Back to the Free Ride: 3 Million Borrowers Get Another Payment Break

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In a move that smacks of desperation, the Biden administration plans to place about 3 million student loan borrowers into another payment pause. Yes, folks, we’re looking at a sequel to the pandemic-era moratorium where borrowers get a free pass on making payments, and interest takes a nap.

The so-called SAVE Plan, Biden’s crowning jewel of student debt reform, has been under fire from Republican-led lawsuits. These suits argue that Biden’s administration has overstepped its authority, and recent court rulings in Kansas and Missouri have sided with the GOP. This has thrown a wrench into Biden’s plan, blocking critical components of the SAVE Plan that were supposed to significantly cut borrowers’ payborrowers ‘. Eight million borrowers are using this plan, and about 414,000 have already benefited from debt relief.

But here we are, with the Department of Education scrambling to hit the pause button on payments once again. This time, it’s due to rulings that prevent the Department from reducing costs and canceling small balance loans for those who’ve been paying for over a decade. Seriously, how many times will we go through this charade?

In a desperate Thursday night appeal, the Department of Justice (DOJ) begged for an emergency motion to halt the Kansas ruling, claiming that not doing so would cause “irreparable harm” and “chaos” for borrowers. Brian Boynton, the DOJ’s principal deputy assistant attorney general, painted a dire picture of the fallout, arguing that reverting to the original 10% income-based payments would be a logistical nightmare. It took months to prepare for the new payment calculations, and reversing that would be no small feat.

Boynton stressed that the chaos and confusion would be unavoidable and the cost unrecoverable. He also warned that the temporary loan pause would harm borrowers since months in forbearance wouldn’t count towards debt relief programs like the Public Service Loan Forgiveness (PSLF) program. Unlike the pandemic pause, these months wouldn’t be counted, leaving borrowers in a bind.

Let’s not forget that this debacle is part of a pattern for Biden. Remember his grand promise to cancel $10,000 to $20,000 in student debt? That was nixed by the U.S. Supreme Court, leaving young voters disillusioned. Now, Biden’s piecemeal approach has helped nearly 4.75 million borrowers. Still, only 3% of the debt relief has come through the SAVE Plan. Most relief has been from fixing broken programs like PSLF and targeting fraudulent colleges.

Biden’s administration isn’t giving up, though. They’re working on a Plan B, hoping to cancel debt for around 30 million people. This narrower and more bureaucratic plan is designed to dodge another legal smackdown. But don’t hold your breath – lawsuits are a given once it hits the final stages this summer.

The new proposal could offer relief from automatic cancellation for those close to defaulting to application-based help for individuals struggling with other financial burdens. The Department of Education is considering various factors, like the amount borrowers are paying compared to their income and assets and whether they’ve been able to manage other debts. They also want to determine whether borrowers received a Pell Grant and use other government support programs.

In the meantime, borrowers enrolled in the SAVE Plan have already been placed into forbearance for July, and this may extend into the coming months if the courts don’t grant the government’s request. About 4.5 million people who qualify for $0 payments because of low incomes won’t be included in the pause.

Despite the court rulings, the Department of Education insists the SAVE Plan still offers substantial benefits, such as the lowest monthly payment for most borrowers and shielding them from unpaid interest accrual. The administration clings to this as a silver lining, but the setbacks continue.

As the 2024 campaign season heats up, student debt remains a hot-button issue, especially for young voters. Biden’s ongoing struggle to fulfill his debt cancellation promises may influence this critical voter bloc. Let’s see how many more pauses, appeals, and court battles we endure before this saga finally concludes.