Student loan forgiveness: Court blocks plan for debt relief; what you need to know

A federal appeals court on Friday temporarily blocked President Joe Biden’s student loan forgiveness plan, putting on hold any debt relief.

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The ruling comes after six states brought a suit aimed at stopping the program that cancels a portion of student loan debt for those with federally backed student loans.

The program cancels $10,000 in student loan debt for those making less than $125,000 a year, or households making less than $250,000. Pell Grant recipients will be eligible for an additional $10,000 in debt forgiveness.

The application portal went live last week and by Friday, more than 22 million people had applied for loan forgiveness.

The Department of Education had been set to begin forgiving loans on Sunday. Administration officials stressed over the weekend that while the program was suspended by the court, the application process will continue.

Education Secretary Miguel Cardona tweeted, “Today’s temporary decision does not stop the Biden Administration’s efforts to provide borrowers the opportunity to apply for debt relief nor does it prevent us from reviewing the millions of applications we have received.”

What does the pause mean for the program? Here is what we know now.

What led to the pause in the program?

Six states — Arkansas, Missouri, Nebraska, Iowa, Kansas and South Carolina — filed a lawsuit that argued that the forgiveness program would damage state-based loan companies that manage federal loans.

A federal judge ruled earlier last week that the states could not bring a suit over potential damage because they did not have standing in the case. The states appealed the ruling, and the U.S. Eighth Circuit Court of Appeals temporarily paused the program so the appeals court can review the case.

What does this mean for those eligible for debt relief?

While the program has been at least temporarily paused, the application process has not.

The application on is still open and taking applications.

If you have not applied to have your loans forgiven, the administration is encouraging you to do so.

According to White House press secretary Karine Jean-Pierre, the order “merely prevents debt from being discharged until the court makes a decision.”

What happens next?

The court is expected to rule on the case this week. The ruling can extend the pause or allow the program to go ahead.