Deficiency of the FFEL Program and the U.S. Student Loan Definable Under Biden’s Regime
Under Biden’s program, individual borrowers who earned less than $125,000 in either 2020 or 2021 and married couples or heads of households who made less than $250,000 annually in those years are eligible to have up to $10,000 of their federal student loan debt forgiven.
The Department of Education said that borrowers with private student loans who haven’t consolidated yet are out of luck.
Borrowers with privately held federal student loans will get one-time debt relief when they consolidate their loans into Direct Loans. The FFEL program is now defunct and only a small percentage of borrowers have FFEL loans. The statement said this is a different program than Direct Loans.
Judge Autrey did not rule on the larger issue when he was appointed by George W. Bush. Instead, he said the states had not suffered injuries of the sort that gave them standing to sue.
Six Republican states brought a lawsuit against the Federal District Court in St. Louis. Judge Henry E. Autrey dismissed it. The suit accused Mr. Biden of overstepping his authority under a 2003 federal law that allows the education secretary to modify financial assistance programs for students “in connection with a war or other military operation or national emergency.”
The White House stated that officials from six states are fighting to stop relief for borrowers buried under a lot of debt.
“The President and his administration are lawfully giving working and middle class families breathing room as they recover from the pandemic and prepare to resume loan payments in January,” he said.
The Third Litigation Against Student Loan Forgiveness Under the Biden Administration: Laws, Rules and Triality in Higher Education Laws
A federal judge denied the request in the third lawsuit from a borrowers who claimed that loan forgiveness would result in a bigger state tax bill. The Pacific Legal Foundation’s public interest lawyer has until October 10 to file a new lawsuit.
If a qualifying borrower also received a federal Pell grant while enrolled in college, the individual is eligible for up to $20,000 of debt forgiveness. Millions of low-income students are given Pell grants each year, which can be as little as $2,000 a year, based on their family’s size and income and how much college costs. These borrowers are more likely to end up in default when they struggle to repay their student debt.
The Congressional Budget Office estimated this week – before the administration excluded FFEL borrowers – that Biden’s plan could cost the government $400 billion but warned that the estimate relies on several assumptions and is “highly uncertain.”
The nonpartisan Congressional Budget Office said in a report released last week that the student loan cancellation could come at a price of $400 billion but noted that those estimates are still “highly uncertain.”
The Higher Education Relief Opportunities for Students Act of 2003 grants the Education Secretary the power to cancel student debt to help address the financial harm suffered due to the Covid-19 virus, according to a Department of Education memo.
A conservative advocacy group called the Job Creators Network is also weighing its legal options, planning to file a lawsuit once the Department of Education formalizes the student loan forgiveness plan next month.
Abby Shafroth, staff attorney at the nonprofit National Consumer Law Center, previously told CNN that she believes the merits of the Biden administration’s legal statutory authority are strong and that it’s unclear who would have legal standing to bring a case and want to do so. Standing to bring a case is a procedural threshold requiring that an injury be inflicted on a plaintiff to justify a lawsuit.
If the standing hurdle is cleared, a case would be heard by a district court before a final ruling is issued on the merits of the case.
The US Supreme Court limits the government’s authority when it comes to implementing new rules. While the Supreme Court takes up a small number of cases each year, lower courts may look at what the justices have said in those cases when assessing the Department of Education’s authority.
The Biden Administration’s Step Towards Fighting Fraud in Student Loan Forgiveness: An Educated and Enforcing Approach
The Biden administration is increasing its efforts to fight scams aimed at taking advantage of borrowers applying for its expansive student loan forgiveness plan, senior administration officials announced Wednesday.
The Department of Education warned borrowers of a student loan forgiveness program scam that requires payment in order to help them get debt relief.
“This Biden forgiveness thing is Christmas, Thanksgiving and the Fourth of July all rolled into one for the scammers,” says Betsy Mayotte, the president of the Institute of Student Loan Advisors, a nonprofit that offers free counseling to borrowers.
Mayotte thinks the release today is a great step. “There’s only two things that can be done by the community to prevent fraud.” One is to educate and the other is to enforce.
The administration’s efforts to stop these types of scams fall heavily on the shoulders of borrowers themselves: Much of the announced plans focus on increasing efforts to educate the public on how to catch and report scams on their own.
We know that evil people will be using this program to run their own frauds and scam, so we need an all-government approach.
“What we’re trying to do here is to get as much relief as possible to the hard working former students who deserve this relief,” Cordray added. “We’re moving at warp speed to get the application and the process going here.”
A Catch-22: Helping borrowers to apply for debt relief and report any scams at the Federal Trade Commission (Tax) by e-mail
The administration urged borrowers to sign up to be notified when the application is available, to make sure their loan servicers have their current contact information, and to report any scams they encounter to the FTC.
