Biden admin warns of increased student loan defaults without forgiveness plan

Secretary of Education Miguel Cardona speaking in Orangeburg, South Carolina, in September 2022. Photo: Colin Myers/Claflin University/HBCU via Getty Images
The Biden administration warned in a new court filing of "an historically large increase" in federal student loan delinquency and defaults without its forgiveness plan.
Why it matters: The program's fate is still undetermined in the wake of numerous legal challenges as the years-long pause on loan repayment is set to expire in December.
- The Department of Education last week pulled the relief application offline after millions of borrowers had already signed up.
- If the program took effect, it would cancel up to $20,000 in student debt for Pell Grant recipients and up to $10,000 for individual borrowers who make under $125,000 per year.
- President Biden has previously said more than 40 million Americans could benefit from the relief.
What they're saying: "Unless the [Education Department] is allowed to provide debt relief, we anticipate there could be an historically large increase in the amount of federal student loan delinquency and defaults as a result of the COVID-19 pandemic," James Kvaal, the department's under secretary, said in the filing.
- "This could result in one of the harms that the one-time student loan debt relief program was intended to avoid," Kvaal added.
- The people most at risk of defaulting are "the approximately 18 million borrowers eligible for one-time debt relief who would have their federal student loans discharged in their entirety under the program," he added.
The big picture: While some of the legal challenges against the program have been dismissed, a federal appeals court upheld one lawsuit and blocked the program on Monday, just days after a federal judge in Texas struck it down
- After a federal judge in Texas declared the program illegal, the Biden administration stopped accepting applications for forgiveness.
- At least 26 million borrowers had already given the Education Department the information to be considered for the debt relief.
Editor's note: This story has been updated with new details throughout.