Colleges are struggling for clarity as student debt relief is disrupted

Three months ago, the Biden administration launched a plan to erase some student debt with much fanfare. But last week, after 26 million borrowers filed for relief, two court rulings halted that.

A federal judge in Texas struck down the program last Thursday. Then, on Monday, the US Eighth Circuit Court of Appeals in St. Louis against the program, extending the waiting period imposed on the program in October. A federal judge in Texas ruled the program illegal, saying it violated congressional authority.

The plan would eliminate $10,000 in student loans for borrowers earning less than $125,000 or households bringing in less than $250,000. Up to $20,000 is forgiven for Pell Grant recipients. Congressional Budget Office has rated that the program will cost $400 billion over the next 30 years.

Banner on the student help website of the Board of Education states that the debt relief program is not currently accepting applications. For those who have already applied, the statement says the department is putting a hold on those applications.

College financial aid offices, many of which are underlings, the court proceedings have brought waves of questions and concerns from current students and alumni. The constant program cuts have made borrowers feel like “political ping pong balls,” said one financial aid official.

“We’re in a pretty difficult place, and even if we anticipated this stop-go nature, being in the middle of it is creating a lot of confusion and anxiety for borrowers,” said Justin Draeger, the company’s president and CEO. National Association of Student Financial Aid Administrators, or Nasfaa. “Keeping track of multiple lawsuits and technical details adds to the confusion.”

In a speech last week — a week before the program ended — President Biden said the administration was on track to eliminate the debt of 16 million borrowers. Now it’s up in the air.

Another big question is whether borrowers will have to start making payments on their federal student loans in January, something they haven’t had to do since the Biden administration suspended payments in March 2020.

“This makes it difficult for financial aid offices to make any kind of plans, as well as field questions from students,” said Aaron Basko, vice president of enrollment services. at Lynchburg University. “Obviously, they’re getting calls and they don’t really have any answers, beyond the headlines.”

With the start date for the payments looming, Draeger expects the administration to extend the pause when the rulings take effect.

“In order for those borrowers to start making repayments, then having to go back, pay off those payments and then get involved — that makes a difficult process even more difficult,” Draeger said.

The Washington Post reported on Tuesday that the Biden administration is considering extending the break.

According to a recent survey of more than 31,000 borrowers by the Student Debt Crisis Center, a nonprofit that advocates for debt relief, two-thirds said they have not recovered financially from the pandemic.

“This shows us how persistent these financial hurdles are for student loan borrowers and why we need not only short-term relief, but long-term relief, such as extending the student loan pause, as well as permanent relief, such as debt relief,” said Cody Hounanian, executive director of the Student Debt Crisis Center.

Student debt relief had been on hold since October, when the U.S. Court of Appeals for the Eighth Circuit temporarily blocked the program in response to a lawsuit by six Republican-led states.

The White House immediately appealed Thursday’s decision. The administration has not said whether it will appeal Monday’s decision.

Inside statement A White House official told The Associated Press after Monday’s decision that the Biden administration believed there was legal authority for the program and that it was “necessary to help the borrowers who need it most as we recover from the pandemic.”

As court proceedings drag on, borrowers are unlikely to learn the fate of the program for weeks. In the meantime, if nothing changes, loan payments will continue in January.

Financial aid offices will do their best to make inquiries about this.

“We advise students that unless there is another extension, they should be ready to make repayments in January,” said Kenneth Ferreira, who oversees student financial services at Franklin Pierce University.

Ferreira said she and other administrators tell students and alumni to keep an eye out for updates from the education department and advise them to monitor emails from their financial aid offices.

“The last thing you want is to be caught up in a criminal status over what is currently an uncertainty,” Ferreira said.

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