Biden administration scales back student loan forgiveness plan

The Missouri Higher Education Loan Authority sued against Biden’s Student Loan Forgiveness Plan in response to the Covid-19 crisis and the State of Missouri

The lawsuit claimed that the Higher Education Loan Authority of the State of Missouri were hurt by Biden’s student loan forgiveness plan. It argues that the plan creates an incentive for borrowers to consolidate Federal Family Education Loans owned by MOHELA into Direct Loans owned by the government, “depriving them (MOHELA) of the ongoing revenue it earns from servicing those loans,” according to the lawsuit.

There has been a sudden change in student loan policy with the Covid-19 crisis. Congress paused required payments on student loans after the passage of the CARES Act.

Borrowers with privately held federal student loans that applied to consolidate their loans into Direct Loans before September 29, 2022 will get one-time debt relief. The FFEL program is no longer in use and a small percentage of borrowers have loans. This is a completely different program than Direct Loans,” the statement said.

The larger issue in the lawsuit was not ruled on by Judge Autrey. He said that the states didn’t suffer injuries like those that made them able to file a lawsuit.

Biden’s program was deemed illegal by a federal judge in Texas, though the Department of Justice appealed the decision. An injunction was issued by the federal appeals court against Biden’s relief because they believed financial institutions would be harmed if borrowers weren’t required to pay their balances.

The White House said that Republican officials from six states are standing with special interests, fighting to stop relief for borrowers.

“The President and his administration are lawfully giving working and middle class families breathing room as they recover from the pandemic and prepare to resume loan payments in January,” he said.

Defending the Biden Administration’s Student Loan Forgiveness Plan with the Job Creators Network Foundation and the Covid-19 Pandemic

Earlier this week, a public interest lawyer who is also a student loan borrower, sued the Biden administration over the student loan forgiveness plan, arguing that the policy is an abuse of executive power and that it would stick him with a bigger state tax bill.

In a Thursday ruling, it was concluded that the student loan forgiveness program would only apply to one person and that she was not qualified because her loans are not owned by the federal government.

The Congressional Budget Office estimated this week that Biden’s plan could cost the government $400 billion, but warned that it is not certain.

The Biden administration’s plan to remove debt was seen as a ripe spot for fraud. More than 10% of Google ads that popped up in searches about student loan forgiveness were fraudulent, according to a July report from the Tech Transparency Project. And in the last year and a half, the FTC has reached nearly $30 million in settlements for borrowers who were falsely promised relief on their student loan payments.

In a Department of Education memo released in August, the Biden administration argued that the Higher Education Relief Opportunities for Students Act of 2003 – or Heroes Act – grants the Education Secretary the power to cancel student debt to help address the financial harm suffered due to the Covid-19 pandemic.

The Job Creators Network Foundation filed a lawsuit on behalf of two people who did not qualify for debt relief.

The staff attorney at the nonprofit National Consumer Law Center told CNN that she believes the legal authority of the Biden Administration is strong, but she doesn’t know who would want to bring a case. Standing to bring a case is a procedural threshold requiring that an injury be inflicted on a plaintiff to justify a lawsuit.

If the standing hurdle is cleared, the case would be heard by a district court first and then the final decision would be issued on the merits of the case.

The Biden Administration is Increasing its Struggle against Student Loan Forgiveness Scam Artists: The Case of Student Loan Advisors

Broadly, the organization argues that the U.S. Department of Education is acting outside of its administrative authority by forgiving student loans. The Department of Education is vested with the power to manage loan programs, but they can’t forgive them without the department’s permission. This power, they say, rests with Congress.

Senior administration officials announced Wednesday that the Biden administration is increasing its fight against student loan forgiveness scam artists.

The Student Debt Relief application window will open this month. You can learn more about the steps you should take and what to do if you encounter a debt relief scam. This is a pic.

Betsy Mayotte, president of the Institute of Student Loan Advisors, said that the Biden forgiveness thing happened during Christmas, Thanksgiving and the Fourth of July.

