President Joe Biden has announced that his administration will extend the pause on federal student loan payments while the White House fights a legal battle in order to save his student loan forgiveness plan.

In a video posted on Twitter, Biden opined, “It isn’t fair to ask tens of millions of borrowers eligible for relief to resume their student debt payments while the courts consider the lawsuit.”

The moratorium which was scheduled to expire on January 1, 2023, is now being extended until 60 days after the lawsuit is resolved. If the lawsuit has not been resolved by June 30, 2023, payments would resume 60 days after that.

Biden’s plan guarantees $10,000 in federal student debt forgiveness to those with incomes of less than $125,000, or households that earn less than $250,000. Pell Grant recipients, who normally demonstrate more financial need, are qualified for an additional $10,000 in relief.

Over 26 million people already applied for the relief, with 16 million approved, but the Education Department halted the processing of applications this month. This happened after a federal judge in Texas blocked the plan; claiming that the program usurped Congress’ power to make laws.

Last week, the Justice Department petitioned the Supreme Court to scrutinize the issue and reinstate Biden’s debt cancellation plan. By extending the student loan repayment freeze, the administration claims it is giving the court a chance to resolve the case in its current term.

“I’m completely confident my plan is legal,” Biden intimated.

Biden pronounced the decision a day after more than 200 advocacy groups persuaded him to extend the pause, cautioning that commencing payment in January would result in “financial catastrophe” for millions of borrowers.

The White House has argued in court that Americans continue to feel the financial stress of the pandemic. Without Biden’s cancellation plan, the number of people falling behind on student loans could escalate to historic levels.

The greatest risk is for about 18 million borrowers who were told their entire loan balance would be canceled. The Education Department has warned that even if payments restart, those borrowers might think they are faultless and ignore the bills.

Extending The Payment Pause Will Cost Several Billion Dollars

Simultaneously, the White House has warned that extending the payment pause will cost several billion dollars a month in lost revenue. As reported by the General Accountability Office, the moratorium has already cost the government more than $100 billion in lost payments and interest.

The Biden administration did not address the costs in its announcement, but instead cast blame on Republicans challenging the plan.

“Callous efforts to block student debt relief in the courts have caused tremendous financial uncertainty for millions of borrowers who cannot set their family budgets or even plan for the holidays without a clear picture of their student debt obligations.”
Education Secretary, Miguel Cardona

“It’s just plain wrong,” he added.

Critics such as the Committee for a Responsible Federal Budget have opposed any further extension, stating that it could worsen inflation and raise the risk of economic recession.

However, supporters of Biden’s plan applauded the action, saying it provides a cushion to working-class Americans.

“This extension means that struggling borrowers will be able to keep food on their tables during the holiday season and the coming months as the administration does everything it can to beat back the baseless and backward attacks on working families with student debt.”
Mike Pierce, Executive Director of the Student Borrower Protection Center.

The legitimacy of broad student debt cancellation has been contested even before Biden became president. Supporters say federal law already gives the Education Department wide flexibility to cancel student loans, while opponents argue that only Congress has the power to cancel debt at that scale.

The Justice Department says the law offers sweeping authority to cancel student debt during a national emergency. Biden has said the relief is needed to help Americans recover from the pandemic.