In the face of numerous legal challenges and the latest move from a federal judge striking down part of President Biden's loan forgiveness plan, the Department of Education pulled applications from its website while it appeals the ruling.
Millions of borrowers had already signed up for the program that would cancel up to $20,000 in loans for Pell Grant recipients and up to $10,000 for individual borrowers who earn less than $125,00 per year. The National Taxpayers Union estimates the plan would've imposed a $2,500 burden per U.S. taxpayer.
Now, in a court filing, the administration is warning about what will happen if their bailout doesn't go through.
"Unless the [Education Department] is allowed to provide debt relief, we anticipate there could be an historically large increase in the amount of federal student loan delinquency and defaults as a result of the COVID-19 pandemic," said James Kvaal, the department's under secretary.
"This could result in one of the harms that the one-time student loan debt relief program was intended to avoid," Kvaal added.
Kvaal said those most at risk of defaulting on their loans are the roughly "18 million borrowers eligible for one-time debt relief who would have their federal student loans discharged in their entirety under the program."
Given the judge blasted the program, calling it "unlawful" and a "complete usurpation of congressional authorization implicating the separation of powers required by the Constitution," it's unlikely the administration's efforts to tug at the heartstrings here will accomplish anything.
Looks like borrowers will have to put their dinner and travel plans on hold.
