President Joe Biden on Friday provided an update on the launch of his administration’s student loan forgiveness efforts, announcing that in less than a week, nearly 22 million people applied online.
But just a few hours later, a federal appeals court threw the show into limbo with an administrative paralysis that, for now, prevents the administration from actually dispensing with the loans. The US Court of Appeals for the Eighth Circuit issued the pause Friday night as it considers a request by six Republican-led states to block the program permanently.
But now that legal wrangling over the program is expected to drag on into next week, the White House was quick to say that borrowers will still be able to at least apply for help.
“[W]We encourage eligible borrowers to join the nearly 22 million Americans whose information the Department of Education already has,” said Press Secretary Karine Jean-Pierre he said in a statement.
Nor does the ruling “prevent us from reviewing these applications and preparing them for transmission to loan servicers,” he added.
However, the schedule and whether the approved applications will ever be completed is now up in the air a week after the schedule first went live. The beta version of the app for up to $20,000 in loan forgiveness released on October 15 followed by the president formal opening on monday of the registration process.
Nebraska Attorney General Doug Peterson, one of the state officials suing to stop the program, praised the ruling in a statement, saying, “It is very important that the court look at the legal issues surrounding presidential power before transferring more than $400 billion in debt to American taxpayers.”
A focus on 40 million borrowers
Biden and his top advisers, including Education Secretary Miguel Cardona, have been persistently urging Americans to sign up. The online form It has been noted for its simplicity: asking borrowers for nothing more than their name, Social Security number, date of birth, phone number, and email. Some documents may be required later in the process, depending on the form.
“It’s very encouraging to see so many borrowers apply so quickly,” Persis Yu, of the Student Borrower Protection Center, told Yahoo Finance on Friday before the ruling. “I think it speaks to the need for this relief and how desperate borrowers are to get this discharge.”
Before Friday’s ruling, the debt was expected to be erased as soon as possible in mid-November.
In August, the Biden administration announced a debt forgiveness plan that would forgive $10,000 of debt for people earning less than $125,000 and an additional $10,000 for those who received Pell Grants, which are awarded to borrowers with extreme financial need.
Some critics argue that the plan does not address the root problems that make college so expensive, while others say the plan overstepped the constitutional authority of the executive branch. Many have also noted the program’s high cost, budget experts say. could reach half a billion dollars depending on how many people sign up.
The White House has said that about 40 million Americans may eventually be eligible for forgiveness and 60% of them are Pell Grant recipients who are eligible for additional relief.
The question, for Kyra Taylor, a staff attorney focused on student loans at the National Consumer Law Center, is this: “Does everyone know they have to apply, they have to raise their hands and I think it’s going to be an open opportunity? ” ask and that will really activate the scope as we go forward.”
The process of forgiveness in the future
If the administration is able to get the forgiveness process back on track, the Department of Education will review and approve applications on an ongoing basis. Loan servicers are the ones who would then execute forgiveness if that final step in the process is reinstated.
Administration officials chose Delaware State University as the venue for Biden’s speech on Friday because the historically black university includes a student body where more than 75% of students receive a Pell Grant and would therefore be eligible. for further forgiveness.
“There is no better example of a university that has changed so many lives,” Biden said Friday.
Biden also faced critics of his student loan efforts, singling out Republicans who criticized the program after benefiting from forgivable loans from the Small Business Paycheck Protection Program. “Who the hell do they think they are?” Biden asked.
The administration’s pardon plan had won two significant victories on Thursday, when a federal judge in Missouri ruled that the six states lacked standing to block the program and the Supreme Court also issued a similar ruling in reference to a different case.
“A state court and the Supreme Court said no, ‘we side with Biden,'” the president said Friday.
On Friday, the US Court of Appeals for the Eighth Circuit handed a temporary victory to officials seeking to block the program in six states: Nebraska, Missouri, Arkansas, Iowa, Kansas and South Carolina. Those states argue that Biden’s plan oversteps his spending authority as the executive branch and threatens the states’ future tax revenues.
A federal judge dismissed the case Thursday, finding that the states lacked standing to sue, meaning they could not show that they would be harmed by the debt relief program. The Eighth Circuit Court of Appeals will now decide whether to uphold that decision.
This post was updated after the Eighth Circuit issued an order suspending the debt relief program on Friday.
Ben Werschkul is the Washington correspondent for Yahoo Finance.