The release they did today is a great step. There are only two things we can do as a community to prevent fraud. One is to educate borrowers while the other is to enforce.

The administration’s efforts to stop these types of scam fall largely on the shoulders of borrowers themselves, and many of the announced plans focus on educating the public on how to catch and report scam on their own.

“It’s an all-government approach, because what we know is it’s already happening, that there are evil people who will be trying to use a program like this, that’s trying to help people, and run their own frauds and scams to somehow get money or personal information about people,” says Richard Cordray, the chief operating officer of Federal Student Aid, a branch of the Education Department.

We want to provide as much relief as we can to the hard working former students who deserve this relief,” Cordray said. “We’re moving at warp speed to get the application and the process going here.”

A Brief Briefing on Debt Relief Applications for Borrowers: What are They Expect to Learn from the State of the Art and Where they Will Go?

The administration urged borrowers to sign up to be notified when the application is available, to make sure their loan servicers have their current contact information and to report any scams they encounter to the FTC.

It is recommended to release more specific information on what the forgiveness application will look like and when it will be available in order to avoid scam vulnerability.

“One of the most critical ways to prevent scams and protect borrowers from being taken advantage of is developing a clear, simple, and secure site for borrowers to apply for debt relief and have the most up to date information from trusted sources,” the administration wrote in a fact sheet outlining their efforts to combat scams.

But in a briefing Wednesday, senior administration officials would not provide any more concrete details on when the application will go live or what the process will look like.

She says it will help in one way. “But if I see the fraud, they will use that as an opportunity too:’The application’s out.’ You have to do it quickly. Time is short. Let us know if you missed it now that the applications are out. It’s a catch-22.

Online PLUS Loans Forgiveness for Undergraduate Students: Why Arizona’s Tax Foundation Can’t Forget Student Loans, and Why the State Code Doesn’t

If the borrower is a graduate student and their income is above poverty line, federal PLUS loans can be used to help pay for the degree.

The online application will be short, according to the Department of Education. Borrowers won’t need to upload any supporting documents or use their Federal Student Aid ID to submit the application.

Unless the US Supreme Court allows the program to go forward, borrowers will not see debt relief. The justices are scheduled to hear oral arguments in February, with a decision expected by June.

The Tax Foundation says there are a few states that can tax the debt if changes are not made before the debt is discharged.

Republicans are leading the charge. In addition to the lawsuit filed by six Republican-led states that say they could be hurt financially by the forgiveness plan, Arizona Attorney General Mark Brnovich also filed a lawsuit last week.

Brnovich, a Republican, argues that the policy could reduce Arizona’s tax revenue because the state code doesn’t consider the loan forgiveness as taxable income, according to the lawsuit. The complaint claims that the forgiveness policy hurts the attorney general office in its ability to recruit. Currently its employees may be eligible for the federal Public Service Loan Forgiveness program, but some potential job candidates may not view that as a benefit if their student loan debt is already canceled, the lawsuit argues.

Make sure you only work with the US Department of Education and our loan servicers, and never reveal your personal information or account password to anyone, according to an email to borrowers.

You can apply online for debt relief if your income is up to $125,000 per individual or $250,000 per household.

The application opened on Monday but the Biden administration agreed to hold off on canceling any debt until October 23. Once processing begins, most qualifying borrowers are expected to receive debt relief within weeks.

“It’s easy. “It’s fast and it’s easy to use on desktop or phone”, Biden said in the press conference announcing the launch.

The Wisconsin Taxpayers Association vowed to sue the Biden administration over student loan forgiveness under the Wisconsin Public Works Act. Circuit Judge Barrett denied the appeal

The application asks for many information, such as the borrowers’ names, birth dates, and social security numbers. You can use the form in both English and Spanish. It will be open through Dec. 31, 2023.

