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A few days ago, a federal appeals court temporarily halted Biden’s student loan forgiveness plan just days after the official application was released. Here’s what you need to know about this week’s student loan trends and how they may affect you.
1 current trend within student loans for the week of Oct. 24, 2022
1. Student loan forgiveness stalled due to Republican-led lawsuit
The Education Department’s student loan forgiveness application went live last week following a successful beta-test period, despite the multiple lawsuits that have been directed toward the relief plan. While most of the lawsuits have since been dismissed, the most recent effort to block forgiveness by six Republican-led states has temporarily stalled cancellation.
On Friday, the Eighth Circuit Court of Appeals issued a stay on forgiveness — essentially a temporary hold — while an appeal is considered to block the relief program due to the state’s claims of lost tax revenue. Student debt forgiveness isn’t considered taxable income, and the six states involved in the lawsuit — Nebraska, Missouri, Arkansas, Iowa, Kansas and South Carolina — argue that the absence of revenue will cause economic damage.
The Biden administration has been given until today to make an official statement on the matter. Nothing has yet been announced by the Federal Court on the status of the appeal.
How this affects student loans
This lawsuit has been one of many filed against Biden for his debt relief plan, and, as of now, doesn’t have any legal bearing on whether forgiveness without congressional approval is legal or not. The appeal only has grounds to prevent debt from being discharged automatically until a decision is reached by the courts.
In Friday’s press brief, White House Press Secretary Karine Jean-Pierre encouraged borrowers to apply for forgiveness if they haven’t yet done so, despite the hold on cancellation. “Tonight’s temporary order does not prevent borrowers from applying for student debt relief,” she stated. “It’s also important to note that the order does not reverse the trial court’s dismissal of the case, or suggest that the case has merit,” Jean-Pierre added.
Eligible borrowers can fill out the application through the Federal Student Aid website and should do so before Nov. 15 to receive relief prior to the expiration of the student loan payment break on January 1, 2023.
Those who already logged their income information with the Education Department could be eligible to receive automatic forgiveness — barring the results of the appeal. If you’re unsure about your forgiveness status, call your federal servicer or check out the Department’s resource guide.
Here’s how you can get prepared
Whether you’re new to student loans or well into repayment, it’s wise to stay informed about how your student loan rates could change. During 2022, more opportunities for cheaper loans or loan forgiveness could open up; keep an eye on the Bankrate student loans news hub for the latest trends.