the messages they receive. Some of this is just the fact that the Department of Education and the student loan servicers have a monumental task – they have to communicate updates with tens of thousands of people. So it happens in waves.

I would also add, as people wait for their approval letters and other communications related to all sorts of programs, we’re seeing from our supporters and from patrons everywhere that they’re getting letters in the mail, they’re getting phone calls, they’re seeing on social media these opportunities for to apply for programs, and these opportunities come from third-party companies that are often “get help” scams.

If Biden’s student debt relief plan is implemented next year following a Supreme Court ruling, how soon will borrowers see relief?

Abrams: I would assume it would be very soon after the decision. They have already approved 16 million borrowers and we expect to see relief immediately.

Hounian: The whole reason the department has processed these applications is precisely so that the Ministry of Education can immediately start canceling student debt when this removes these legal obstacles. So it will go quickly.

Does the Biden administration have a plan B if the Supreme Court rules against the plan?

Hounian: I’m not sure if the administration themselves have their backup plan. I think they are steadfast in their fight right now to protect the president’s plan as it stands. But as advocates and part of a broad coalition fighting for debt forgiveness for several years now, we’ve identified several ways the president can use various authorities to cancel student loan debt.

For his proposal, the president chose to rely on a piece of legislation that allows them to issue relief due to the emergency aspect of the COVID-19 pandemic. But we also know that the president has the legal authority to write off student loan debt broadly through settlement agreements, which are part of the Higher Education Act. So there are other options.

What other options do borrowers have besides Biden’s student debt relief plan?

Hounian: There are a host of other options and programs available to borrowers that can help them access relief — and for some, have their entire student loan debt erased. We worked really hard this year to enroll borrowers in a public loan forgiveness program that has been on the books for over a decade now. This year had an expanded set of rules that made it even easier for people to apply. This is something we will continue to spread awareness about.

There will be what are called account adjustments next year, which means there will be borrowers who will be closer to completing an income-driven repayment plan or public service loan forgiveness and will be able to get relief either with the same or faster.

And there is also the continued work to rectify the existing programs for totally and currently disabled borrowers, [and] those who fell victim to for-profit schools. So there are a ton of options.

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