Biden extends pause on student loan repayment

Extension gives Supreme Court time to hear case in current term

Biden extends pause on student loan repayment

Christmas has come early for more than 40 million Americans, as President Joe Biden has announced the pause on student loan repayments has been extended to June 30, 2023.

In theory, this gives the U.S. Supreme Court enough time to rule in the current session on whether his debt forgiveness plan can go through. Last week, a federal appeals court issued a nationwide injunction after six states filed a lawsuit that the program not only threatens their future tax revenues, but also requires approval by Congress.

“The injunction will remain in effect until further order of this court or the Supreme Court of the United States,” a three-judge panel of the 8th Circuit Court of Appeals in St. Louis said in its ruling.

“We’re extending the payment pause because it would be deeply unfair to ask borrowers to pay a debt that they wouldn’t have to pay, were it not for the baseless lawsuits brought by Republican officials and special interests,” Education Secretary Miguel Cardona said in a statement.

The pause, which was initially scheduled to end on Dec. 31, 2022, will be extended until 60 days after the Biden administration can proceed and the litigation is resolved, according to a press release by the U.S. Department of Education.

Initially, a federal judge rejected the challenge brought by Nebraska, Missouri, Arkansas, Iowa, Kansas and South Carolina, saying that while they raised “important and significant challenges to the debt relief plan,” they ultimately lacked legal standing. However, the appeals court said that Missouri had shown a likely injury from the program: the Missouri Higher Education Loan Authority (MOHELA), a major loan servicer, would lose revenue under the plan and Missouri’s state treasury department receives money from MOHELA.

“Whatever the eventual outcome of this case, it will affect the finances of millions of Americans with student loan debt as well as those Americans who pay taxes to finance the government and indeed everyone who is affected by such far-reaching fiscal decisions,” the panel said in its ruling.

Earlier this month, the Biden administration stopped accepting applications for relief after a federal district judge in Texas blocked the plan. U.S. District Judge Mark Pittman ruled that the program is “an unconstitutional exercise of Congress’s legislative power and must be vacated,” Politico reported.

In August, Biden announced his long-awaited plan to tackle the national student debt crisis, directing the Department of Education to cancel $10,000 in federal student loan debt per borrower, for those making less than $125,000 annually. Meanwhile, recipients of Pell Grants, awarded only to undergraduate students who display exceptional financial need, will see up to $20,000 wiped out. According to The White House, the historic initiative would assist up to 43 million borrowers, including eliminating the full remaining balance for roughly 20 million borrowers.

“As conversations around the debt landscape have evolved and more attention has been paid to the significant financial and emotional toll of student debt, employers have begun to take a closer look and think through solutions for their employees,” Kristen Carlisle, general manager at Betterment at Work, told HRD in August.

More than half of employees (57%) believe their employers should play a role in helping them pay down their student debt, whether that’s via direct financial support or offering digital tools or advisors to help guide them through the process, according to a Betterment survey conducted last year.

HR leaders are taking notice. Student loan repayment assistance is the second most popular benefit (behind financial wellness) employers are looking to add in the coming years, according to the 2021 SmartDollar Financial Wellness Benefits Study by Ramsey Solutions.

“We’re increasingly hearing from others in the industry that businesses are beginning to match employee contributions to their student loans, a cutting-edge benefit that we expect to increase in popularity to help employees combat this difficult financial burden,” Carlisle said.

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