Millions of Californians applied for Biden student loan relief. What is the holdup?

Susan Walsh/AP

More than 2.3 million Californians applied for or were deemed automatically eligible for tens of thousands of dollars in student debt forgiveness in the four weeks that applications were open this fall, White House data shows.

So far, fewer than 1.5 million of them had applications approved as a result of various lawsuits that forced the administration to pause the program.

No one has gotten relief.

President Joe Biden announced the plan in August to offer up to $20,000 in forgiveness for borrowers who had received a Pell Grant, a form of federal student aid for low-income families, and up to $10,000 if they did not.

The program intended to protect borrowers who were at risk of missing payments as a result of economic burdens from the coronavirus pandemic. The White House estimated that more than 40 million borrowers would qualify for debt relief through the program.

Overall, 26 million borrowers applied or were otherwise deemed eligible for forgiveness by the U.S. Department of Education. The department “fully approved” relief and sent information to loan providers for over 16 million of these people.

By then, the administration was forced to halt accepting applications. Loan providers were blocked from discharging debt.

According to an administration official, who was able to confirm with the condition of anonymity, the Education Department had not sent over some information for people deemed automatically eligible to loan servicers before the program was blocked, which accounted for some of the gap. For some applicants, the Education Department was unable to process their materials or get enough information needed to confirm eligibility before lawsuits halted the program.

After Biden announced the plan in August, several conservative groups and states sued, claiming that the policy is harmful and that it was beyond the president’s power to cancel consumers’ debts. With lawsuits holding up the forgiveness program, the administration extended the pause on federal loan payments until June 30.

The Supreme Court agreed to hear two of the lawsuits. One lawsuit by six Republican-led states claims the policy would hurt companies that service federal student loans; in the other, plaintiffs alleged they were harmed by the plan because they would at least partially be excluded from getting forgiveness.

The Court will hear oral arguments on Feb. 28. Federal student loan payments will resume 60 days after the Court releases a decision or, if the court fails to reach a decision by the June 30, 60 days later on Aug. 29.

Officials are confident that the program is legal and that they will get back to delivering relief.

“We remain confident in our legal authority to adopt this program that will ensure the financial harms caused by the pandemic don’t drive borrowers into delinquency and default,” Secretary of Education Miguel Cardona said in a statement in January when the Departments of Education and Justice filed a brief in support of the program with the Supreme Court.

Emergency grants

There are other ways that the White House has helped with students’ financial burdens through the pandemic that have been implemented with fewer hangups.

On Wednesday, the Biden administration released estimates that 18 million students received financial aid since the beginning of 2021 through the Higher Education Emergency Relief Fund, which was created by the Trump-era Coronavirus Aid, Relief and Economic Security (CARES) Act of March 2020. There have been three iterations of the Higher Education Emergency Relief Fund (HEERF), the last of which was the program’s largest investment via the 2021 American Rescue Plan at nearly $40 billion.

Half of the funds for HEERF went to financial aid grants and discharge of unpaid loans, the White House reported. Grants could be used for any student expense, like food, housing, mental health care and child care.

In 2021, 463 colleges and universities in California were part of HEERF, according to Education Department data. More than 1.7 million students received grants in 2021, with an average of $1,510 per person. In all, the state got almost $2.6 billion.

Nationwide, higher education institutions participating in HEERF gave $19.5 billion in grants to about 12.7 million students in 2021, meaning almost half of all students who were enrolled in those schools got aid. It estimated that 80% of Pell Grant recipients received aid thorough HEERF.

About 2,000 schools chose to provide an additional $1.7 billion in emergency financial aid grants through HEERF. More than half of HEERF’s total dollars were spent in 2021, for a total of $39 billion. About 40% of funds provided by the American Rescue Plan, or $15.8 billion, was spent.

Many of those grants targeted community colleges, historically Black colleges and universities, minority serving institutions and tribal colleges and universities. The Education Department projected that 6 million community college students, 450,000 HBCU students, 8 million students at minority serving institutions and 24,000 TCU student received aid.

The White House release said leaders at nearly all these institutions credited HEERF funds for preventing students from dropping out.

Loan discharges

Overall, the Biden administration has discharged $48 billion for nearly 2 million borrowers, per Education Department data. That includes borrowers who are in public service or who attended institutions like Corinthian Colleges that the administration deemed took advantage of students.

This summer, the Department of Education put $5.8 billion to cancel remaining loans for 560,000 borrowers who attended one of the Corinthian Colleges’ schools or subsidiaries. It was the largest single discharge in the Education Department’s history. The discharge came after a lawsuit filed against the department in 2017 pressed officials to relieve students that investigations claimed Corinthian had swindled.

Corinthian, a for-profit university company, went out of business in 2015 following a lawsuit filed by Vice President Kamala Harris when she was California’s attorney general. The suit, which the attorney general’s office won, alleged Corinthian misrepresented job placement rates and students’ ability to transfer credits, and targeted low-income individuals through deceptive advertisements.

“They targeted people who they assumed wouldn’t fight back. They targeted people who they assumed no one would be there to fight for. And they were wrong,” Harris said in announcing the discharge.

In January, the Education Department proposed revising the income-driven repayment plan to reduce the amount of money borrowers have to pay per month and cut costs.

“We cannot return to the same broken system we had before the pandemic,” Cardona said in the proposal, “when a million borrowers defaulted on their loans a year and snowballing interest left millions owing more than they initially borrowed.”

Cardona said, “These proposed regulations will cut monthly payments for undergraduate borrowers in half and create faster pathways to forgiveness, so borrowers can better manage repayment, avoid delinquency and default, and focus on building brighter futures for themselves and their families.”