A nonprofit just joined forces with a major student-loan lender in asking a federal court to end the payment pause, saying the relief has limited the 'financial incentive' to work in public service
But Mackinac Center wrote in its complaint that"only Congress can categorically suspend repayment obligations for all student-loan borrowers nationwide. And only Congress can cancel the accrual of interest on student debt owed to the United States."
"The Department initially claimed a short extension was needed to enable Congress to decide whether to extend the suspension legislatively," the complaint said."But electorally accountable lawmakers in Congress declined to extend the suspension of payment obligations and interest accrual any further, even as they repeatedly legislated all manner of other forms of Covid-19 relief.
The key argument the group is making relates to the Public Service Loan Forgiveness program, which is intended to forgive student debt for government and nonprofit workers after ten years of qualifying payments. It wrote in its complaint that as a nonprofit, PSLF offers an incentive for people with student debt to work at the group, but the payment pauses have taken away that incentive.
"If interest continues to accrue, then a borrower's outstanding debt that will be forgiven under PSLF after ten years is greater than if interest does not accrue. The borrower therefore has greater incentive to work for a public-service employer and to have that debt forgiven under PSLF. In other words, the benefit public-service employers receive under PSLF is greater if interest continues to accrue on student debt than if interest does not accrue," the complaint said.
"Conversely, if interest stops accruing, outstanding debt that will be forgiven under PSLF is less than it otherwise would be," it continued."The financial incentive to work for a public-service employer thus falls commensurately."in October challenging Biden's broad debt relief and used a similar argument, saying that the relief would undermine hiring efforts under PSLF. That lawsuit did not progress.
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