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Student loan forgiveness blocked, what's next?

A student loan expert says she's still optimistic that Biden's student loan forgiveness plan can still happen, despite its current block by a federal judge.

GREENSBORO, N.C. — Now that a federal judge has struck down President Joe Biden’s student loan forgiveness plan, the White House is already planning to appeal. But experts say it could be months for the case to work through the courts. In the meantime, there are three key steps you should take to get ready for the fallout.

Prepare for repayments

“Anyone who has student loan debt with federal student loans, you probably need to get prepared to be paying your payments on January 1 with full interest and the principal,” said Ja’Net Adams with Debt Sucks University.

She recommends setting aside money now just in case you must make payments next year.

“You know what your payments were before the pause in March 2020. So you know at least that’s what it’s going to be going forward,” Adams said. “Over these next few weeks leading up to January 1, start putting a little money back and getting ready, so at least you have the first payments, January and February, ready. That will help you not to feel a financial strain.”

It can be hard to set aside that money over the holidays, but Adams says don’t feel guilty about doing what you need to do to avoid a financial mess.

“This is not the best time for this to be happening. You have holiday spending and Christmas spending, but just understand you don’t want to put yourself in financial strain come the new year,” Adams said. “So if there’s something you can hold back on, maybe not buying a gift for every adult in your family, use that money for your student loan payment come January.”

Know the facts of the case

District Court Judge Mark Pittman, an appointee of former President Donald Trump based in Fort Worth, said the program usurped Congress' power to make laws.

“In this country, we are not ruled by an all-powerful executive with a pen and a phone. Instead, we are ruled by a Constitution that provides for three distinct and independent branches of government,” Pittman wrote.

He added: “The Court is not blind to the current political division in our country. But it is fundamental to the survival of our Republic that the separation of powers as outlined in our Constitution be preserved.”

The debt forgiveness plan would cancel $10,000 in student loan debt for those making less than $125,000 or households with less than $250,000 in income. Pell Grant recipients, who typically demonstrate more financial need, would get an additional $10,000 in debt forgiven.

The cancellation applies to federal student loans used to attend undergraduate and graduate school, along with Parent Plus loans.

The 8th U.S. Circuit Court of Appeals had also put the forgiveness plan on hold on Oct. 21 while it considered an effort by the states of Nebraska, Missouri, Iowa, Kansas, Arkansas, and South Carolina to block the program.

White House Press Secretary Karine Jean-Pierre said the administration disagreed with Thursday’s ruling and the Department of Justice had filed an appeal. She said they plan to appeal. And she said so far, 26 million people had applied for debt relief, and 16 million people had already had their relief approved. The Department of Education would “quickly process their relief once we prevail in court," she said.

“The President and this Administration are determined to help working and middle-class Americans get back on their feet, while our opponents — backed by extreme Republican special interests — sued to block millions of Americans from getting much-needed relief,” she said in a statement.

Reaction to the ruling was predictably mixed along political fault lines. The Student Borrower Protection Center blasted Pittman as a “right-wing federal judge,” saying "tens of millions of student loan borrowers across the country now have their vital debt relief blocked as a result of this farcical and fabricated legal claim.”

Rep. Virginia Foxx of North Carolina, the ranking Republican on the House education committee, celebrated it.

“Yet another nail has been added to the coffin of President Biden’s illegal student loan bailout, and hardworking taxpayers across the country are rightfully rejoicing," she said. “This administration continues to operate as if its own self-appointed authority in transferring billions of dollars in student loans is legitimate, but the rule of law says otherwise.”

Try to relax

“I’m an optimist. I’m about 80-20 that it’s still going to happen,” said Betsy Mayotte with FreeStudentLoanAdvice.org. “People were complaining that the Biden administration took a really long time to make an announcement about forgiveness in the first place. I feel like the reason it took so long is that the legal team was working hard. They had to have anticipated there was going to be legal pushback on this. So, they were making sure they had their ducks in a row.”

Mayotte says borrowers should prepare for the worst possibility of having to repay their loans but hope for the best.

“I have a lot of anxious people reaching out to us about this,” she said. “There isn’t any value in losing sleep over it. The courts are going to do what they are going to do. I do still have a high degree of confidence it will happen. So, try to move on with your day.

The Associated Press contributed to this report. 

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