There’s been no shortage of objections and legal challenges from Republican-led states and conservative groups to President Biden’s student loan forgiveness plan, which would cancel up to $20,000 for millions of borrowers.
And just when many of us thought the hurdles might’ve been over (several cases were dismissed last week), a significant development happened over the weekend. It wasn’t great news for student loan borrowers.
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A federal appeals court temporarily blocked the student debt relief plan on Friday to allow a lawsuit from six GOP-led states to play out in court. The lawsuit claims the plan would financially hurt state-based loan companies that manage some federal loans.
As a student loan borrower who regularly covers this topic, I immediately thought to myself: “What does this temporary hold mean?”
You probably feel the same way if you have federal student loans, so I spoke to two student loan experts to figure out what’s happening.
How Does This Current Lawsuit Affect the Student Loan Forgiveness Plan?
It’s the first of several court challenges to achieve any level of success, but it’s only “procedural,” said Robert Farrington, founder of The College Investor. The court can’t decide on anything regarding the student loan forgiveness plan without hearing some basic arguments. “There are still potentially standing issues with the lawsuit, so it could be dismissed,” he explained.
The federal appeals court could announce a ruling as soon as this week. However, if the same group then appeals to the Supreme Court, it could slow down the timeline for forgiveness — regardless of whether or not the lawsuit is ultimately successful. “There will be a slight delay,” said higher education expert Mark Kantrowitz. “The state attorney generals are unlikely to prevail in their appeal.”
What Happens to Borrowers Who Have Already Applied for Student Loan Forgiveness?
White House press secretary Karine Jean-Pierre said in a statement Friday that the temporary court block doesn’t suggest the lawsuit “has merit,” and the administration will continue “full speed ahead” with the student loan relief plan. However, it prevents federal student loan debt from being discharged until the court makes a decision.
For Borrowers Who Haven’t Yet Applied for Student Loan Forgiveness, What Should They Do Now?
The application remains open for student loan forgiveness, and the White House is encouraging borrowers to continue applying for student debt relief at StudentAid.gov. The Department of Education is still reviewing applications and preparing them for loan servicers.
If you qualify, Farrington suggests filling out the student loan forgiveness application as soon as possible. “There’s no reason not to go to StudentAid.gov and apply,” he said. “It takes minutes and ensures you’ll get loan forgiveness if this goes through.”
What Should Borrowers Do Moving Forward?
These legal challenges are out of borrowers’ control, so instead of stressing about what could happen, focus on what you can control right now. For me, that meant applying for student loan forgiveness as soon as the application went live (it only took me a minute). It’s also a good idea to assume payments will resume at the start of next year, so keep your contact information updated with your loan servicer, review your loans, and rethink your repayment strategy.
The Bottom Line
When it comes to student loan forgiveness, experts suggest preparing for the worst and hoping for the best. Take advantage of the loan payment pause, stay up to date with developments via the Department of Education, and apply for forgiveness if you qualify.