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The ongoing pause on most federal student loan payments is set to end in on August 31. And President Biden has also indicated that he will make a final decision about enacting broad student loan forgiveness by that date, as well. With only weeks to go before this key deadline, millions of student loan borrowers are dealing with unprecedented uncertainty as they await a formal announcement.
While no decisions have been publicly announced yet, there are growing signs that Biden is set to extend the student loan pause, and may be preparing to approve some form of wide-scale student loan cancellation, as well.
Biden Administration Appears Ready to Implement Student Loan Forgiveness and an Extension of the Student Loan Pause
As first reported by POLITICO, the Education Department has put procedures in place to implement a wide-scale student loan forgiveness program. Biden simply has to give the word. These procedures include mechanisms to automatically cancel federal student loans for potentially millions of borrowers, while allowing others to apply through a simplified, self-certifying application process. The Department is also prepared to re-amortize reduced loan balances for borrowers who don’t get their student loans completely cancelled.
The establishment of these detailed procedures underscores that a mass student loan forgiveness program is under very serious consideration. Biden is reportedly open to cancelling $10,000 in federal student loans for borrowers earning below $125,000 per year.
In addition, the Education Department has reportedly notified its contracted loan servicers not to send billing notices to borrowers this month. Given that payments are set to resume in just a matter of weeks, the order is a clear sign that the administration does not anticipate billing borrowers in the immediate future, particularly given that top officials have promised borrowers significant notice before resuming payments.
Ongoing Inflation Makes Student Loan Pause Extension And Other Relief More Likely
Biden administration officials have said throughout the year that economic and pandemic data would guide the decision process about a further extension of the student loan pause. And recent economic data on inflation is not looking rosy — prices continue to increase across a number of sectors. And this month’s jobs report, while robust, suggests that the economy may still be running too hot, according to top economists.
Advocates for student loan borrowers have repeatedly warned that ending the student loan pause amidst soaring inflation could be disastrous for families. The current economic data could provide a clear justification for extending the relief, and potentially establishing new relief for borrowers, as well.
Biden Administration Appears to Endorse Legal Argument Favoring Broad Student Loan Forgiveness
Last month, the Biden administration suggested in court filings that it endorses — at least to some extent — a legal argument that the Secretary of Education has broad discretion to cancel federal student loan debt.
The filing was related to proceedings in the Sweet v. DeVos case, a class action lawsuit brought by student loan borrowers over stalled Borrower Defense to Repayment applications (a program that can cancel federal student loan debt for borrowers defrauded by their school). As part of a joint settlement proposal, attorneys for the administration suggested that the Higher Education Act’s compromise authority grants “considerable discretion” to the administration to cancel student debt.
“The Secretary’s ‘compromise and settlement authority’ includes the authority to compromise and release the student loan debts owed to him by federal student loans borrowers on terms determined by the Secretary,” wrote the Department.
Advocacy groups, some student loan legal experts, and progressives in Congress have repeatedly pointed to the Higher Education Act’s compromise and settlement clause as a solid basis for Biden using executive action to enact broad student loan cancellation. Of course, other experts have disagreed with this broad interpretation, and the administration’s arguments in the filing appeared to be limited to “claims” brought by the class of student loan borrowers.
Still, the filing provides insight into the administration’s legal arguments that could underpin a decision by Biden to enact wide-scale student loan forgiveness.
Republicans Introduce Bill to End Student Loan Pause and Prevent Mass Student Loan Forgiveness
Last week, Republican Reps. Virginia Foxx, Elise Stefanik, and Jim Banks introduced legislation designed to get out in front of Biden’s potential student loan actions.
The bill, called the Responsible Education Assistance Through Loan (REAL) Reforms Act, would stop the ongoing student loan pause and would end student loan forgiveness for new borrowers under existing programs, including Public Service Loan Forgiveness (PSLF) and income-driven repayment plans. The bill would also expressly ban President Biden from cancelling student loan debt on a mass scale.
The legislation has little to no chance of passing the House and Senate, where Democrats hold slim majorities. However, the introduction of the bill is a clear sign that Republicans take seriously the fact that Biden appears to be moving towards enacting additional student loan relief for borrowers.
Biden Has Political Momentum
Biden has had a series of political wins over the last couple of months. He recently signed several major bipartisan bills into law, including the CHIPS Act (which will increase semiconductor production in an effort to make the U.S. more competitive with China) and a gun control bill. The Senate just passed the Inflation Reduction Act, which is on track to become a historic federal investment in climate change mitigation and health care.
With several big wins — and potentially more on the way — Biden may feel emboldened to go big on other fronts, including student loan relief. This may be particularly true given the approach of the midterm elections, which will determine which party controls Congress for the second half of Biden’s term.
Further Student Loan Reading
Court Grants Preliminary Approval For $6 Billion In Student Loan Cancellation Under Landmark Settlement
Biden Administration Is Ready To Implement Mass Student Loan Forgiveness, As Decision Could Come Any Day
Did The Biden Administration Just Drop A Big Hint On Student Loan Forgiveness?
If You Went To These Schools, You May Qualify For Student Loan Forgiveness: Here’s What To Do