Updated Nov 16, 2022 - Politics & Policy

Biden admin warns of increased student loan defaults without forgiveness plan

Secretary of Education Miguel Cardona speaking in Orangeburg, South Carolina, in September 2022.

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.

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