Tens of millions of borrowers could soon get some relief from their student loans after a federal judge ruled Wednesday to allow the temporary restraining order on the White House's latest debt relief plan to expire.
The Biden administration's "Plan B" widespread debt relief plan was first announced in April. The plan was put on an indefinite hold when it was blocked by a judge in August. The removal of the block could mean 25 million Americans will eventually see their student loan debts forgiven.
However, student loan forgiveness efforts have had a rocky path this past year, and experts think it's possible another lawsuit may come forward and halt this initiative again.
Why was the plan originally blocked?
A Republican-led initiative in seven states resulted in a lawsuit that caused a federal Georgia court to place a temporary restraining order on the Biden administration's relief plan before it was even finalized.
Courts don't normally block proposals before they're finalized. In this case, evidence was presented showing that the Department of Education was planning to issue forgiveness to borrowers as soon as the plan's rules were finalized, instead of waiting the required 60 days. The courts halted the plan as a precautionary measure.
What changed?
US District Judge Randal Hall ruled Wednesday that Georgia was the improper battleground for the lawsuit, as the state failed to present a case that the relief plan would cause sufficient harm to the state. Instead, he ruled Missouri would be a better state for the case and will transfer it.
In doing so, the temporary restraining order he had placed on the relief plan is allowed to expire.
Who would receive forgiveness under this debt relief plan?
The Biden administration's debt relief program would partially or fully forgive a borrower's debt:
- If the debt exceeds the amount they initially borrowed after interest
- If the loan is older than 20 or 25 years
- If the borrower's trade school resulted in great amounts of debt or low earnings.
- Borrowers who are eligible for forgiveness programs but haven't applied
If your loan has accrued $20,000 in interest, or you're a single borrower earning less than $120,000 or are married with a combined income lower than $240,000 and are enrolled in an income-driven repayment plan, you might also qualify for forgiveness.
How likely is it that borrowers will receive forgiveness through 'Plan B'
Now that the restraining order has been allowed to expire, it means the plan can move forward for millions of borrowers, unless there is another block put in place by the Missouri court or another US court.
Mark Kantrowitz, a financial aid expert, doesn't think borrowers should get their hopes up yet. "There may be a bit of a race between the Republicans and the federal government to see who can act first. Given that federal agencies don't move very quickly, it seems unlikely that borrowers will get some forgiveness."
For now, his advice for borrowers was to sit tight and wait for the courts to issue final rulings on this forgiveness plan and others, like SAVE.
The Department of Education didn't immediately respond to a request for comment.