Over 26 million Americans have either applied for student debt cancellation or received notice that they will be approved for cancellation if they do not opt out since the application opened in mid-October. That’s roughly 1 in every 10 American adults. If you are one of those 26 million people, by now you’ve probably heard the bad news that court orders on November 11 and 14 blocked President Biden’s plan to cancel up to $20,000 in student loan debt for low- and middle-income people. The Biden Administration is appealing, asking higher courts–including the Supreme Court–to lift the blocks so it can cancel debt, and the legal challenges are far from settled. But the court orders, issued less than two months before the payment pause is set to expire, have created massive confusion for borrowers about the status of their student loans, the likelihood of cancellation, and whether they are going to have to make payments in January for the first time in nearly three years.
Below we summarize what is going on in the courts, and what borrowers can do while the legal fight continues.
What is going on in the courts?
Since President Biden announced the plan to cancel up to $20,000 in federal student loan debt for low- and middle-income Americans in August, several groups and politicians that oppose giving relief to student loan borrowers have filed lawsuits in courts across the country challenging the Biden Administration’s authority to provide debt relief and asking the courts to block the plan. They have filed cases in several courts they believed would be friendly to their claims, hoping to find a judge willing to block debt relief.
Two of those lawsuits–one filed by the Pacific Legal Foundation and one by a Wisconsin group–have already been rejected by courts, and the Supreme Court has denied requests to intervene.
In a third case, brought by six states (Nebraska, Missouri, Arkansas, Iowa, Kansas and South Carolina) asking the courts to block debt cancellation, the court similarly dismissed the case. But the Eighth Circuit Court of Appeals, a higher court, issued a temporary order blocking cancellation while it considers the states’ appeal. The court did not rule that cancellation is unlawful, but it said that there are “substantial questions of law which remain to be resolved.” On November 18, the Biden Administration petitioned the Supreme Court to overturn the order and allow the Administration to move forward with canceling debt.
Notably, the six states claim that they are seeking to block cancellation because it might harm state finances by reducing the amount of taxes they might be able make borrowers pay in the future and because with fewer people in debt, the student loan servicer MOHELA would make less money that it might pass on to Missouri. At the same time, they ignore that debt cancellation offers over $46 billion in financial relief to working and middle-class residents in their states alone. The district court dismissed the case after finding that the states are not actually harmed by debt relief and so cannot sue.
Finally, in a fourth case, spearheaded by an organization that advocates for tax cuts for businesses, a judge in Texas ordered that the cancellation plan be struck down entirely. To be clear, this is not the final word: the decision has been roundly criticized as wrong on the law by legal experts, and the Biden Administration has already appealed it. But to comply with the order, the Biden Administration has temporarily stopped accepting and processing applications for debt relief.
In summary: Two cases challenging student debt cancellation have been thrown out entirely by the courts. A third case was thrown out by a court, but a higher court is nonetheless placing a temporary block on debt cancellation while it considers the appeal. And in a fourth case, a judge ruled the cancellation program unlawful in a decision that has been widely criticized by legal experts. And the Biden Administration is appealing the orders blocking it from moving forward with debt relief. The battle in the courts continues.
What now?
To comply with the court order from the judge in Texas, the Department of Education has stopped processing cancellation applications and has removed the online application from its website.
For borrowers who have already applied for cancellation, the Department of Education has said it will update borrowers via email with news about the cancellation program and the status of their individual applications, but it will not take any further steps to cancel student debt under the debt relief plan at this time. Borrowers will not need to reapply for debt relief, and unless the Department asks for more information, you do not need to do anything.
For borrowers who did not yet apply for cancellation or who did not provide an email address on their application, you can sign up for updates from the Department of Education here, including updates about whether the application reopens. It is also a good idea to update your contact information with your student loan servicer and on studentaid.gov to help ensure you get updates about your loans and relief opportunities. The online application for debt relief is currently closed due to the court order. Although borrowers can still mail in paper applications, those will not be processed unless the court decisions are overturned.
What is the likelihood that the court decisions will be overturned on appeal?
Attorneys with the Student Loan Borrower Assistance Project believe that the decisions blocking cancellation are wrong on the law and should not stand up to further legal scrutiny. Not only do the plaintiffs in these cases lack standing to bring these lawsuits, which should result in their dismissal, but the Biden Administration has broad authority to cancel student loan debt and appropriately used that authority to help relieve student debt burdens now as working and middle class people with student loan debt are trying to recover from the economic stress created by the pandemic.
But unfortunately, we do not have a crystal ball. Different judges have come out differently on these issues so far, and it may take months for the legal challenges to be resolved.
What about repayment?
At this time, President Biden has not extended the student loan payment pause. Repayments are set to begin again in January 2023. NCLC is working with advocates across the country to push for an extension of the payment pause now that borrowers will not receive cancellation before payments resume as they were promised and expected. Now more than ever, we need to hear from borrowers about the impact these court decisions will have on their lives and what returning to repayment during this time of uncertainty will mean for borrowers.
Share your story!
Please share your story with us here, so that we can show the White House that they once again need to step up to protect borrowers from further crisis while we wait for the court appeals to be decided.
Where can I find more updates about cancellation and repayment?
You can find more updates about the original plan for the student debt relief program here. For updates on the status of the cancellation plan, sign up for email updates from the Department of Education here.
For more information about other types of student debt relief, visit our page here.
If you have questions about repayment, visit our page here.
