What to know about Thursday’s ruling on student debt relief

Your Money

FILE – In this May 17, 2018, file photo, new graduates line up before the start of the Bergen Community College commencement at MetLife Stadium in East Rutherford, N.J. (AP Photo/Seth Wenig, File)

(NewsNation) — A U.S. Judge in Texas blocked President Joe Biden’s student debt relief plan Thursday, with less than two months remaining until borrowers are expected to resume payments.

The plan, which was already on hold while a federal appeals court in St. Louis considered a separate lawsuit filed by six states, would provide millions of borrowers with up to $20,000 in student loan forgiveness.

Here’s what we know:

A quick history of Biden’s plan

The debt forgiveness plan, announced in August, would cancel $10,000 in student loan debt for those making less than $125,000 or households with less than $250,000 in income. Pell Grant recipients, who typically demonstrate more financial need, would get an additional $10,000 in debt forgiven.

The cancellation applies to federal student loans used to attend undergraduate and graduate school, along with Parent Plus loans.

The debt relief would apply only to loan balances that existed before June 30, 2022.

What was the basis of Thursday’s ruling?

The judge said Biden didn’t have the power to authorize the plan and that he needed approval from Congress. That ruling came from District Court Judge Mark Pittman, an appointee of former President Donald Trump based in Fort Worth.

“In this country, we are not ruled by an all-powerful executive with a pen and a phone,” he said. “Instead, we are ruled by a Constitution that provides for three distinct and independent branches of government.”

The administration argued the relief was authorized as a means of dealing with the national emergency of the pandemic, but Pittman rejected that argument.

What now?

The 8th U.S. Circuit Court of Appeals had put the forgiveness plan on hold Oct. 21 while it considered an effort by the states of Nebraska, Missouri, Iowa, Kansas, Arkansas and South Carolina to block the program.

That temporarily stopped the administration from actually clearing debt. Still, the White House encouraged borrowers to continue applying for relief, saying the court order didn’t prevent applications or the review of applications.

Following Thursday’s ruling, the U.S. Department of Education announced it was no longer accepting applications.

About 26 million people throughout the country applied for the aid, and some 16 million had been approved at the time of the ruling, according to a White House spokesperson.

The Biden administration has said it will hold on to those applications so they can be processed if the plan is greenlit.

In the meantime, the Department of Justice filed to appeal Thursday’s ruling.

As of Friday, however, there was no set timeline for when that case would be decided or when the Oct. 21 stay might be lifted.

Student loan debt payments are scheduled to resume Jan. 1,

The education department said it’s website will be updated with more information as it becomes available.

The Associated Press contributed to this report.

© 1998 - 2022 Nexstar Media Inc. | All Rights Reserved.

Trending on NewsNation

Elections 2022

More Elections 2022