Federal Student Loan Relief Program

On Hold: Federal Student Loan Relief Program

Blocked: Biden’s Student Federal Loan Relief Program

After more than 26 million people applied, a Texas federal court judge blocked the Biden administration’s student loan forgiveness program. Soon after, the ability to apply for debt relief was halted.

“We are disappointed in the decision of the Texas court to block loan relief moving forward,” said Secretary of Education Miguel Cardona in a statement on Nov. 11, following the decision. “Amidst efforts to block our debt relief program, we are not standing down. The Department of Justice has appealed today’s decision on our behalf, and we will continue to keep borrowers informed about our efforts to deliver targeted relief.”

The Department of Education webpage now directs visitors to subscribe and check back for updates, explaining that more details will be posted when they are available.

Background on the Program

In August, President Biden announced millions of Americans who met certain income limits would be eligible for student loan forgiveness: up to $20,000 if they received a Pell Grant, and as much as $10,000 if they didn’t. Previously, the U.S. Department of Education said borrowers would receive forgiveness within six weeks after applying. The full application launched online on Oct. 17. Within three weeks, approximately 26 million people had applied for the relief. Since then, 16 million requests have been approved and sent to loan servicers to be discharged when allowed by the courts, according to the Department of Education.

What’s Next?

So, where does this leave the millions of people who have applied for debt relief? We’ll have to wait for the case to work its way through the appeals courts to find out. The other question likely on the minds of borrowers is if there will be another extension to the monthly payment pause for most federal student loans that began in March 2020 following the start of the global health pandemic caused by Covid.

A number of news outlets are reporting the Department of Education has confirmed another extension of the halt in payments is under consideration (as of Nov. 17). Most federal student loan repayments are set to resume on Dec. 31, 2022.

At this point, with seven extensions of the pause and counting, anything is possible. One thing we know for sure is that it’s a good idea for those who owe student loan debt that has been paused to begin making preparations to make payments again, even if those payments come a little later than anticipated.

Here’s another idea to consider: If you know you will still owe more than any potential loan forgiveness may bring, you can continue or resume making federal student loan payments – if you are able – while the pause is in progress. Check with your loan servicer for more details.

Here are some tips from StudentAid.gov to help borrowers best prepare for making payments again after more than a two and a half year break.

Prepare Now for Making Loan Payments Again

By: Jean Chatzky, SavvyMoney