President Joe Biden on Friday provided an update on the launch of his administration’s student loan forgiveness efforts, announcing that in just under a week, nearly 22 million people applied online.
But just hours later, a federal appeals court threw the program into limbo with an administrative stay that, for now, prevents the administration from doing away with the loans. The U.S. Court of Appeals for the Eighth Circuit issued the stay Friday night as it considers a request by six Republican-led states to permanently block the program.
But with the legal dispute over the program expected to be extended next week, the White House quickly asserted that borrowers will continue to be able to apply for at least the relief.
“[W]We encourage eligible borrowers to join the nearly 22 million Americans whose information is already in the Department of Education” Press Secretary Karine Jean-Pierre said in a statement.
The ruling also “does not prevent us from reviewing these applications and preparing them for transmission to loan servicers,” he added.
However, the program and whether approved applications will ever be completed is up in the air a week after the program was launched. The beta version of the application for up to $20,000 in loan forgiveness was launched on October 15, followed by the president’s formal presentation on Monday of the application process.
Nebraska Attorney General Doug Peterson, one of the state officials suing to stop the program, praised the ruling in a statement, saying, “It is very important that the legal issues surrounding presidential power be analyzed by the court before transfer over $400 billion in debt to American taxpayers.”
Focused on 40 million borrowers
Biden and his top aides, including Education Secretary Miguel Cardona, have been pushing Americans to sign up. The online form has been noted for its simplicity: asking borrowers for nothing more than their name, Social Security number, date of birth, phone number and email. Certain documents may be required later in the process, depending on the form.
“It’s very encouraging to see so many borrowers applying so quickly,” Persis Yu of the Student Borrower Protection Center told Yahoo Finance on Friday before the ruling. “I think it speaks to the need for that relief and how desperate borrowers really are to get that write-off.”
Before Friday’s ruling, the earliest the debt was expected to be cleared was mid-November.
In August, the Biden administration announced a debt forgiveness plan that would forgive $10,000 of debt for people making less than $125,000 and an additional $10,000 for those who received Pell grants, which go to borrowers with extreme financial need.
Some critics argue that the plan fails to address the root problems that make college so expensive, while others claim that the plan overstepped the constitutional authority of the executive branch. Many have also noted the high cost of the program, which budget experts say could reach as much as half a billion dollars depending on how many people sign up.
The White House has said that about 40 million Americans may eventually be eligible for the pardon, and 60 percent of them are Pell Grant recipients, who are eligible for additional relief.
The question, for Kyra Taylor, a staff attorney focused on student loans at the National Consumer Law Center, is this: “Everybody knows they have to apply, they have to raise their hand, and I think that’s going to be open. question and that’s really going to trigger outreach as we go forward.”
The forgiveness process is moving forward
If the administration is able to get the pardon process back on track, the Department of Education will review and approve applications on an ongoing basis. Loan servicers are the ones who would actually execute the forgiveness if the final step in the process is reinstated.
Administration officials chose Delaware State University as the site for Biden’s Friday speech because the historically black university includes a student body where more than 75 percent of students receive a Pell Grant, and therefore they would be eligible for increased forgiveness.
“There is no better example of a university that has changed so many lives,” Biden said Friday.
Biden also fired back at critics of his student loan efforts, singling out Republicans who criticized the program after benefiting from forgivable loans from the Small Business Paycheck Protection Program. “Who the hell do they think they are?” Biden asked.
The administration’s amnesty plan scored two significant victories Thursday when a federal judge in Missouri ruled that the six states did not have the right to block the program, and the Supreme Court also made a similar decision in a separate case.
“A state court and the Supreme Court said no ‘we’re on Biden’s side,'” the president said Friday.
On Friday, the U.S. Court of Appeals for the Eighth Circuit granted a temporary victory to officials seeking to block the program in six states: Nebraska, Missouri, Arkansas, Iowa, Kansas and South Carolina. Those states argue that Biden’s plan exceeds their spending authority as the executive branch and threatens the states’ future tax revenues.
A federal judge dismissed the case Thursday, finding that the states lacked standing to sue, meaning they failed to show they would be harmed by the debt relief program. The Eighth Circuit Court of Appeals will now decide whether to uphold that decision.
This post was updated after the Eighth Circuit issued an order Friday that put the debt relief program on hold.
Ben Werschkul is a Washington correspondent for Yahoo Finance.
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