Buffalo, N.Y. (WBEN) - Confusion and delay continues to compound surrounding the Biden administration's student loan debt forgiveness plans as Republicans place several legal challenges against the plan.
In addition, this Tuesday senior administration officials have announced new details about the student loan debt relief application but as of Thursday, no concrete date has been announced on when it will be made available to borrowers.
Legal Challenges
On September 27th, Attorney Frank Garrison who works for a conservative legal group brought forth the first challenges to Biden's plan saying that forgiveness would cause him personal injury in the form of a state tax bill. As a result, taxes won't have to be paid on forgiven debt under a relief provision of the American Rescue Plan, where some states would charge levies on the relief.
Since then, several other challenges have been initiated, just in time for the expected announcement of the student loan forgiveness applications which were said to be announced in early October.
This begs the question, if these legal challenges were said to be successfully challenged after the student loan debt was dissolved, would the borrowers debt relief be reversed?
Local attorney Paul Cambria told WBEN on Thursday that that's not going to be the case, "It works as of the time the decision is made. A lot of times decisions like this are not retroactive and so they only operate going forward."
Cambria doesn't think these legal challenges will prevent the plan from going forward, "Yeah, I do. I think that that's the climate right now and with who's controlling Congress and so on, I think it's gonna go forward. There may be some tweaks here and there, there always are, but I think it will go forward."
What We Know About The Application
The rules for the qualifying for the loan forgiveness have changed slightly and quietly, Jeff Boron, a college planning specialist from Send Your Kids To College explains, "It's going to affect about 700,000 people, [who] will be excluded. You should be able to check whether your loan is eligible or not once the new site from the Department of Education and Government [rolls out], but some of the excluded zones actually were loans that were kind of reconsolidated private lender deals, Perkins loans. So some of those are going to excluded. Still, the majority of people with direct federal loans will have the forgiveness program if it rolls out."
According to published reports, the senior administration promised that applications will be released in October. A legal filing filed last Friday suggests the department said it "will not discharge any student loan debt under the debt relief plan prior to October 23, 2022."
"They have not officially released to date and I don't think they're going to commit to that, until the courts take a look at this case," says Boron, referring to the states who filed challenges to Biden's plan.
Good news is, borrowers will know what to expect if/when the application comes out. Boron explains, "There's a couple of surprising things. First of all, we've been told that the student would need their FSA ID, the ID they use when they did their FASFA to take out the loans. They are no longer in need and it's going to go by name, date of birth and social security number. Second of all, they will not have to submit any documentation. Loan forgiveness is tied to a maximum income of $125,000 for single children $250,000 for married couples, or household. We're no longer going to have to provide proof or copies of tax returns. It's almost going to be on the honor system and so you're going to have to sign that says under penalty of perjury that your income was below this level, therefore, you're requesting forgiveness."
Additional forms may be asked upon request.
As a result of a simpler process, it is suggested that it could take a couple weeks to process an application as opposed to the project 4-6 weeks that was originally stated.
"I think it will be a lot quicker because they're not going to review tax returns and other data, they're going to take someone's word for it, which is somewhat troubling because not everybody's going to be honest, so you're gonna go have to go back to these people to recoup some money if they weren't entitled," Boron says.
Regardless, Boron once again reminds borrowers the urgency of filling out the application because it would be ideal to process the application before repayment becomes unpaused January 1st of next year. The application will be available to borrowers until the end of 2023 and then the application goes away.
