Biden's student loan plan blocked again. What happens now with student loan recipients?

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  • About 26 million borrowers had already applied for relief. Of those who applied, 16 million have already been approved for forgiveness
  • Such debt disproportionately affects people of color, who don’t have the levels of generational wealth of many of their white counterparts.
  • Black college grads exit college with $25,000 more debt on average than white students, and four years later nearly half of Black people owe 12.5% more than they initially borrowed.

 

The Biden administration is no longer accepting applications for student loan forgiveness after a federal court blocked the administration’s plan. This decision could impact disproportionally Latino and Black students as almost 7 in 10 (67%) of Latino student borrowers have educational debt according to the Education Data Initiative. Thirty three percent of Latino borrowers said they put off marriage and 37% delayed having children because of their student debt.  

Borrowers will have to wait for the government’s appeal to the 5th Circuit Court to be resolved. While it may be difficult to keep track of all the legal challenges, student loan borrowers can subscribe to updates from the Department of Education and check the Federal Student Aid website for more information.

The court could take months to issue a final judgment. If it overturns the Texas trial court’s ruling, the Biden Administration could begin writing off student debt.

Initially, the Biden administration said it would begin granting student loan forgiveness before payments resume in January after a years-long pause because of the pandemic. But now the Biden Administration cannot resume payments on January 1st until this is resolved.

Who is eligible for student loan forgiveness?

If Biden’s program is allowed to go forward, individual borrowers who earned less than $125,000 in 2020 or 2021 and married couples or heads of household who earned less than $250,000 annually in those years could receive debt relief of up to $10,000.

If a qualified borrower also received a federal Pell Grant while enrolled in college, he or she is eligible for up to $20,000 in forgiveness.

The case will now move to the United States Court of Appeals for the 5th Circuit, which can either return the case to a lower court or rule in the administration’s favor. Depending on the court’s decision, either side could then take the case to the Supreme Court. But those in support of the forgiveness plan are worried about what will come next.

Summary Eligibility for Biden’s Student Loan Cancellation Plan

  • You must earn less than $125,000 a year for individuals, or $250,000 for married couples and/or head of households. Individual borrowers who make under $125,000 annually are eligible for up to $10,000 in forgiveness. Current and former Pell Grant recipients are eligible to receive up to $20,000 in forgiveness if they meet the income requirements. The plan would cancel up to $20,000 in debt for current federal student loan borrowers and parent PLUS loan borrowers.
  • You must have current outstanding debt on federal student loans, including parent PLUS loans, obtained before June 30, 2022.
  • Current students who are dependents must use their parents’ or legal guardians’ income to determine eligibility.
  • Federal loans taken out for undergraduate, graduate, and/or professional degrees qualify.
  • If you never finished your degree or are still in school, you can still qualify as long as your loans were disbursed by June 30, 2022.
  • If you defaulted on your federal student loans, you may still qualify for debt relief. If your loans are in default, you can likely still qualify for forgiveness.
  • If you continued to make payments on federal student loans during the payment pause starting in March 2020, or if you paid off those loans during the payment pause, those payments may be refunded.
  • If you used federal student loans to pay for community college, a trade program, professional degree or other alternative certification, you’re still eligible for forgiveness.

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The application for Biden’s student loan relief is blocked. What happens now with student loan recipients?