Biden to extend student loan repayment break as court battle drags on

WASHINGTON (AP) — President Joe Biden announced Tuesday that his administration would extend a pause on federal student loan payments while the White House fights a legal battle to save his plan to cancel parts of the debt.

“It is not fair to ask tens of millions of borrowers eligible for relief to resume paying off their student debt while the courts consider the lawsuit,” Biden said in a statement. video posted on Twitter.

The moratorium was set to expire on Jan. 1, a date Biden set before his debt cancellation plan stalled in the face of legal challenges from conservative opponents.

From now on, it will extend until 60 days after the resolution of the lawsuit. If the lawsuit has not been resolved by June 30, payments would resume 60 days after that.

Biden’s plan promises $10,000 in federal student debt forgiveness to those with incomes below $125,000 or households earning less than $250,000. Pell Grant recipients, who typically demonstrate more financial need, are eligible for additional assistance of $10,000.

More than 26 million people already requested reliefwith 16 million approved, but the Department of Education stopped processing applications this month after a Texas federal judge overturned the plan.

EXPLANATION : Here’s what you need to know if you’ve applied for student loan forgiveness

The Justice Department last week asked the Supreme Court to review the matter and reinstate Biden’s debt cancellation plan. By extending the recess, the administration says it is giving the court a chance to resolve the case in its current term.

“I am absolutely confident that my plan is legal,” Biden said Tuesday.

Biden announced the decision a day after more than 200 advocacy groups urged him to extend the pause, warning that starting payments in January would spell “financial disaster” for millions of borrowers.

The White House argued in court that Americans continue to feel the financial stress of the pandemic. Without Biden’s cancellation plan, he says, the number of people in arrears on student loans could reach historic levels.

The biggest risk is around 18 million borrowers who have been told their entire loan balance will be forgiven. Even if payments resume, these borrowers might think they are safe and ignore bills, the Department for Education has warned.

But at the same time, the White House warned that extending the payment pause would cost several billion dollars a month in lost revenue. The moratorium has already cost the government more than $100 billion in lost payments and interest, according to the General Accountability Office.

The Biden administration did not address the costs in its announcement, but instead blamed Republicans who contest the plan.

“The ruthless efforts to block student debt relief in court have caused enormous financial uncertainty for millions of borrowers who cannot budget for families or even plan vacations without a clear picture of their student debt obligations. student debt,” Education Secretary Miguel Cardona said.

“That’s just plain wrong,” he added.

Critics such as the Committee for a Responsible Federal Budget have opposed any further extension, saying it could worsen inflation and increase the risk of economic recession.

LOOK: Biden says nearly 26 million people have applied for student loan forgiveness

But supporters of Biden’s plan applauded the action, saying it provided a cushion for working-class Americans.

“This extension means struggling borrowers will be able to keep food on their tables over the holiday season – and for months to come – as the administration does all it can to fend off baseless and retrograde attacks on working families in debt,” said Mike Pierce, executive director of the Student Borrower Protection Center.

The legality of broad student debt cancellation has been in question since Biden took office. Proponents say federal law already gives the Department of Education ample flexibility to cancel student loans, while opponents argue that only Congress has the power to cancel debt on this scale.

In announcing its plan, the Biden administration invoked the HEROES Act of 2003, a post-September law. 11, 2001, law intended to help the military. The Justice Department says the law provides sweeping power to cancel student debt in the event of a national emergency. Biden said the relief was needed to help Americans recover from the pandemic.

A Texas federal judge struck down that justification this month, saying Biden overstepped his authority. The HEROES Act “does not give the executive branch clear authorization from Congress to create a $400 billion student loan forgiveness program,” wrote District Court Judge Mark Pittman, who was appointed by the former President Donald Trump.

The Justice Department is asking a New Orleans appeals court to stay Pittman’s order while the administration appeals. He is separately asking the Supreme Court to overturn a federal court in St. Louis that halted Biden’s plan in response to a Republican-led six-state lawsuit.

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