With Student Loan Forgiveness At Risk, Is a ‘Forever’ Payment Pause Possible?
With President Joe Biden’s federal student loan forgiveness plan in danger of being struck down by the U.S. Supreme Court, the administration could put its focus on extending the loan repayment pause that first went into effect in March 2020. There has even been speculation that the pause could go on indefinitely, though that would be an extremely uphill battle.
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The idea of a permanent pause was floated as far back as a year ago, when the White House was considering another extension of the payment pause.
“To put it simply, if payments don’t resume on May 1 , I don’t think the Biden administration will ever resume payments unless they are forced to by a court,” Robert Kelchen, higher education professor at the University of Tennessee, told Fortune in March 2022. “Republicans are likely to respond by seriously trying to end the federal student loan program the next time they’re in charge.”
A lot has changed since then. For one thing, President Joe Biden’s sweeping loan forgiveness plan was announced in August 2022. For another, that plan has faced a series of legal challenges that have gone all the way to the Supreme Court, which is currently weighing whether to allow the plan or kill it.
In the meantime, the Republican party has taken control of the U.S. House, and has shown no inclination to support loan forgiveness or further payment pause extensions.
For now, the latest extension of the pause — the eighth so far — is set to expire 60 days after either June 30, 2023, or whenever the Supreme Court decides on the loan forgiveness plan.
Could the White House make the pause permanent? That’s unlikely, experts say.
As previously reported by GOBankingRates. Biden’s loan forgiveness plan uses the Heroes Act of 2003 — enacted in the wake of the Sept. 11 attacks — as the authority granting student loan relief. The act grants certain powers in the event of war or national emergency. In this case, the national emergency was the COVID-19 pandemic.
The problem is that the national COVID emergency is due to end on May 11, 2023. When that happens, the authority to cancel student loan debt under the Heroes Act also ends, according to student loan expert Mark Kantrowitz.
“This authority is intended to be temporary and is in effect only for as long as the national emergency is in effect,” Kantrowitz wrote in a January blog on The College Investor site. “As soon as the President rescinds the national emergency declaration, the authority for a payment pause and interest waiver will end.”
The administration is also facing legal challenges questioning its ability to keep extending the payment pause. SoFi Bank filed a federal lawsuit to end the payment pause last week, asserting that the eighth extension is “not in accordance with the law, is without observance of procedure required by law, is arbitrary and capricious and is invalid,” according to court filings. Now that SoFi has made the first move, other lenders could follow suit, which would put a further payment pause in serious jeopardy.
However, there could be one workaround that would free many borrowers from having to make federal student loan payments and operate in much the same way as a payment pause. This would come in the form of revisions to income-driven repayment (IDR) plans that could result $0 monthly payments for certain borrowers.
Regulations recently proposed by the U.S. Department of Education would amend the Revised Pay As You Earn Repayment (REPAYE) plan and phase out the three other existing IDR plans available to lower-income debtors — Pay As You Earn Repayment (PAYE), Income-Based Repayment (IBR) and Income-Contingent Repayment (ICR) plans.
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Borrowers participating in existing IBR, ICR and PAYE plans will follow the new plan should it pass into law, but they would need to enroll through their student loan provider or through the Federal Student Aid site. The new proposed regulations do not include changes to accommodate those holding Parent PLUS loans, which are not repayable on an IDR plan.
To qualify for $0 monthly payments, borrowers must make less than around $30,600 a year, while individuals in families of four much make less than roughly $62,400, according to an Education Department press release.
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