Recent Legal Challenges to Loan Cancellation, and Guidance for Borrowers

Recent Legal Challenges to Loan Cancellation

As of October 2024, President Biden’s latest student loan cancellation plan faces significant legal obstacles:

1. A federal judge in Missouri has temporarily blocked the plan, preventing any widespread cancellation for now.
2. This injunction was requested by six Republican-led states, led by Missouri, hours after a federal judge in Georgia allowed a previous pause on the plan to expire.
3. The legal battle involves multiple states and courts, highlighting the complexity of implementing large-scale student loan relief.
4. The Education Department has vowed to defend the proposal in court, but the timeline and outcome remain uncertain.
5. These developments underscore the ongoing volatility in student loan policy and the importance of borrowers staying informed about potential changes.

Read more about the legal challenges on PBS, here.

Summary of Other Challenges in the Student Loan Landscape

In addition to the legal challenges to loan cancellation, borrowers face a range of other issues:

1. Income-Driven Repayment (IDR) Complications: Processing of IDR plans, including recertification and new enrollments, is currently paused. Many borrowers, especially those previously on the SAVE plan, are in an indefinite forbearance due to another set of legal challenges to the SAVE repayment plan.
2. Public Service Loan Forgiveness (PSLF) Uncertainties: Confusion surrounds the transition of PSLF processing from MOHELA to the Department of Education, with unclear implications for borrowers.
3. Account Adjustments and Payment Counts: Promised adjustments to correct past mishandling of loans have been delayed, leaving many borrowers uncertain about their progress towards forgiveness.
4. Recertification Issues: Annual income recertification requirements are in flux, with inconsistent information from servicers and lack of clear guidance for borrowers.
5. Communication and Processing Delays: Borrowers face inconsistent communication from loan servicers and the Department of Education, as well as significant delays in processing important documents.
6. Servicer Changes: Transitions between loan servicers have created additional confusion about where to submit forms and how to access account information.

These challenges create a complex and often frustrating environment for student loan borrowers, necessitating careful attention and proactive management of their loans.

Recommendations for Borrower Action

Given this complicated landscape, here are key recommendations for borrowers:

1. Stay Informed and Document Everything
   • Regularly check StudentAid.gov and your loan servicer’s communication.
   • Keep detailed records of all loan-related information and interactions
2. Understand Your Loans and Repayment Options
   • Know your loan types, servicers, and repayment plan
   • Research income-driven repayment and forgiveness programs like PSLF
3. Be Proactive and Persistent
   • Submit required forms and recertifications on time
   • Follow up on applications and report any errors or inconsistencies
4. Plan for the Long-Term
   • Prepare for eventual repayment, Buy Back, or potential payment increases, including during forbearance period.
   • Budget wisely and consider long-term impacts on forgiveness eligibility
5. Protect Yourself and Seek Help When Needed
   • Be cautious of scams and only work with reputable professionals and trusted sources of information
   • Use official channels like the FSA Feedback Center to report issues or submit complaints.