Millions of borrowers have applied for President Joe Biden’s student loan forgiveness initiative since the the application has been put online.
According to his plan, up to 40 million borrowers can receive $10,000 or more in student loan forgiveness if their income was within the required limits in 2020 or 2021. Only federally administered loans (such as direct loans and FFELP loans held by the federal government) are currently eligible.
But no one has yet received a student loan forgiveness under the program, and the situation remains fluid for borrowers. Here are the major updates.
26 million borrowers submitted student loan forgiveness requests
According to President Biden, 26 million borrowers have already submitted the simple online application for student loan cancellation available through StudentAid.gov. And as of last week, the Education Department has already 16 million pre-approved borrowers for student loan forgiveness.
Implementation of student loan forgiveness still blocked by Federal Court of Appeals
While the Department of Education receives and processes student loan cancellation requests, the implementation of loan cancellation has been locked by a federal appeals court since October in response to a legal challenge.
In this case, a coalition of Republican-led states sued the Biden administration, arguing that Biden’s loan cancellation plan was illegal and would hurt states financially due to reduced revenue associated with borrowers consolidating debts. FFELP loans held by companies into a direct loan issued by the government. . The coalition’s legal arguments were initially dismissed by a federal district court judge because FFELP loans are currently ineligible for Biden’s student loan forgiveness initiative (even if consolidated, unless the consolidation request was submitted before September 29, 2022). The coalition then appealed to the 8th Circuit Court of Appeals, which placed a temporary administrative stay on the program while it considered imposing a preliminary injunction. This temporary suspension remains in effect and a decision is expected after the midterm elections.
8th Circuit ruling may not end legal battle over student loan forgiveness
The Department of Justice recently forwarded a letter written by MOHELA, an FFELP loan holder and contractor to the Department of Education, suggesting the agency had nothing to do with the Republican-led states’ decision to sue the administration over the cancellation of the loan. If true, it could undermine their legal case, as states have cited MOHELA and other similar agencies as potentially losing revenue as a result of Biden’s plan.
Regardless of the 8th Circuit’s final decision, the legal battle over Biden’s student loan forgiveness initiative could continue. The losing party will likely appeal the 8th Circuit’s decision to the United States Supreme Court. While the Supreme Court has recently rejected other legal challenges to the initiative, each case is different and another appeal could potentially further delay the implementation of student loan forgiveness.
Borrowers can still apply for a one-time student loan waiver
As legal challenges continue, the Biden administration is still accepting applications for the unique student loan forgiveness initiative.
“Following a court order, we are temporarily prevented from processing debt discharges,” read a message on the application site. “We encourage you to apply if you are eligible… We will process waivers quickly when we are able to do so and you will not need to re-apply.”
The Department of Education is also issuing a paper application for borrowers who do not have internet access. And officials are also working on a fix that will allow borrowers living abroad – whose foreign IP addresses have been blocked as a security measure – to apply online.
The Department of Education is still working on loan forgiveness eligibility for FFELP borrowers
Borrowers with FFELP loans held by individuals have been barred from Biden’s unique student loan forgiveness initiative following a last minute policy reversal by the administration in response to legal challenges, including the case that ended in the 8th Circuit.
“[The Education Department] assesses whether there are other avenues to provide relief to borrowers with federal student loans not [federally-held]…including FFEL program loans and Perkins loans, and is discussing this with private lenders,” according to the Ministry of Education website on the cancellation initiative. Senior administration officials, including Education Secretary Miguel Cardona, said they were exploring potential solutions. But so far, none have been announced.
Other student loan forgiveness programs remain available for direct loans and FFELP
While Biden’s unique student loan forgiveness plan remains stalled in court, other important initiatives remain unaffected by these legal challenges.
The Department of Education and MOHELA are still implementation of limited PSLF waiver, which operated as a temporary extension of the civil service loan cancellation program. Although it officially ended on October 31, officials will continue to process applications over the coming months.
Additionally, the Biden administration is just beginning to implement the IDR account adjustment, a sweeping initiative that will move borrowers toward loan forgiveness through income-driven repayment plans (even for borrowers who don’t currently have such a plan). The IDR account adjustment will also work as an extension of many benefits of the limited PSLF waiver for borrowers working in the civil service.