Student Loan Forgiveness Applications Halted After Court Ruling – Forbes Advisor

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The Department of Education stopped accepting federal student loan forgiveness applications after a Texas judge ruled the plan illegal on Thursday, November 10. but this week’s decision represents the most serious roadblock yet.

However, the Biden administration is not backing down. “We are disappointed with the Texas court’s decision to block loan relief,” US Education Secretary Miguel Cardona said in a statement. “The Department of Justice has appealed today’s decision on our behalf, and we will continue to keep borrowers informed of our efforts to provide targeted relief.”

What is the trial in Texas about?

In August, Biden issued an executive order directing the Department of Education to forgive up to $10,000 in federal student loans for borrowers earning less than $125,000 (or $250,000 for those filing taxes jointly). Borrowers who have Pell Grants can apply for up to $20,000 in debt forgiveness.

The lawsuit in Texas was initiated by the Job Creators Network Foundation, a conservative advocacy group that filed a lawsuit in October on behalf of two student borrowers. The group alleges that the two plaintiffs – one of whom is not eligible for the rebate and the other who is only eligible for partial loan forgiveness – were unable to comment on the rebate program before it was rolled out. because the Biden administration violated federal procedure.

Federal Judge Mark Pittman sided with the plaintiffs, writing, “In this country we are not ruled by an all-powerful executive with a pen and a phone.” His decision suspends the pardon program, but the Justice Department has already appealed the decision to the 5th US Circuit Court of Appeals. However, it could take months to resolve the case, jeopardizing the president’s pardon schedule.

What does this mean for borrowers?

While the student loan forgiveness program was already suspended due to other legal challenges, the Department of Education halted requests for forgiveness after this week’s ruling. Borrowers who have not yet applied will have to wait for the government’s appeal regarding the Texas case to be resolved. You can subscribe to updates from the Ministry of Education or consult the Federal Student Aid website to stay up to date with the latest information.

If you have already submitted a pardon application, you do not need to do anything further. Over 26 million borrowers have submitted requests for forgiveness and 16 million requests have already been approved and sent to loan servicers. However, no pardon can be processed until these legal issues have been resolved.

Debt cancellation was originally scheduled to begin in November, but that timeline is now unlikely. Federal student loan payments, which have been suspended since March 2020 due to the Covid-19 pandemic, are scheduled to resume in January 2023. Millions of borrowers hoping for forgiveness may have to start payments again until the courts can solve these problems. It’s unclear whether the Biden administration will delay restarting the payment due to the latest legal setbacks.

Not sure if you qualify for student loan forgiveness? Use our student loan forgiveness calculator to see if you qualify or review Frequently Asked Questions on the program.

Other court cases are still pending

The Texas lawsuit isn’t the only case against student loan forgiveness. A federal appeals court temporarily blocked President Joe Biden’s student loan forgiveness plan in October, preventing any debt from being forgiven. The 8th Circuit Court of Appeals issued the stay in response to a petition from six Republican-led states: Arkansas, Iowa, Kansas, Missouri, Nebraska and South Carolina.

These six states are suing the Biden administration to prevent the cancellation of student loans for millions of borrowers. They argue that the administration does not have the authority to issue the order without congressional approval. A federal district judge dismissed the lawsuit before the states appealed to the 8th Circuit Court. At that time, the temporary suspension was issued.

“The order does not reverse the dismissal of the case by the trial court, nor does it suggest that the case has merit,” said Karine Jean-Pierre, the White House press secretary. “It simply prevents the debt from being discharged until the court makes a decision.” A final decision in this proceeding is still pending.

In two separate events, Supreme Court Justice Amy Coney Barrett rejected offers to block the pardon program.

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