Biden’s Reforms and 813,000 Student-Loan Borrowers

… In July 2023, ED announced borrowers who had made the required 20 or 25 years of qualifying payments on income-driven repayment plans would be notified of their debt cancellation and 30 days later their debt servicers would begin discharging their loans. ED was expected to review borrowers’ accounts every two months. However, in August 2023, the New Civil Liberties Alliance, a nonprofit aimed at protecting constitutional freedoms, filed a lawsuit on behalf of the Cato Institute and the Mackinac Center for Public Policy to block relief for borrowers who made necessary payments on income-driven repayment plans. The groups argued that because they are nonprofits, the relief would undermine their recruiting efforts through the Public Service Loan Forgiveness program, which forgives student debt for government and nonprofit workers after 10 years of qualifying payments. They also argued that Congress, which created income-driven repayment plans in the 1990s, never gave ED authority to give credit for nonpayment. In an 18-page order dismissing the case, U.S. District Judge Thomas L. Ludington of the Eastern District of Michigan disagreed, concluding the groups lacked the standing to stop the efforts to alleviate the burden of student debt. The decision was issued the same day ED began discharging $39 billion in federal student loans held by more than 804,000 borrowers who have been in repayment for more than 20 years. The timing of both the lawsuit and decision was important as federal student loan payments were set to resume in October 2023 after a multi-year pause….

December 20, 2023

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Originally Published in JD Supra