There have been three, recent developments with student loan relief in the last couple of weeks. These developments relate to the Student Loan Debt Cancellation announced a couple months ago, the Student Loan Payment Pause which was due to end on January 1, 2023, and the rules for discharging student loans in bankruptcy.
STUDENT LOAN DEBT CANCELLATION
President Biden had announced that eligible borrowers could cancel up to $20,000 in Pell Grants and up to $10,000 in non-Pell Grants. The U.S. Department of Education must hold the student loans. And borrowers must satisfy income requirements.
This student loan debt cancellation was challenged in a number of Federal Courts. A Federal Court in Texas declared the program unconstitutional. That ruling was appealed by the government to the 5th Circuit Court of Appeals. The student loan cancellation has been placed on hold until the appeal has been decided.
PAYMENT PAUSE
The payment pause was due to end on January 1, 2023. Due to the pending litigation involving the student loan debt cancellation, the payment pause has been extended. The government did not believe it fair for borrowers to pay on student loans which may ultimately be cancelled. If legal challenges to the student loan debt cancellation remain as of June 30, 2023, then student loan payments will resume in 60 days.
STUDENT LOAN DISCHARGE IN BANKRUPTCY
The U.S. Department of Justice and the U.S. Department of Education announced new guidelines in evaluating requests to discharge student loans in bankruptcy. These guidelines are intended to lower the bar for obtaining a bankruptcy discharge of student loans. An analysis of these guidelines will follow in a separate blog, so check back with us.