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Biden aides consider extending student loan freeze after court defeats

The discussions are preliminary but come as White House officials face legal challenges to the debt forgiveness program

President Biden answers questions with Education Secretary Miguel Cardona at an event related to student debt relief last month. The Biden administration is no longer accepting applications for student loan forgiveness after courts have blocked the program. (Susan Walsh/AP)

White House officials are weighing extending a pause on student debt payments after a federal appeals court blocked President Biden’s plan to cancel up to $20,000 in debt per borrower, according to two people with knowledge of the matter.

In August, Biden announced that the administration would implement student debt forgiveness while simultaneously ending a moratorium on student debt payments that started during the pandemic. But Biden’s plan has so far been thwarted in the courts. The U.S. Court of Appeals for the 8th Circuit, by a 3-0 vote on Monday, issued an injunction preventing the administration from going forward with discharging debt, and a Texas judge last week declared the program unlawful in a separate ruling.

Appeals court grants injunction against Biden’s student loan forgiveness

Although the Biden administration has vowed to defend the program in court, White House officials have in recent days discussed the possibility of extending the debt freeze again if they are unable to move forward with the president’s initial program. Payments had been scheduled to resume on Jan. 1 in conjunction with the loan forgiveness.

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Key details on Biden’s student loan forgiveness

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No decisions have been made, and the people briefed on the matter stressed that the conversations were preliminary. Those people spoke on the condition of anonymity to discuss early private talks. The moratorium is not expected to be indefinitely extended during Biden’s tenure, the people said, but extending it at least temporarily would provide some relief to borrowers. It is unclear if the president has signed off on the idea or been involved in the planning, though senior aides have discussed the move.

“As the legal vulnerability has become clearer and clearer, the White House has been making increasingly firm plans to extend the loan repayment pause,” one of the people familiar with the matter said. “The extension we’re likely to see is meant to make sure borrowers don’t have the rug pulled out from under them, rather than an indefinite replacement for loan forgiveness.”

A White House spokesman declined to comment.

The Biden administration could face a difficult political challenge should the courts persist in striking down the program, which Republican lawmakers have maintained is an unconstitutional violation of congressional spending authority.

Biden’s program would have affected as many as 40 million borrowers and canceled up to $20,000 in student debt for individuals earning less than $125,000 per year, or less than $250,000 for married couples. The Congressional Budget Office, Congress’s nonpartisan scorekeeper, has estimated that Biden’s plan would cost roughly $400 billion. The Committee for a Responsible Federal Budget, a D.C.-based think tank, estimated earlier this year that the debt pause costs roughly $50 billion per year.

The Education Department is no longer accepting applications for relief because of the court rulings. More than half of eligible borrowers have already signed up.

Biden’s student loan forgiveness plan is blocked. Can you still apply?

Student debt activists have called for the administration to take action to help student borrowers despite the courts’ moves.

Michael Pierce, who served as a deputy assistant director of the Consumer Financial Protection Bureau during the Obama administration and is now at the Student Borrower Protection Center, has called for the administration to “make it clear that the student loan system will remain shut off as long as these partisan legal challenges persist.” Pierce has said Biden should explore other legal avenues to cancel student debt should the courts dismiss the one chosen by the administration’s attorneys.

“I think it’s the bare minimum,” Pierce said of a potential extension of the moratorium. “Borrowers’ fate is in Biden’s hands.”

Conservatives are likely to blast any extension of the moratorium, which has been in place since President Donald Trump began it in March 2020. Many economists prefer Biden’s debt cancellation plan to the moratorium, in part because debt cancellation applies only to families below a certain annual income, while the debt moratorium is universal and helps affluent borrowers who could afford to keep making payments.

How President Biden decided to go big on student loan forgiveness

“This seems like a ham-fisted way of trying to do a student loan bailout but far less efficiently — it would benefit virtually everyone, including the wealthiest borrowers,” said Brian Riedl, a policy analyst at the Manhattan Institute, a libertarian-leaning think tank. “And it’s so far from the original point of the moratorium, which was mass unemployment and recession that’s now long gone.”

The administration, meanwhile, has publicly maintained its belief that the program will be affirmed by the courts.

“We are confident in our legal authority for the student debt relief program and believe it is necessary to help borrowers most in need as they recover from the pandemic,” White House press secretary Karine Jean-Pierre said in a statement Monday after the ruling. “The Administration will continue to fight these baseless lawsuits by Republican officials and special interests and will never stop fighting to support working and middle class Americans.”

Student loan forgiveness

The latest: The Supreme Court will review the legality of President Biden’s debt relief plan, after another appeals court rejected a bid to revive it. To date, Biden’s student loan forgiveness plan is on ice after a Texas judge blocked the student debt relief plan.

Calculate your eligibility: We tackled everything you need to know about the debt relief plan. Use this calculator to see how much of your student loan debt can be forgiven. Here’s what to expect in the student loan forgiveness application.

The opponents: What is happening to student loan forgiveness? A federal appeals court temporarily halted the student debt relief program. Six Republican-led states are also suing to overturn President Biden’s student loan forgiveness plan. An Indiana lawsuit was the first significant legal action seeking to invalidate Biden’s policy.

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