One way to avoid scam vulnerability in the first place would be to release more specific information on what the forgiveness application will look like or when to expect it.
“One of the most critical ways to prevent scams and protect borrowers from being taken advantage of is developing a clear, simple, and secure site for borrowers to apply for debt relief and have the most up to date information from trusted sources,” the administration wrote in a fact sheet outlining their efforts to combat scams.
But in a briefing Wednesday, senior administration officials would not provide any more concrete details on when the application will go live or what the process will look like.
“In one way, it’ll help,” she says. “But if I know the scammers, they’ll use that as an opportunity too: ‘The application’s out. You have to hurry. Time is short. Now that the applications are out, let us help you to make sure you don’t miss it.’ So it’s a catch-22.
Application Form for Online PLUS Loans Under Biden’s Debt Relief Plan – Evidence from a Federal Lawsuit by Mark Brnovich
In addition to federal Direct Loans used to pay for an undergraduate degree, federal PLUS loans borrowed by graduate students and parents may also be eligible if the borrower meets the income requirements.
The online application will be short, according to the Department of Education. They do not have to submit the application with any supporting documents or their Federal Student Aid ID.
If the US Supreme Court doesn’t allow the program to proceed, borrowers shouldn’t expect debt relief. The justices are expected to rule on the matter by June.
There are a handful of states that may tax the debt discharged under Biden’s plan if state legislative or administrative changes are not made beforehand, according to the Tax Foundation.
Republican states are leading the charge. Arizona Attorney General Mark Brnovich filed a lawsuit last week stating that he could be hurt financially by the forgiveness plan.
Brnovich, a Republican, argues that the policy could reduce Arizona’s tax revenue because the state code doesn’t consider the loan forgiveness as taxable income, according to the lawsuit. The attorney general office is seen as being affected by the forgiveness policy. The Public Service Loan Forgiveness program may be available to employees if they are eligible, but some job candidates may not consider that to be a benefit if their student loan debt has already been canceled, the lawsuit argues.
It recommended that borrowers never reveal their personal information or account passwords, in order to work with the US Department of Education and our loan servicers.
Those who meet the program’s annual income limits — up to $125,000 per individual or $250,000 per household — can apply online at https://studentaid.gov/debt-relief/application.
The Education Department, which holds $1.6 trillion in student loan debt and will manage the cancellation process, quietly opened the application website for testing on Friday night. More than eight million people had already applied by Monday, Mr. Biden said. The form is available in English and Spanish, and is intended to work on desktop computers and mobile devices.
There are other legal challenges that the Biden administration is facing. Justice Amy ConeyBarrett denied two requests to challenge the program.
The Seventh Circuit is where this case is being heard. A federal district court judge dismissed the lawsuit earlier this month, on ground that the taxpayer group lacked “standing.” The taxpayers could not demonstrate a personal injury as is required to bring a suit. The Supreme Court said in 2007, if federal taxpayers can challenge any government expenditure, the courts won’t function as courts of law and will be used as complaint bureaus.
The lower court ruled in favor of the case, so that’s why she acted alone. She did not want to refer the matter to the full court. Her denial appeared as a single sentence on the court’s docket.
A federal district court judge rejected a separate lawsuit brought by six Republican-led states Thursday, also because the plaintiffs did not have the legal standing to bring the challenge.
The states are planning to appeal. The case will likely go to the 8th Circuit Court of Appeals, where it will likely face conservative judges.
The Biden administration is also facing lawsuits from Arizona Attorney General Mark Brnovich, and conservative groups such as the Job Creators Network Foundation and the Cato Institute.
The Federal Reserve Bank Student Loan Forgiveness Program: The Case against the Executive Branch and the Taxpayers’ Voice in the 21st Circuit Court of Appeals
The emergency application was received by Justice Amy ConeyBarrett, who is assigned to the Seventh Circuit Court of Appeals. Presumably the court’s other justices agreed with her decision.
Within hours of the Supreme Court action, another closely watched challenge to the program, this one brought by six GOP-led states, was tossed out by a federal district court in Missouri.
The emergency request to the Supreme Court was brought by the Brown County Taxpayers Association, a Wisconsin organization made up of around 100 taxpaying individuals and business owners that advocates for conservative economic policy.
Several conservative organizations have objected to the plan. Those lawsuits are percolating in various lower courts, though they may face similar difficulty showing a specific harm to stay alive.
The executive branch can’t create the student loan forgiveness program according to the Texas federal judge.
The program is an unconstitutional exercise of Congress’s legislative power, which is why it must be thrown out, wrote Judge Mark Pittman, who was nominated by Donald Trump.
The White House issued a statement that said they did not agree with the ruling on the student debt relief program.
