Whatever happened to student loan forgiveness?
January 17, 2023
By Chris Jackson
V.P. of Retail Banking
President Biden's plan to cancel up to $20,000 in college debt for some people may never actually happen.
Since it was announced in August 2022, the sweeping student loan forgiveness plan has faced intense pushback from political opponents and a variety of legal challenges in the courts.
That didn't stop the Department of Education from receiving more than 26 million applications for student loan forgiveness last year, up until the courts blocked the from program from accepting further submissions.
Whether you're someone who applied, or you're an opponent of the plan; in this article, we'll let you know where the courts currently stand on the one-time student debt cancellation -- and what happens next.
What was in the student loan forgiveness plan?
Under Biden's original plan, announced last August, federal student loan borrowers would get up to $10,000 in loan forgiveness, as long as their income is under $125,000 (or under $250,000 for married couples filing jointly). Anyone who received a Pell Grant could get double that amount — up to $20,000 — in debt relief. The plan included graduate students and parents with PLUS loans, in addition to traditional college graduates who met the income qualifications.
Why courts blocked it, and what happens next:
In November, a federal judge in Texas ruled the student loan forgiveness program was unlawful. And in a separate lawsuit, a federal appeals court issued an injunction against the program on behalf of six states — Arkansas, Iowa, Kansas, Missouri, Nebraska and South Carolina — stopping the Department of Education from accepting more applications and discharging any debt until the case was decided.
Opponents generally argue that the Biden administration does not have the legal authority to broadly cancel student loan debt. The 5th Circuit Court of Appeals agreed, ruling that the Biden administration improperly relied on emergency regulatory authority to enact the program, bypassing normal procedures and depriving Americans of the opportunity to engage in a “public input period” on the plan.
Now the case is headed to the Supreme Court, with arguments tentatively scheduled for late February or early March 2023. In the meantime, the Supreme Court left the injunction blocking the program in place.
We won't know whether or not borrowers get forgiveness until the Court issues its ruling. This could technically happen anytime after oral arguments are heard, but the Supreme Court typically releases its major case decisions in June.
What if I already applied for student loan forgiveness?
If you already applied for the program, the Department of Education says on its website it will “hold your application.” We assume this means the application will remain valid until the matter is resolved in court — one way or the other.
Subscribe to the our monthly newsletter and we will keep you posted on information as further updates are available.
In the meantime, you still don't have to make any payments on your federal loans for at least a few more months.
Pandemic-era payment pause continues
The Biden Administration extended the pause on all federal student loan payments until 60 days after either June 30, 2023, or 60 days after the Supreme Court makes its decision — whichever date comes first.
In fact, no one has been required to make any federal student loan payments since March 2020, when Congress paused payments as part of the CARES ACT. Since then, there have been eight more payment pauses, including this latest extension, which will bring the total moratorium to over three years.
How to prepare for making loan payments again
Here are some tips to help borrowers best prepare for making payments again after a three-year break.
- Make sure the contact information on your StudentAid.gov profile has been updated.
- Review your auto-debit enrollment. If you aren't enrolled, for auto payments, you can sign up by logging into your loan servicer's website or by contacting your loan servicer directly.
- Check out the government's Loan Simulator to find a repayment plan that meets your specific needs and goals or to decide whether a consolidation could work for you.
- Consider applying for an income-driven repayment (IDR) plan. depending on your income and family size, an IDR plan can make your payments more affordable.
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