Federal Government To Pause Student Loan Payments, Interest For 3 Million Borrowers

Authored by Bill Pan via The Epoch Times,

In response to court rulings blocking key elements of the federal government’s new student loan repayment program, the Biden administration will be giving about 3 million borrowers a reprieve from their monthly payments.

The 3 million borrowers eligible for the pause are enrolled in the income-driven repayment program dubbed SAVE and have a monthly payment that is more than zero, according to the U.S. Department of Education. About 4.5 million SAVE enrollees who qualify for zero-dollar payments because of low incomes will not be included in the pause.

The payment pause is similar to the COVID-19 student loan relief that lasted for 3 1/2 years, from March 2020 through September 2023, during which borrowers didn’t have to pay monthly bills and interest didn’t accrue.

Borrowers who are eligible for the new pause will be informed directly in the coming days, a spokesperson for the Education Department told The Epoch Times.

The announcement was made days after a federal judge in Kansas, siding with attorneys general of three Republican-led states, blocked the implementation of the final segment of the SAVE plan but declined to unwind the portions of it that are already in place.

The blocked segment is a calculation formula update scheduled to take effect on July 1. It would have allowed borrowers with undergraduate loans to have their monthly payments capped at 5 percent of their discretionary income, down from the current 10 percent limit.

Borrowers with undergraduate and graduate school loans would also have seen a reduction in repayments, with the amount depending on the proportion of their graduate and undergraduate loan debt.

A separate ruling by a federal court in Missouri put SAVE’s debt discharge provisions on hold while litigation challenging the program moves forward. The SAVE plan offered debt cancellations for those who originally took out $12,000 or less in loans and have made at least 10 years of monthly payments.

Both of the judges presiding over the twin cases agreed that the SAVE plan, which uses the Higher Education Act to forgive hundreds of billions of dollars in loan debt, goes beyond what the statute authorizes.

In his opinion, Judge John Ross of the Eastern District of Missouri said Congress did not intend to make debt forgiveness under the law as economically far-reaching as President Biden’s program.

“The court is not free to replace the language of the statute with unenacted legislative intent,” Judge Ross wrote.

“Congress has made it clear under what circumstances loan forgiveness is permitted, and the [income-contingent repayment] plan is not one of those circumstances.”

A Congressional Budget Office estimate said SAVE could cost $230 billion over the next decade, while researchers at the Wharton School of the University of Pennsylvania placed the price tag at $475 billion over the same 10-year period.

The pair of rulings prompted some Democrat lawmakers to urge the Education Department to place affected borrowers on forbearance, citing the confusion that could result from the injunctions.

“This damning and harmful lawsuit will only throw struggling borrowers further into chaos, deny them the student debt cancellation they demand and deserve, and prevent them from purchasing homes, growing their families, and so much more,” Rep. Ayanna Pressley (D-Mass.) said in a statement.

“The Biden Administration must continue to take immediate action to ensure borrowers receive the student debt cancellation they were promised.”

The federal government has promised a continued push for student loan forgiveness.

“President Biden, Vice President [Kamala] Harris, and Secretary [Miguel] Cardona remain committed to fixing a broken student loan system and making college more affordable for more Americans,” an Education Department spokesperson said in a statement to The Epoch Times.

“They will not stop vigorously defending the SAVE Plan, the most affordable repayment plan in history, and will continue to fight for this long-overdue relief.”

Some 414,000 borrowers have had their federal student loan debts erased under SAVE, according to the department.

The injunctions will not affect any forgiveness that has already been granted.