“For the 26 million borrowers who have already given the Department of Education the necessary information to be considered for debt relief – 16 million of whom have already been approved for relief – the Department will hold onto their information so it can quickly process their relief once we prevail in court,” Jean-Pierre said.
The administration did not go through the proper process to make a formal notice-and-comment rule in order to allow people to voice their disagreement with the program rules.
“This ruling protects the rule of law which requires all Americans to have their voices heard by their federal government,” said Elaine Parker, president of Job Creators Network Foundation, in a statement Thursday.
Default of Student Loan Payments in the Biden-Harris Program After the Large-Scale Collision, and a New Start on Student Loan Forgiveness
If litigation fails, payments will stop 60 days after debt cancellation program is implemented, 60 days after lawsuits are resolved or 60 days after June 30.
Tuesday’s extension, the White House said, will alleviate uncertainty for borrowers as the administration asks the Supreme Court to review lower-court orders blocking Biden’s student debt relief program.
“I want borrowers to know that the Biden-Harris administration has their backs and we’re as committed as ever to fighting to deliver essential student debt relief to tens of millions of Americans,” Cardona said.
By the time the pandemic hit, Bicknell had made about six years of payments on her student debt, paying off nearly $110,000. Her balance is roughly the same as what she originally borrowed. She expects to be eligible for debt cancellation from the Public Service Loan Forgiveness program in January 2024 – when the remaining debt, worth more than $100,000, will be wiped away.
There is a pause on student loan payments. But a restart date is up in the air, dependent on when the Supreme Court rules on the forgiveness program.
During the pause, these borrowers aren’t required to make payments just like everyone else – yet they still receive credit toward the Public Service Loan Forgiveness program as though they did make the payments, as long as all other qualifications are met.
The Covid-19 Psyvantha Case in Biden’s State-Government-Defined Student Loan Repayment Program Revisited
Bicknell used the money to pay for child care and saved for a future home. She and her husband also moved their children to a more family-friendly community where the rent is higher.
Borrowers must also be enrolled in a federal income-driven repayment plan, which ties monthly payments to a borrower’s income and family size. Generally, the bigger the monthly loan payment, the less net income a person has.
Lauren McClain, who teaches political science and government at a community college in Texas, has been working in the public sector and making payments on her student loans since 2014. She has about $151,000 of student debt remaining and expects to be granted forgiveness under the PSLF program in 2024.
The Supreme Court said on Monday that it will take up the case concerning Biden’s student loan program in February, which is currently on hold.
The two individual borrowers who brought the challenge are neither qualified for full debt relief forgiveness nor allowed to comment on the Education Secretary’s decision to give debt relief to some.
The justices have already announced they will hear arguments in a different case this term, in a dispute brought by a group of states. The court did not say whether it would ultimately consolidate the two cases.
The court wanted to know if the challengers in the new case had the legal right to bring the case. The court also asked the parties to discuss whether Biden’s plan was “statutorily authorized” and was adopted in a “procedurally proper manner.”
The program is already frozen while legal challenges play out and Monday’s action does not change that. It does, however, add new plaintiffs to the mix.
In the case of hand, the justices were urged by Elizabeth Prelogar to lift a block on the program and hear oral arguments. They only agreed to the request of the last one.
Prelogar argued in court that the Secretary of Education plans to use his authority to give relief to student loan borrowers affected by the Covid-19 Psyvantha but the case is the second of its kind.
The nine million borrowers who received the inaccurate emails have now started to receive new emails from the government correcting the error. The applications have not yet been approved or rejected.
The Department of education said in a statement that it is in close contact with the outside vendor, and that communication with borrowers is a top priority.
The Department of Education will review more student loan forgiveness applications if and when the government’s case prevails in court, according to the most recent, accurate emails sent to borrowers.
She says that the problem is that some clients have applied for other relief measures like public service loan forgiveness and think the email they got is related to the Biden-Harris cancellation.
Many borrowers had received an email in November saying that their application was approved to receive up to $20,000 in loan cancellation. The email was signed by Education Secretary Cardona and said that they would discharge borrowers’ approved debt “if and when we prevail in court.”
“[Tuesday’s email] may not seem like a big deal, but borrowers are trying to figure out how to move on with their lives,” Yu says. “And so they’re hanging on these words and these words matter.”
Carolina Rodriguez says she’s hearing a similar sentiment when speaking to her clients at the Education Debt Consumer Assistance Program in New York. She says borrowers are confused and have reached out to confirm there isn’t anything they can do during this waiting period.
When the Supreme Court hears the case in February it appears that borrowers will be stuck in limbo for a long time.
It has created confusion for the borrowers due to the mess of Biden’s forgiveness program. There are a lot of questions surrounding student loans this year.
A decision on whether the program is legal and can move forward is expected by June. No debt will be discharged under the program while it’s on hold.
