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The Education Department warned Wednesday that student loan defaults could soar by a “historically large” margin if President Joe Biden’s loan forgiveness plan is blocked by lawsuits, as the Biden administration prepares to restore its loan program. insists on

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Education Department Under Secretary James Quayle said Wednesday that the Education Department expects a large increase in both student loan delinquencies and defaults if the forgiveness plan is not allowed to move forward. in a filing In Texas, part of the administration’s appeal of a federal judge’s decision to block the plan.

Quale said in the filing that the Covid-19 pandemic will be the main driver of increased delinquencies and defaults. $10,000 for borrowers earning less than $125,000 annually (or $20,000 for Pell Grant recipients).

The roughly 18 million borrowers who would have their entire federal student loans discharged under Biden’s plan are particularly at risk of default because they assumed their loans would be wiped out, said Kaval, referring to the group’s ongoing There may be more defaults due to confusion. What are they owed?

main background

The statement was filed in response to a lawsuit against the Biden administration challenging student loan forgiveness on behalf of two borrowers in Texas, in which Chief Texas federal judge Mark Pittman—who was appointed by former President Donald Trump—last week The week called for blocking the debt relief plan. Justice Department appealed Rule. Biden's student loan program was already blocked by the 8th US Circuit Court of Appeals in October after six Republican state attorneys general challenged the program. Following Pittman's order, the White House said it would stop accepting applications for loan forgiveness.

big number

26 million. US Education Secretary Michael Cardona said how many Americans applied for student loan forgiveness before applications were suspended. Some 16 million people had already been cleared.

what to watch

The federal government will resume student loan payments next year if it goes according to plan. Federal student loan payments have been on hold since March 2020, when the COVID-19 pandemic shut down the US economy. Both Trump and Biden will continue to extend the emergency relief, but it is set to expire on December 31, 2022. Fears of a recession have raised tensions over student loan forgiveness. The Education Department said in Monday's filing that the moratorium on payments and interest accruals would cost several billion dollars a month.

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