Americans will be able to have their student loan payments suspended until August, President Joe Biden has announced, with the delay set to give the Supreme Court a chance to rule on a Republican challenge to the measure.
US President Joe Biden has announced that his administration will extend break period in repayment of student loans until June 30 due to legal challenges to its plan to erase student debt.
Payments were normally scheduled to resume on January 1, but will not be required again until now 60 days after dispute resolution related to Joe Biden’s loan cancellation plan. If the dispute is not resolved by June 30, payments will resume 60 days later, at the end of August, the US Department of Education said in a statement.
“I am confident that our student debt plan is legal,” Biden said in a tweet. “But he is on hold due to Republican elected officials want to block it“.
Why is Biden’s plan on hold?
Joe Biden’s measure has been challenged in court, and a federal appeals court asked the administration suspend all payments pending a decision on the background. The Department of Education then stopped accepting requests for loan forgiveness, plunging millions of Americans into financial uncertainty.
The federal government has appealed the decision to the Supreme Court. This extension of the moratorium must therefore give the Supreme Court more time to process the case.
At the same time, a federal judge in Texas, Mark Pittman, has declared Joe Biden’s plan unconstitutional. Judge Pittman – appointed by former President Donald Trump – wrote that President Biden was trying to usurp the authority of Congress, which has the power to order spending, according to the Constitution. “In this country, we are not run by an all-powerful leader with a pen and a telephone. On the contrary, we areis governed by a constitution which gives three different branches and independent of the government“, he wrote.
The US government would cancel until $10,000 in debt for borrowers earning less than $125,000 a year, or $250,000 for married couples. The Congressional Budget Office calculated in September that debt relief would cost about $400 billion to the government. Republicans fear that this plan will cause inflation to rise.
This new pause in loan payments, announced Tuesday night, will therefore reduce borrower uncertainty while the administration asks the Supreme Court to review lower court orders is preventing Joe Biden’s debt relief plan from being implemented, the Education Department said.
“We are extending the payment break because it would be grossly unfair to ask borrowers to pay a debt they would not have to pay if not for baseless lawsuits from Republican officials and special interests” said Education Minister Miguel Cardona.
The student loan repayment freeze, first enacted in March 2020 under President Donald Trump, has been repeatedly extended by Biden.
When his administration unveiled its sweeping debt relief plan in August, it announced that loan repayments resumes in January. If the Ministry of Education has previously recognized that an extension could costing several billion dollars a monthhe warned that resuming payments before legal challenges are resolved could lead to massive defaults.
26 million borrowerss have already applied for cancellation of their loan. The Ministry of Education has approved the cancellation of 16 million loans until now.