Supreme Court Justice Amy Coney Barrett rejected a challenge to the Biden administration’s student loan forgiveness program on Thursday, declining to take up an appeal brought by a Wisconsin taxpayers group.

The Brown County Taxpayers Association did not have the right to challenge the decision of the lower courts, which made the appeal hard to win. Under normal circumstances, taxpayers don’t have a general right to sue the government over how it uses taxpayer funds.

Barrett acted alone because she has jurisdiction over the lower court that ruled on the case. She declined to refer the matter to the full court. The court had a single sentence on its docket.

The appeals court has yet to rule on that lawsuit, brought by six Republican-led states. A lower court judge ruled on October 20 that the states lacked legal standing to file the lawsuit.

The states are going to appeal immediately. If that were to happen, it would likely face a panel of conservative judges in the 8th Circuit Court of Appeals.

The Biden administration is also being sued by conservative groups such as the Job creators Network Foundation.

How easy it is to apply for debt relief: a case study in the seventh circuit court of appointing borrowers to an emergency request

The person who got the emergency application was Justice Amy ConeyBarrett of the Seventh Circuit Court of Appeals. She might have had the other justices agree with her decision.

A district court in Missouri tossed out a challenge brought by six GOP-led states that had been closely watched by the Supreme Court.

The emergency request was brought by the Brown County Taxpayers Association, a group made up of around 100 taxpaying individuals and business owners who advocate for conservative economic policy.

Several conservative organizations have challenged the plan. The lawsuits can be complicated, but they may face difficulties showing a specific harm to stay alive.

The situation is not easy to understand. Student loan forgiveness is a subject of disagreement and many lawsuits. A federal appeals court stayed the potential discharge of debt on Friday. The Biden administration wanted borrowers to apply and they were willing to do so. “The order does not reverse the trial court’s dismissal of the case or suggest that the case has merit,” Karine Jean-Pierre, the White House press secretary, said.

The six people who successfully negotiated the opening of the healthcare.gov website on the day it was launched are not the same as the 22 million people who submitted applications in the first week. As professors of public policy, we have shared our research on how administrative burdens make vital public services harder to access with the Biden administration, and we spoke with Department of Education officials about how many people might participate in the program (though we played no role in helping design this process or the application itself). Even so, it was astonishing for us to see just how simple it is to apply for debt relief.

Setting aside the conflict over policy, the streamlined application shows what is possible when government prioritizes the public in the delivery of public services. The form is just a couple of minutes to complete. It’s available in both Spanish and English on both a computer and a phone. The welcome page, a form and a confirmation page are all that’s required to apply. It is not necessary to have a password in order to be beneficiaries, a small step that can deter people from starting. Applicants need five pieces of information: name, social security number, date of birth, phone number and email address. That’s it.

The District Court Challenge to President Biden’s Student Loan Forgiveness Program: a Democrat-Colored Decision that isn’t

But the Texas federal judge found that the law does not provide the executive branch clear congressional authorization to create the student loan forgiveness program.

Judge Mark Pittman, who was nominated by President Donald Trump, wrote that the program was unconstitutional and must be thrown out.

The Justice Department said Thursday that it would appeal the decision, and White House press secretary Karine Jean-Pierre said in a statement that “we strongly disagree with the District Court’s ruling on our student debt relief program.”

“For the 26 million borrowers who have already given the Department of Education the necessary information to be considered for debt relief – 16 million of whom have already been approved for relief – the Department will hold onto their information so it can quickly process their relief once we prevail in court,” Jean-Pierre said.

They argued that they could not voice their disagreement with the program’s rules because the administration did not put it through a formal notice-and-comment rule making process under the Administrative Procedure Act.

“This ruling protects the rule of law which requires all Americans to have their voices heard by their federal government,” said Elaine Parker, president of Job Creators Network Foundation, in a statement Thursday.

If litigation fails, payments will stop 60 days after the debt cancellation program is implemented, or 60 days after the lawsuits are resolved.

