Court temporarily blocks Biden’s student loan forgiveness plan

A federal appeals court late Friday issued an administrative stay temporarily blocking President Joe Biden’s plan to cancel billions of dollars in federal student loans, throwing the program into limbo just days after people began applying for loan forgiveness.

The Eighth Circuit Court of Appeals issued the stay while it considers a motion from six Republican-led states to block the program. The stay ordered the Biden administration not to act on the program while it considers the appeal.

It’s unclear what the decision means for the 22 million borrowers who already applied for the relief. The Biden administration had promised not to clear any debt before Oct. 23 as it battled the legal challenges, but the soonest it was expected to begin erasing debt was mid-November.

White House Press Secretary Karine Jean-Pierre encouraged borrowers to continue to apply for the relief, saying the court’s temporary order did not prevent applications or the review of applications.

“We will continue to move full speed ahead in our preparations in compliance with this order,” she said in a statement. “And, the Administration will continue to fight Republican officials suing to block our efforts to provide relief to working families.”

The crucial question now is whether the issue will be resolved before Jan. 1, when payments on federal student loans are expected to restart after being paused during the pandemic. Millions of Americans were expected to get their debt canceled entirely under Biden’s plan, but they now face uncertainty about whether they will need to start making payments in January.

Biden has said his previous extension of the payment pause would be the final one, but economists worry that many Americans may not have regained financial footing after the upheaval of the pandemic.

If borrowers who were expecting debt cancellation are asked to make payments in January, there’s fear that many could fall behind on the bills and default on their loans.

A notice of appeal to the Eighth U.S. Circuit Court of Appeals was filed late Thursday, hours after U.S. District Judge Henry Autrey in St. Louis ruled that since the states of Nebraska, Missouri, Arkansas, Iowa, Kansas and South Carolina failed to establish standing, “the Court lacks jurisdiction to hear this case.”

Separately, the six states also asked the district court for an injunction prohibiting the administration from implementing the debt cancellation plan until the appeals process plays out.

Nebraska Attorney General Doug Peterson, one of the six attorneys general leading the effort to block the debt relief program, praised the court’s decision.

“We are pleased the temporary stay has been granted,” Peterson said in a statement. “It’s very important that the legal issues involving presidential power be analyzed by the court before transferring over $400 billion in debt to American taxpayers.”

The plan, announced in August, would cancel $10,000 in student loan debt for those making less than $125,000 or households with less than $250,000 in income.

Pell Grant recipients, who typically demonstrate more financial need, will get an additional $10,000 in debt forgiven.

The Congressional Budget Office has said the program will cost about $400 billion over the next three decades.