- September 12, 2022
- Posted by: Shane Cummiskey
- Category: Forgiveness Information
The current presidential administration has announced plans to cancel up to $10,000 or $20,000 for each federal student loan borrower. Borrowers are eligible for student debt relief if they make less than $125,000 a year as an individual. The announcement was made by the President of the United States and the Secretary of the U.S. Department of Education (DOE) in a joint press conference Wednesday, August 24th, 2022. The main website for the U.S. Department of Education studentaid.gov immediately crashed and suffered from loading issues and timeout errors, as did the websites of the major student loan servicers Aidvantage, MOHELA, Fedloan, Nelnet and Great Lakes for the 3-5 days following the announcement. Although the announcement has been made during the press conference, the Department of Education has communicated that the form required to access this forgiveness has not yet been made available to the general public. The DOE estimates that this form, which will primarily be used to document a borrower’s income is below the $125K threshold, could be ready by mid October but definitely before December 31, 2022. Student loan servicers also have limited information regarding the execution of this plan, and some have advised student loan borrowers to stop contacting their student loan servicer for details on the plan because it is exhausting their customer service capabilities.
If you are an individual with a federal student loan, you can receive $20,000 of student loan debt relief if you have ever received a Pell Grant. This can be determined by checking a line item in your mystudentdata.txt file. This file is a historical record of all of your student aid and can be downloaded from the studentaid.gov website after you log in. The line item is “Student Pell Lifetime Eligibility Used:”, and if the line item has a value greater than zero, then you have taken out Pell Grants in the past. The amount of the Pell Grant isn’t important, and has no bearing on the amount of forgiveness you will receive.
However, if a borrower did not receive a Pell Grant, the borrower is eligible for debt relief of up to $10,000. The debt relief will affect millions of borrowers. According to some statistics, 45% or about 20 million borrowers will have their student debt fully paid off. As a result, these individuals will have more economic freedom.
These individuals will contribute to the economy with their student loan debt paid off. Instead of paying money towards student loans, these individuals have more disposable income and economic freedom to purchase real estate, cars, or other obligations. The current presidential administration is trying to counter inflation while at the same time fulfilling a campaign promise to help former students with student loan debt.
Potential Student Loan Forgiveness Lawsuits
On the other hand, the cancellation of student loans might face legal challenges because many are asking: who will pay off the student loans? Will printing money to pay off student loan debt increase the amount of inflation? The high cost of paying student loan debt can also face political challenges, especially during election season.
These questions will be asked with the current presidential administration’s plan to pay off student loan debt. Lawsuits can eventually reach the US supreme court, where they can face certiorari and possibly a different ruling than lower courts. However, the current presidential administration is confident in its legal authority to pay off student loan debt.
The current presidential administration is using the power of the Higher Education Relief Opportunities For Students (HEROES) Act of 2003 passed by Congress to implement student loan forgiveness. The former and current presidential administrations used the HEROES Act during the Covid-19 pandemic to temporarily pause student loan payments among other benefits. The HEROES Act can be invoked in “connection with a war or other military operation or national emergency” as defined in Section 5 of the public law (108-76). The Secretary of Education may use their legal authority to protect borrowers from facing a devastating financial position. These borrowers can be a protected class; the Secretary of Education is not legally obligated to look at cases on a case basis.
If the forgiveness order is challenged and reaches the US supreme court, significant questions will be asked. For example, does the Covid-19 pandemic still qualify in September of 2022 as a “war or other military operation or national emergency” within the context of the HEROES Act? Is the size of the protected class too big in scope? Does the Secretary of Education have the legal authority to cancel payments? These are some of the legal questions that could end up being adjudicated by the courts.
If the current presidential administration is not legally challenged or is successful in a court challenge, millions of borrowers with student loan debt will be relieved of an extraordinary amount of federal debt. If the US supreme court rules that the Heroes Act was not designed the way the current presidential administration envisions the law, then millions of borrowers will still have to pay off their loans or comply with the existing forgiveness laws that have been in existence since 1994. No matter what happens, Hopecredit is here to assist federal student loan borrowers to maximize their forgiveness benefits under federal law.
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