The White House said Tuesday’s extension will alleviate uncertainty for borrowers as it asks the Supreme Court to review lower court orders blocking Biden’s student debt relief program.

“I want borrowers to know that the Biden-Harris administration has their backs and we’re as committed as ever to fighting to deliver essential student debt relief to tens of millions of Americans,” Cardona said.

The US Supreme Court announced on Monday that it will hold arguments in a second case in February concerning President Biden’s student loan forgiveness program, which is currently on hold.

The challenge has been brought by two individual borrowers – Myra Brown and Alexander Taylor – who are not qualified for full debt relief forgiveness and who say they were denied an opportunity to comment on the Education Secretary’s decision to provide targeted student loan debt relief to some.

The U.S. Supreme Court will hear Biden’s Student Loan Forfeit Program in the Light of the Covid-19 Pandemic

The Supreme Court will hear arguments in a dispute brought by a group of states. The court did not say whether it would ultimately consolidate the two cases.

The court wanted to know if the challengers had the legal right to bring the case. The court asked if Biden’s plan was constitutionally authorized and whether it was adopted in a proper manner.

The court’s action Monday does not change the state of play as the program has already been frozen while legal challenges play out. It does, however, add new plaintiffs to the mix.

In the case at hand, Solicitor General Elizabeth Prelogar had urged the justices to lift a block on the program and hear oral arguments this term. They only agreed to the request for the last one.

“This is the second of two cases in which lower courts have entered nationwide orders blocking the Secretary of Education’s plan to use his statutory authority to provide dept relief to student-loan borrowers affected by the Covid-19 pandemic,” Prelogar argued in court papers.

The GAO said in a report that most colleges don’t provide students with all the financial information they need, which is why Congress should require colleges to give students an accurate price for attendance.

If you are accepted to a college, you can usually receive a financial aid letter. The letter states the costs as well as the grant awards that the student is eligible for.

According to the government’s best practices, colleges should estimate the cost of attendance by subtracting grants and scholarships from all other costs. But about 91% of colleges understate or don’t include the net price at all in their letters.

Legislation was introduced last week that would set certain requirements for financial aid offers.

The bill was introduced to give students and their families more information about the cost of college. The Understanding the True Cost of College Act, a bipartisan bill, has failed to make it to Congress.

Foxx, GOP leader of the House Education and Labor Committee, has been critical of Biden’s proposed student loan forgiveness program – which, she argues will do nothing to address college costs while shifting the $400 billion cost of debt relief to taxpayers. The Supreme Court is expected to rule on the legality of the program in June.

Biden has proposed making community college free, but he can’t do that on his own and legislation to fund the initiative failed to pass Congress when it came up for a vote last year. But lawmakers did approve a $400 increase to the maximum federal Pell grant for low-income students, raising it to $6,895 a year.

A Federal Student Loan Forgiveness Program in the Aftermath of a Pandemic, and a Future a Follow-Up

New guidance by the Department of Justice made it easier to discharge federal student loan debt under the previous policy.

Nine million borrowers received inaccurate emails, and now the government is sending new emails to correct the error. They have not been approved or rejected yet, after their applications were received.

The Department of Education said in a statement that “communicating clearly and accurately with borrowers is a top priority” and that it is in close touch with the outside vendor, Accenture Federal Services.

If the government’s case goes to court, the Department of Education will review more student loan forgiveness applications according to the most recent accurate emails sent to borrowers.

The pandemic-related pause on student loan payments remains in place. But a restart date is up in the air, dependent on when the Supreme Court rules on the forgiveness program.

The Public Service Loan Forgiveness program allows certain government and nonprofit employees to seek federal student loan forgiveness after making 10 years of qualifying payments – but it has been plagued with implementation problems for years.

The Biden program has created confusion among borrowers. Student loans this year have a lot of big questions.

A decision on whether the program is legal and can move forward is expected by June. Until then, it is on hold and no debt will be discharged under the program.

