Over 800,000 student loan borrowers may soon get relief after a federal court ruled in favor of President Joe Biden's plan to cancel $39 billion in debt.
On Monday, a lawsuit from two conservative groups that sought to block the debt relief program was struck down by U.S. District Judge Thomas L. Ludington, an appointee of former President George W. Bush.
Biden announced the program one month ago, just weeks after the U.S. Supreme Court blocked his larger plan to eliminate approximately $400 billion in student loan debt for millions of borrowers.
According to the U.S. Department of Education, 804,000 student loan borrowers are eligible for the relief. The program resulted from efforts to fix "historical failures" in calculating payments made under income-driven repayment (IDR) plans.
Borrowers who have made the "equivalent of either 20 or 25 years of qualifying months" in student loan payments are eligible have their remaining debt be discharged under the plan.
The new method of calculating eligibility is based on borrowers being in a state of repayment for the required time period, regardless of whether the payments were partial or late, or not paid at all in some cases.
The plan credits months in which payments might not have been made due to forbearance, deferment or hardship claims as eligible toward the IDR forgiveness program threshold.
The Education Department's website contains additional information on the IDR plan and several other existing student loan debt forgiveness programs.
Assuming the IDR forgiveness plan moves forward as expected, the debt is set to be "automatically discharged" for those eligible. While it is not clear when the debt will be eliminated, the Biden administration said before the lawsuit was filed that the debt would start to be canceled this week.
Read more: Student Loan Forgiveness Updates and FAQs: Who Qualifies and How To Apply
The Education Department said last month that those eligible for relief would be informed "in the coming weeks." The department said that it would "continue to identify" eligible borrowers and inform them every two months until next year.
The lawsuit that was dismissed on Monday, filed by the New Civil Liberties Alliance (NCLA) on behalf of the Mackinac Center for Public Policy and the Cato Institute, argued that "no authority allows the [Education Department] to count non-payments as payments."
NCLA's Sheng Li said in comments to USA Today that "the merits of the case" were not considered in Monday's ruling, which was based on standing, while noting that the organization was "reviewing our legal options with our clients."
The suit also accused the Biden administration of setting "an accelerated schedule" for debt relief that was "apparently designed to evade judicial review."
An Education Department spokesperson told Newsweek on Tuesday that the "lawsuit was nothing but a desperate attempt from right wing special interests to keep hundreds of thousands of borrowers in debt, even though these borrowers have earned the forgiveness that is promised through income-driven repayment plans."
"We are not going to back down or give an inch when it comes to defending working families," the spokesperson added.
Biden said in a statement that on Monday he would continue pursuing debt relief for "as many borrowers as possible" regardless of the "lawsuits, challenges, or roadblocks Republican elected officials or special interests put in our way."
"Today, because of actions my Administration took, these 804,000 borrowers who have been in repayment for over 20 years will start to see their student debt cancelled," the president said. "Over 614,000 of them will have all of their remaining federal student loan debt cancelled once this action is complete."
Student loan payments not eligible for relief are set to resume in October, although a new IDR plan may substantially reduce payments and effectively eliminate payments for some low-income borrowers.
Update 08/15/23, 4:05 p.m. ET: This article has been updated to include a statement from a Department of Education spokesperson.
Uncommon Knowledge
Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
About the writer
Aila Slisco is a Newsweek night reporter based in New York. Her focus is on reporting national politics, where she ... Read more
