A Judge Blocked Student Loan Forgiveness, and Applications Are Paused. What's Next?

The Biden administration’s student loan forgiveness plan just suffered a major setback as a federal judge in Texas struck down the program, forcing the federal government to stop accepting applications.

The Department of Justice immediately appealed the district court’s ruling, the White House said in a statement Thursday evening shortly after the judge’s order came out.

The development leaves borrowers uncertain and fearful that the forgiveness they’ve been promised could be in jeopardy. Whatever happens next, the ruling is likely to at least delay the timeline for student loan forgiveness.

The federal government officially started accepting applications on Oct. 17, and the portal was open for about three and a half weeks. By Friday morning, the Education Department’s federal student aid website was displaying a message that says it cannot continue accepting applications due to the legal hitch.

“Courts have issued orders blocking our student debt relief program. As a result, at this time, we are not accepting applications. We are seeking to overturn those orders,” the message reads.

What's next for student loan forgiveness?

The student loan forgiveness program, which would cancel up to $10,000 or $20,000 of federal debt for about 40 million eligible borrowers, was already on hold because litigants in another suit in a federal appeals court were granted a temporary stay on Oct. 21 stopping the administration from canceling any debt. That suit was filed by attorneys general from six states.

But the new decision in the Texas case is a bigger complication because the judge actually ruled against the administration, while the stay in the appeals court case is essentially just a pause while that case moves forward.

Northern Texas District Judge Mark Pittman argued in a 26-page opinion that the program is unconstitutional, rejecting the administration’s argument that it can cancel debt under the HEROES Act, a law that gives the Education Department more authority during national emergencies. Pittman, who was an appointee of former President Donald Trump, sided with the conservative advocacy group that brought the suit.

The federal government is appealing the decision to the United States Court of Appeals for the Fifth Circuit. The next phase of the legal battle over the program could take place in that court, but either side could appeal again to the Supreme Court, where some experts anticipate the matter will ultimately be decided.

Meanwhile, other legal challenges to the program remain active, including the case in which the stay was granted in the Eight Circuit Court of Appeals.

The Education Department says it will hold on to all of the student loan forgiveness applications it has already received.

In a statement Friday, Education Secretary Miguel Cardona said more than 26 million borrowers have done everything they need to do for the department to be able to process their applications for relief. Of those, 16 million applications are already approved, and loan servicers have been advised to discharge debt when the courts allow it, Cardona said. But so far, no one has received forgiveness yet due to the legal obstacles.

Eligible borrowers who have not already applied for loan forgiveness may have to wait and see what happens in the ongoing court cases until they’ll be able to apply. To stay up to date, you can get email updates on the status of the program by subscribing on the department’s website.

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