Biden’s Student Loan Pause – The Biden administration is facing another lawsuit over its decision to extend the pandemic-related pause on federal student loan payments. While the moratorium is set to end later this year, the plaintiffs want it to end immediately. The latest legal challenge was filed by the New Civil Liberties Alliance on behalf of the Mackinac Center for Public Policy, a free market think tank, earlier this week. Private lender SoFi had already sued the Biden administration last month, also seeking to end the pause on payments.
The moratorium has been extended eight times under both the Trump and Biden administrations since March 2020, when it was put in place to help people struggling due to the Covid-19 pandemic. However, the New Civil Liberties Alliance lawsuit argues that the Department of Education has unlawfully extended the pause, relying on an “ever-shifting foundation of purported legal justifications.”
The lawsuit alleges that the pause harms nonprofit employers, such as the Mackinac Center for Public Policy, that normally use a federal debt relief program for nonprofit workers to help recruit employees. The pause, they argue, reduces the incentive the federal program, known as Public Service Loan Forgiveness, provides borrowers to work for a nonprofit.
The Department of Education, on the other hand, has maintained that the pause, as well as a proposed one-time debt cancellation plan, are legal. In response to the latest lawsuit, the agency issued a statement, saying that the lawsuit is “an attempt by partisan special interest groups to put millions of borrowers at serious risk of financial harm” and that the Department will continue to fight to deliver relief to borrowers, provide a smooth path to repayment, and protect borrowers from industry and special interests.
Thanks to the pause, most federal student loan borrowers have not been required to make payments for more than three years. Interest has also been frozen during that time. However, the impending end of the moratorium has caused concern among borrowers, who may struggle to make payments once the pause is lifted.
The latest extension of the pause was put in place by President Joe Biden in November once his separate student loan forgiveness program was also challenged in court. The administration has now tied the payment restart date to the litigation over the forgiveness program, which was heard by the US Supreme Court at the end of February.
Federal student loan payments are set to resume 60 days after the Supreme Court issues its ruling, or in late August, whichever comes first. The justices are expected to rule in late June or early July, but a decision could come earlier. If allowed to move forward, Biden’s student loan forgiveness program would cancel up to $20,000 for qualifying low- and middle-income borrowers.
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