The Biden administration has implemented a payment pause for 3 million student loan borrowers in response to legal challenges.
Biden Administration Implements Payment Pause Amid Legal Challenges
The Biden administration is responding to court rulings by planning a payment pause for about 3 million student loan borrowers. This pause, similar to the pandemic-era moratorium, means borrowers won’t need to make payments and won’t accrue interest.
President Biden’s SAVE Plan, a major student debt reform effort, has been blocked by court rulings following Republican-led lawsuits. These rulings stopped the Department of Education from reducing borrowers payments starting July 1 and cancelling more loans for certain borrowers.
In response to a Kansas court decision and the Department of Justice argued that a payment pause is necessary to comply with the ruling. This pause aims to prevent chaos and financial harm caused by sudden payment adjustments which could take months to implement properly.
READ ALSO: Supreme Court Halts EPA’s ‘Good Neighbor’ Rule: Impact On Air Pollution Reduction
(photo: CNBC)
Impact of Payment Pause on Loan Forgiveness Programs
While borrowers won’t have to make payments during the pause, they won’t accrue credit towards debt forgiveness programs like Public Service Loan Forgiveness (PSLF) or income-driven repayment plans. This is unlike the pandemic pause where each month counted towards these programs, according to the report of ABC News.
The payment pause affects less than half of the 8 million enrolled in the SAVE Plan excluding about 4.5 million with $0 payments due to low incomes. Despite setbacks, the Department of Education maintains that the SAVE Plan offers significant benefits including shielding borrowers from accruing unpaid interest under certain conditions.
President Biden continues to face challenges in reforming student loan policies amid political and legal hurdles. The administration remains committed to finding alternative paths to debt relief navigating bureaucratic challenges and avoiding further legal obstacles in the coming months.
READ ALSO: 233,000 Weekly Jobless Claims Dip As Unemployment Benefits Rise To 1.84 Million