For the third consecutive time, federal student loan borrowers begin a new year without having to make payments on their loans thanks to a pandemic-related pause.

The Committee For a Responsible Federal Budget estimated the cost of the yearslong pause to be $155 billion.

The Plan to Repay for the Professional Student Loan Loan Program (PLLIF) Using Changes from a Year’s Waiver

A yearlong waiver that expanded eligibility for the PSLF program expired on October 31, but some of those temporary changes will be made permanent starting in July.

The new rules will allow borrowers to receive credit for late payments if they happen in a lump sum or in installments. The rule used to mean that a payment was eligible if it was made in full within 15 days of the due date.

Also, time spent in certain periods of deferment or forbearance will count toward PSLF. These periods include deferments for cancer treatment, military service, economic hardship and time served in AmeriCorps and the National Guard.

The new rules will also simplify the criteria to meet the requirement that a borrower be a full-time employee in a public sector job. Full-time work at30 hours a week will be considered by the new standard. In particular, the change will help adjunct faculty at public colleges qualify for the program.

The Department of Education expects to start implementing some parts of the new income-driven repayment plan later this year. The proposal is going through a rulemaking process which will allow for changes to be made before it takes effect.

What Happened When Inflation and Economic Data Collided: Stocks and Stock Markets Before the Bell, or Before the First Bank Holidays

CNN Business published a version of the story. Before the Bell newsletter. Not a subscriber? You have to sign up here. Clicking the link will take you to an audio version of the newsletter.

The possibility of a 2023 market rally ground to a halt last week amid an onslaught of unfortunate inflation and economic data that spooked investors and increased the likelihood that the Federal Reserve will continue its economically painful rate hikes campaign for longer than Wall Street hoped.

All major indexes lost ground on Friday, their biggest losses of the year. The S&P 500 fell by 2.7%. The Dow Jones Industrial Average sank 3%, and the tech-heavy Nasdaq fell 3.3%.

What’s happening: It appears that after months of steady decline, the pace of inflation is going sideways. January’s Personal Consumption Expenditures price index – the Fed’s favored inflation gauge – came in hotter than expected on Friday.

Prices rose a whopping 5.4% in January from a year earlier, the Commerce Department’s Bureau of Economic Analysis reported. In December, prices rose 5.3% annually.

Source: https://www.cnn.com/2023/02/26/investing/stocks-week-ahead/index.html

Frustrated By Inflation: When Do Markets Look Like They Are Going to Become More Immaculate? The Booth School Business Monetary Policy Forum

A paper presented Friday at the Booth School of Business Monetary Policy Forum in New York argued that disinflation will likely be slower and more painful than markets anticipate.

There are significant disinflations that occur when the monetary policy is tightened, said the paper. “An ‘immaculate disinflation’ would be unprecedented.” (Immaculate, in this instance, refers to the possibility of inflation falling quickly to the Fed’s 2% goal without any serious economic damage).

Several Fed presidents, governors and top economists were on hand at the Booth School forum to discuss the paper and monetary policy on Friday. The majority of those speaking expressed deep concern about the stubbornness of inflation and general market reaction.

Inflation won’t quit: Cleveland Fed President Loretta Mester said that while price growth has moderated from its recent high, the overall pace of inflation remains too high and could be more persistent than her colleagues currently anticipate.

The Boston Fed President said that further rate increases were likely to reach a restrictive level and then remain there for some time.

Fed Governor Philip Jefferson was befuddled with inflation on Friday and observed that it continues to confound economists. “The inflationary forces impinging on the US economy at present represent a complex mixture of temporary and more long-lasting elements that defy simple, parsimonious explanation,” he said. Parsimonious being another million-dollar word for frugal.

Economists stressed that more pain lies ahead. “It’s important that markets understand that ‘no landing’ is not an option,” said Peter Hooper, vice chair of research at Deutsche Bank, an author of the report.

