A federal appeals court has hit the pause button on President Joe Biden’s student loan cancellation program.
The 8th Circuit Court of Appeals issued a stay on October 21 in response to an emergency motion filed by the attorneys general of six states challenging the program’s legality.
The six states involved in the lawsuit — Iowa, Kansa, Missouri, South Carolina, and Arkansas — claim that the forgiveness program is an unlawful and arbitrary regulatory action that would cause irreparable and imminent harm to their own state-run student loan servicers and the corresponding tax collections received by the states.
The stay is intended to allow time for additional briefs to be filed and is not based on the merits of the case, per CBS News.
The emergency motion was filed with the appeals court after a federal district judge dismissed the case the day before, ruling that the six states did not have sufficient standing to warrant the court blocking Biden’s debt-cancellation program.
The case noted above is just one of six different lawsuits pending against the loan-cancellation push.
Andrew Lautz, the director of federal policy at the National Taxpayers Union, described the loan “forgiveness” program as “a transfer of wealth from society at large to people who borrowed to go to college right now.”
The National Taxpayers Union estimates that the plan will result in an average increase in federal taxes of $2,503 per taxpayer.
The Congressional Budget Office has not yet evaluated the total cost of the policy, CNBC reported.
However, the Committee for Responsible Federal Budget (CRFB), a public policy think tank in Washington, D.C., estimates that the overall plan over the next 10 years could cost taxpayers between $440 billion and $600 billion.
In addition, an analysis by the CRFB found that the loan “forgiveness” program would boost near-term inflation.
Currently, some 40 million Americans carry student debt. More than 22 million have already applied for the loan forgiveness program, which would allow up to $20,000 in debt “forgiveness” per borrower.
White House Press Secretary Karine Jean-Pierre said in a statement that the stay “does not prevent us from reviewing these applications and preparing them for transmission to loan servicers.”
The application for student loan debt relief remains open, and the U.S. Department of Education is urging everyone who is eligible to apply.
“We will continue to review applications. We will quickly process discharges when we are able to do so, and you will not need to reapply,” according to the Federal Student Aid website.
Regardless of whether the lawsuit is settled in favor of the plaintiffs or the defendants, a further appeal will likely be filed with the Supreme Court, according to Heights Security analyst Benjamin Salisbury, per CBS News.
In the meantime, those with student loans should be prepared to resume loan payments beginning January 1, when the COVID-19-related moratorium on loan payments expires.
Additionally, those with student loan debt can explore income-based repayment programs, which can help lower monthly payments based on an individual’s monthly discretionary income.
The Biden administration rolled out a new income repayment plan recently, which limits the monthly amount that borrowers pay to 5% of their discretionary income, a decrease from the previous 10%, and increases the amount that is considered non-discretionary income to about $31,000, up from the previous amount of about $20,000.
