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Biden's student loan pause faces another lawsuit

Student Loan Forgiveness Explainer
Posted at 4:50 PM, Apr 07, 2023

The Biden administration is facing another lawsuit over extending the pandemic-related pause on federal student loan payments.

The pause is set to end later this year, but the plaintiffs want the moratorium to end immediately.

The newest legal challenge was filed by the New Civil Liberties Alliance on behalf of the Mackinac Center for Public Policy, a free market think tank, earlier this week. In a similar lawsuit, private lender SoFi sued the Biden administration last month, also seeking to end the pause on payments.

The moratorium has been extended eight times under both the Trump and Biden administrations since March 2020, when it was put in place to help people struggling due to the Covid-19 pandemic.

The New Civil Liberties Alliance lawsuit argues that the Department of Education has unlawfully extended the pause, relying on an "ever-shifting foundation of purported legal justifications."

The lawsuit alleges that the pause harms nonprofit employers, like the Mackinac Center for Public Policy, that normally use a federal debt relief program for nonprofit workers to help recruit employees. The pause, they argue, reduces the incentive the federal program, known as Public Service Loan Forgiveness, provides borrowers to work for a nonprofit.

Thanks to the pause, most federal student loan borrowers have not been required to make payments for more than three years. Interest has also been frozen during that time.

The Department of Education has maintained that the pause, as well as a proposed one-time debt cancellation plan, are legal.

"This lawsuit is an attempt by partisan special interest groups to put millions of borrowers at serious risk of financial harm," the agency said in a statement sent to CNN. "The Department will continue to fight to deliver relief to borrowers, provide a smooth path to repayment, and protect borrowers from industry and special interests."

The latest extension of the pause was put in placeby President Joe Biden in November once his separate student loan forgiveness program was also challenged in court.

The administration has now tied the payment restart date to the litigation over the forgiveness program, which was heard by the US Supreme Court at the end of February.

Federal student loan payments are set to resume 60 days after the Supreme Court issues its ruling, or in late August -- whichever comes first. The justices are expected to rule in late June or early July, but a decision could come earlier.

If allowed to move forward, Biden's student loan forgiveness program would cancel up to $20,000 for qualifying low- and middle-income borrowers.

This story has been updated with additional information.