Recent data has signaled that the US economy is strong, but he expects bad news to come in the middle of this year, and that it will be helpful to the Fed.

The last word: Former Bank of England Governor Lord Mervyn King. He said he wouldn’t give any advice to the central banks about what to do.

Source: https://www.cnn.com/2023/02/26/investing/stocks-week-ahead/index.html

Can loans go up if payments resume without student loan forgiveness? The case of the U.S. supreme court of Appeals for Student Loans

Federal Reserve researchers said student loan default and delinquencies could go up, if payments resume without debt relief.

That forgiveness proposal is now on hold after an injunction by the 8th US Circuit Court of Appeals. On Tuesday, The Supreme Court of the United States will hear the case with its decision expected by June 2023.

“We note a stark increase in new credit card and auto loan delinquency for borrowers with eligible student loans over the past few quarters, growing at a faster pace than those without student loans and those with ineligible loans,” they wrote.

When the burden of student loans starts to increase, the data may be a sign of economic distress.

Student loan debt in the US is estimated to be over $1 trillion by the end of last year according to the Federal Reserve Bank of New York.

College graduates do earn more than those who do not have a degree. According to data from the Bureau of Labor Statistics, in 2021 full-time workers aged 25 and older with a bachelor’s degree out-earned those with a high school diploma and no degree by $27,000 annually.

According to the head of the Institute for Higher Education Policy, college cost have gone up more than inflation.

In the 1969-1970 academic year, adjusted for inflation, attendance at a public, four-year institution cost almost $2,000. Fees and room and board are included. That’s compared with $29,033 in the 2020-2021 school year, data shows.

The Higher Education Act of 1965 opened the possibility of college to even more people, regardless of area of study – but it also created a new type of relationship between the federal government, banks and college campuses through the Guaranteed Student Loan program.

The Guaranteed Student Loan program is one of the original student loan programs, according to Elizabeth Shermer, an associate professor at Loyola University Chicago who researched and wrote about student loans.

The government solved the issue of how to get banks involved with risky investments, since they were assured of repayment and not the federal government.

She said that using the federal mortgage program to guide the government’s investment into colleges isn’t the same as using student loans. It is not possible for the federal government to take your degree in the same way that a bank can take your house.

The assumption is that it’s not American to have a free ride, so we will use lending that turned a country of renters into a nation of homeowners. But just like we now know how the mortgage program exacerbated racial and gender inequality, the same thing happened with the student loan programs too,” she said.

It made it easier to buy and sell mortgage debt in the 1930’s, when Fannie Mae was created in order to create more reliable funding for housing.

This was the “most important” moment in the history of loans, she said, as the availability of financial aid products to both for-profit and nonprofit companies allowed for the rise of private student loans.

That coupled with the rising cost of tuition in the 1970s meant that students needed more money to continue their education. Since there was a limit to how much students could borrow in federal loans, private loans were needed as a supplement.

It’s going to be expected of you that you need to borrow in order to get through college. She said that it was like a perfect storm.

Colleges and universities can increase what they charge in the event of cuts to higher education appropriations. Just increase tuition,” Shermer said.

It was discovered that how poorly managed this thing was and that it would be cheaper for the government to just lend directly to students and parents.

In the intervening years, several initiatives were launched aimed at reducing the rate of default. In 1993 the Income-Contingent Repayment Plan capped repayments at 20% of discretionary income or 12 years of fixed payments for qualified borrowers.

The Pay As You Earn program provides guidelines that many borrowers still use today, like capping payments at 10% of discretionary income and cancellation of loans after 20 years.

Repayment of a borrower’s principal with a one-time loan forgiveness program as suggested by the U.S. Supreme Court

The proposed repayment plan isn’t likely to face the same legal challenges even if the one-timeloan forgiveness program is rejected by the Supreme Court.

The plan would cap payments at 5% of the borrower’s discretionary income, create a shorter time to forgiveness and cover unpaid monthly interest when balances are low.