The White House is providing a new roadmap to the restarting of federal student loan repayments and interest accrual now that the administration’s debt cancellation program is stalled by a pair of legal challenges.
Payments were slated to resume on Jan. 1, 2023 — presumably after eligible borrowers had the opportunity to both apply for and receive up to $20,000 in debt cancellation prior to reentering repayment.
The Department of Education (ED) on Tuesday said it will instead offer another short-term extension that ties the resumption of loan repayment to a resolution of two ongoing legal challenges, which have halted the administration from implementing the debt cancellation program. The first prevented the administration from carrying out the relief and is currently before the Supreme Court, while the second is making its way through the appeals process and resulted in the department removing the debt relief application from its website.
“Payments will resume 60 days after the Department is permitted to implement the program or the litigation is resolved, which will give the Supreme Court an opportunity to resolve the case during its current Term,” ED’s notice reads. “If the program has not been implemented and the litigation has not been resolved by June 30, 2023 – payments will resume 60 days after that.”
According to the administration over 26 million people have provided ED with the necessary information to be considered for the program, and 16 million of those applicants were approved before the courts prevented the administration from administering the relief.
ED has sought to ensure that the wind-down of the nearly three-year pause on loan payments does not negatively impact borrowers, especially since most borrowers have not been in repayment status or in contact with their servicers.
“Borrowers can use the additional time to ensure their contact information is up to date with their loan servicers and consider enrolling in electronic debit and income-driven repayment plans to support a smooth transition to repayment,” the announcement read.
While this latest extension gives borrowers additional time to assess their finances, it is unclear how the legal challenges to the program will play out, or if the administration and the courts will come to a resolution in the near future.
“Restarting payments in January, before the courts have fully determined the legality of this program, could result in even more confusion for borrowers and challenges for financial aid administrators who provide counseling,” said NASFAA President and CEO Justin Draeger. “We hope the courts will resolve these issues quickly.”
Prior to Tuesday’s announcement Republicans on the House Education and Labor Committee outlined seven reasons why the administration should not offer another extension of the payment pause, citing inflation, costs to taxpayers, and confusion for borrowers and servicers, among other issues.
Following the announcement Sen. Patty Murray (D-Wash.), chair of the Senate education committee who has been lock-step with the administration’s actions concerning the payment pause, applauded the White House’s decision.
“With borrowers in limbo while this makes its way through the courts, I’m glad the administration has moved to extend the student loan pause and take some stress off the shoulder of borrowers in Washington state and across the country,” Murray said. “I’ll keep working with the Administration and my colleagues to fix our broken student loan system for everyone and in the long-term.”
Publication Date: 11/23/2022