Storm Brewing Over Possibly Stillborn Student Loan Forgiveness Plan

When I last visited the topic of student loan forgiveness here at GoCertify.com, one lawsuit had already been filed to block that program from taking effect, with another pending. As I write this follow-up, a handful of such legal actions are now documented at the HigherEdDive website (here’s a link to their constantly-updated tracker on this topic).

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It looks like the administration’s plans to ease student debt burdens are at least in limbo, if not entirely off the table.

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A One-Two Punch Is Coming

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To some extent, the lawsuits can be viewed as an effective delaying tactic, to slow down any delivery on the promises made to forgive some or all of federal student loan holders’ debts. Many of these suits rightly observe that the executive branch may be overstepping its bounds simply by forgiving that debt.

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Because, according to the Constitution, the Congress holds the "power of the purse" for the government, the House and Senate must be the ones to allow or deny changes that would affect the government’s intake of funds (or its decision to forgo said intake). And, as the CBO and many Republican lawmakers have observed, we’re talking about a sum in the range of $400 billion or so.

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That’s definitely NOT small change, even in the context of a trillion-plus government budgets (see Fiscal Year 2023 Budget and a helpful summary with various numbers for same). For an interesting summary of some of the suits in process around the program see this Washingto Post story: "Appeals court grants injunction against Biden’s student loan forgiveness."

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The real problems will begin in January, when the 118th Congress is seated on the third day of that month. Although its majority will be a slim one, the Republicans will be taking over the House of Representatives that day. Among the many initiatives for which they’ve already announced rollbacks or cancellations, the Student Loan Forgiveness Program is on that list.

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Thus, it seems almost inevitable that the Biden administration’s proposed program is doomed, and unlikely to provide permanent debt relief for those who hold Federal Student Loans, and who qualified under that program’s terms for some level of forgiveness.

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What’s The Forgiveness Program’s Current Status

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According to the already-cited Washington Post story, more than 26 million individuals have already applied to the program at present. Another 8 million have income information on file with the U.S. Department of Education, and are also eligible for debt relief without having to apply. That means a total of as many as 34 million could be affected by current and coming changes in legal status and countervailing legislation.

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Does this mean that student loan forgiveness is toast? It very well might. But one day (Nov. 15) after publishing the aforelinked story, The Washington Post followed up with another item entitled "Biden aides consider extending student loan freeze after court defeats."

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It’s clear that the executive branch, while it may not have the power to forgive student debt without explicit approval from Congress, can indeed extend its existing moratorium on student loan debt payments. That is currently scheduled to expire on Jan. 1, 2023. There’s no telling how long such an extension could go on.

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An un-named source in the story says such extension would not be "an indefinite replacement for loan forgiveness." Thus, it’s unlikely to be a permanent free ride, either. One thing’s for sure: the situation is going to get more interesting after New Year’s. Stay tuned: I’ll keep you posted.

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For many people in general — and many readers here at GoCertify.com — this is more than just an academic exercise. It could have a real impact on the future financial prospects and condition.