Stalled Plan

Stalled Plan

Why the student loan forgiveness plan stalled and what happens next

We were so close to student loan forgiveness. Unfortunately, the plan has been stalled by a ruling in a federal district court. Let’s take a look at what happened and what will likely happen next.

The Lawsuits

There are two lawsuits that ground the debt relief to a halt: One filed in Texas by two individuals and one filed by six states — Nebraska, Missouri, Arkansas, Iowa, Kansas and South Carolina. As CNBC notes, both lawsuits essentially are saying the same thing, that Biden’s plan is an overreach of his power.

What it Means for Borrowers

Unfortunately, this means more waiting for student loan borrowers. The Biden administration did file an appeal in Texas, so if that goes through, the plaintiffs will try to move it to the Supreme Court. Likewise, if the appeal falls through, the Biden administration will likely seek out the high court.

Borrowers should hope that both lower courts agree on the legality of the forgiveness plan. If that happens, it’s less likely the Supreme Court will get involved. However, if one court agrees and one doesn’t, the Supreme Court will probably have to settle the dispute.

If The Plan Goes On

If the debt relief plan goes on, borrowers will see their debt reduced by up to $20,000. One good thing is that the student loan forbearance has been extended for now. If you haven’t applied yet for loan forgiveness, you’ll have to wait until things open up again. The Biden admin is barred from processing applications during the appeal process.

Chris O'Shea

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