As the Supreme Court gets ready to hear oral arguments to determine the program’s future next week, the story of President Biden’s iconic one-time student loan forgiveness initiative is about to move on to the next stage.
The US Department of Education (ED) has suggested changes to income-driven repayment (IDR) plans that could result in significant reductions in loan payments because the legality of President Biden’s broader federal student loan forgiveness program is in doubt. Some borrowers will actually make no payments at all each month.
Qualified borrowers
The three other existing IDR plans that are available to lower-income debtors, Pay As You Earn Repayment (PAYE), Income-Based Repayment (IBR), and Income-Contingent Repayment (ICR) plans, will gradually be phased out as part of the ED’s proposed regulations. The Revised Pay As You Earn Repayment (REPAYE) plan will be modified.
When the new plan becomes law, borrowers who are currently enrolled in the IBR, ICR, and PAYE plans must enroll through their student loan provider or the Federal Student Aid website. The newly proposed regulations do not make any adjustments to take into account people who have Parent PLUS loans, which cannot be repaid under an IDR plan.
Borrowers must earn less than $30,600 annually, while members of families of four must earn less than $62,400 annually, in order to be eligible for $0 monthly payments.
An unprecedented one-time initiative to implement widespread student loan forgiveness was announced by Biden last year. Up to 40 million borrowers may be eligible to have their federal student loans canceled under the program for a maximum of $20,000. Prior to the program’s suspension last fall as a result of numerous legal challenges, over 26 million borrowers had applied for debt relief and over 16 million had been accepted.
The Biden administration has filed an appeal against those judgments, and the Supreme Court has set a February 28 hearing that is sure to be a major event. In one instance, a group of Republican-led states claims that the Biden administration’s one-time debt relief program will cause states to lose revenue by incentivizing borrowers of commercial FFELP loans, which are backed by some state-affiliated organizations, to combine those loans into the government’s Direct lending program.
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Student Loan Forgiveness Under Court Hearing
In the other situation, a right-leaning group advocating for two borrowers of student loans has claimed that the Biden administration acted arbitrarily in determining program eligibility and broke the law by issuing new regulations.
According to the Biden administration, the program is legitimate and was set up in accordance with federal regulations, which permit the Education Department to respond to major disasters like the COVID-19 pandemic.
Attorneys for the Justice Department argued that several provisions of the HEROES Act [of 2003] underscore Congress’s intent to authorize the Secretary to respond promptly and fully to national emergencies in a legal brief submitted to the court last month.
The Secretary has been wrongfully stripped of his statutory authority to give specific student loan debt relief to borrowers affected by national emergencies by the lower court’s orders.
After the hearing next week, the Supreme Court may issue a ruling at any time; however, it is generally believed that the ruling will be made public in June.
The current suspension of student loan payments has been extended by the Biden administration to take effect 60 days after June 30 or the day the Supreme Court rules, whichever comes first.
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