For the third consecutive time, federal student loan borrowers begin a new year without having to make payments on their loans thanks to a pandemic-related pause.
The yearslong pause cost the government $155 billion through the end of 2022, according to an estimate from the Committee for a Responsible Federal Budget.
The Postgraduate Student Loan Program and New Rules for the Payments of a Borrower with a Special Liabilities Condition in the Public Sector
A yearlong waiver that expanded eligibility for the PSLF program expired on October 31, but some of those temporary changes will be made permanent starting in July.
Under the new rules, borrowers will be able to receive credit toward PSLF on payments that are made late, in installments or in a lump sum. Payments were only considered eligible if they were made in full within 15 days of the due date.
Also, time spent in certain periods of deferment or forbearance will count toward PSLF. For cancer treatment, military service, economic hardship, and time served in the National Guard are included in these periods.
The new rules will make it easier to meet the requirement of being a full-time employee in a public sector job. The new standard will consider full-time employment at 30 hours a week. The change will help the Adjunct Faculty at public Colleges qualify for the program.
The new rule is expected to cap payments at 5% of a borrower’s discretionary income, down from 10% that is offered in most current income-driven plans, as well as reduce the amount of income that is considered discretionary. It would forgive remaining balances after 10 years of repayment, as well as pay off the borrower’s monthly interest.
Before the Bell newsletter: What’s happening in stock markets and economics before the 2023 rally? An update on the S&P 500, the tech-heavy stock market, and the stock market
CNN Business initially published a version of the story. Before the Bell newsletter. Not a subscriber? You can be the first one to sign up here. You can listen to an audio version of the newsletter by clicking the same link.
The possibility of a 2023 market rally ground to a halt last week amid an onslaught of unfortunate inflation and economic data that spooked investors and increased the likelihood that the Federal Reserve will continue its economically painful rate hikes campaign for longer than Wall Street hoped.
On Friday, all major indexes suffered their biggest losses of the year. The S&P 500 dropped by 2.5%. The tech-heavy stock exchange fell as the blue chip index sank.
What is happening? The pace of inflation appears to be sideways after months of decline. The price index of personal consumption expenditures came in more than expected on Friday.
The Bureau of Economic Analysis reported that the prices grew 5.4% in January. December prices rose 5.3% annually.
Source: https://www.cnn.com/2023/02/26/investing/stocks-week-ahead/index.html
Inflationary Dynamics and the Pain of Recession: A Brief Address to the Booth School of Business M&P Policy Forum on Friday (Invited Press Release)
A paper presented Friday at the Booth School of Business Monetary Policy Forum in New York argued that disinflation will likely be slower and more painful than markets anticipate.
“Significant disinflations induced by monetary policy tightening are associated with recessions,” said the paper. “An ‘immaculate disinflation’ would be unprecedented.” In this instance,culate refers to the chance that inflation could fall to the Fed’s 2% goal without any serious economic damage.
Several Fed presidents, governors and top economists were on hand at the Booth School forum to discuss the paper and monetary policy on Friday. The majority of those speaking expressed deep concern about the stubbornness of inflation and general market reaction.
The Cleveland Fed President said that inflation remains high despite the fact that prices have slowed, and that it could stay high for a long time.
Susan Collins, Boston Fed President, said at the conference she expected further rate increases to reach a sufficiently restrictive level and then hold there for some time.
Fed Governor Philip Jefferson struck a more befuddled stance on Friday, observing that inflation continues to baffle economists. He said that there is a mixture of temporary and long- lasting elements that defy simple explanations for the inflationary forces impinging on the US economy. It is a million-dollar word for frugal.
Economists stressed that more pain lies ahead. The report states that “no landing” is not an option and that it’s important for markets to understand that.
While recent data has signaled that the US economy remains strong, “by the time we get to the middle of this year we expect to see some bad news coming and the sooner the markets get that message the more helpful it will be to the Fed,” he said.
Lord Mervyn King summed up what people were thinking on Friday. He wouldn’t give advice to any central banks about what they should do.
Source: https://www.cnn.com/2023/02/26/investing/stocks-week-ahead/index.html
A Study of Student Loans and Auto Loan Delinquencies in the U.S. after an Injunction by the 8th Circuit Court of Appeals
But, “if payments resume without debt relief, we expect both student loan default and delinquencies to rise and potentially surpass pre-pandemic levels,” warned Fed researchers.
That forgiveness proposal is now on hold after an injunction by the 8th US Circuit Court of Appeals. On Tuesday, The Supreme Court of the United States will hear the case with its decision expected by June 2023.
“We note a stark increase in new credit card and auto loan delinquency for borrowers with eligible student loans over the past few quarters, growing at a faster pace than those without student loans and those with ineligible loans,” they wrote.
The data may be a sign of economic distress when student loan payments resume, which may cause more trouble in the future.