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Earlier this summer, the Supreme Court ruled to strike down Biden’s student loan forgiveness program, which would have canceled up to $20,000 of debt for roughly 43 million eligible borrowers.
Now that the program has been officially struck down, federal student loan repayment resumed in October. But the fight to help student loan borrowers is far from over. Both the Biden Administration and the Department of Education are working hard to provide targeted forgiveness, in addition to more affordable payment options to those who need it the most.
Why the Supreme Court struck down Biden’s student loan forgiveness plan
The Supreme Court ruled in a 6-3 decision that the Biden administration does not have the authority to forgive student loans without an act from Congress. The decision, announced on June 30, and written by Justice Roberts, says, “The HEROES Act allows the Secretary [of Education] to ‘waive or modify’ existing statutory or regulatory provisions applicable to financial assistance programs under the Education Act but… does not allow the Secretary to rewrite that statute to the extent of canceling $430 billion of student loan principal.”
The Supreme Court said such an expensive and broad plan couldn’t use the in-place policy to deal with national emergencies. The HEROES Act originally was meant to financially protect service members while they fought in Afghanistan and Iraq but has been used during the COVID-19 pandemic for actions such as the pause on student loan payments.
“Six States sued, arguing that the HEROES Act does not authorize the loan cancellation plan. We agree,” Roberts wrote. Any broad forgiveness plan would need to be approved by Congress.
Student loan payments restart in October
After the Supreme Court’s ruling, the Department of Education announced that federal student loans would begin accruing interest on September 1st, and payments officially restarted in October. This timeline was established as part of the debt ceiling deal on June 2nd and will not be extended again.
A new path to student loan forgiveness
Last week, the Administration announced plans to use the 1965 Higher Education Act (HEA) in a new initiative to cancel debt. Under this new proposal, five groups of borrowers would be eligible for automatic forgiveness:
- Borrowers whose balances are now greater than what they originally borrowed due to interest accrual.
- Borrowers who entered repayment “many years ago,” including those who started repayment before income-driven repayment and newer forgiveness programs were created.
- Borrowers who are eligible for forgiveness under income-driven repayment or another program but haven’t applied.
- Borrowers who took out loans to attend programs that didn’t provide enough financial value for them to be able to afford their loans.
- Borrowers who have experienced financial hardship due to their student loans and that continue to experience hardship — despite the available options — because their needs aren’t addressed by the current system.
This was followed by another announcement on Oct. 4, 2023, that the Administration will provide an additional $9 billion worth of relief to 125,000 borrowers. This is a result of more fixes to the student loan system that were preventing qualifying borrowers from obtaining relief.
This includes 53,000 borrowers who qualify for Public Service Loan Forgiveness but whose payments hadn’t been properly accounted for. About 51,000 of those borrowers have already been in repayment for at least 20 years. Around 22,000 borrowers will get their loans discharged due to total or permanent disability.
This recent announcement will bring Biden’s Administration’s tally on student loan forgiveness to a total of $127 billion.
What’s next for borrowers
More proposals for student loan forgiveness are likely to come in the future, but in the meantime, borrowers should prepare to repay their loans.
Borrowers may do this by applying to the new Saving on a Valuable Education (SAVE) plan — an updated version of Revised Pay As You Earn (REPAYE). The SAVE plan is one of four income-driven repayment options offered by the Department of Education and has been deemed “the most affordable” one.
With this plan, your payments could be as low as $0 a month if you earn $32,800 or less a year as a single borrower or $67,500 or less if you have a family of four. This plan also speeds up forgiveness for those with an outstanding balance of $12,000 or less.
For those who do not qualify for income-driven repayment and are having difficulty making payments, the Administration has implemented a 12-month “on-ramp” that can serve as a temporary solution.
During that time, the Department of Education will not refer missed payments to collections or credit agencies to allow borrowers to ease into repayment. This plan will help prevent student loans from going into delinquency and protect borrowers’ credit for a year.
After that, borrowers still in financial difficulty may qualify for student deferment or forbearance to give them more time before needing to pay their loans, although it should be used as a last resort.
As a seasoned expert and enthusiast in the realm of education policy and student loans, I bring a wealth of knowledge and understanding to shed light on the recent developments in student loan forgiveness, particularly concerning the Supreme Court's decision to strike down President Biden's program.
The Supreme Court's ruling, delivered in a 6-3 decision, centered on the constitutional limits of executive authority, asserting that the Biden administration lacked the power to unilaterally forgive student loans without explicit congressional approval. This landmark decision, announced on June 30 and articulated by Justice Roberts, invoked the HEROES Act, emphasizing that it allows the Secretary of Education to modify provisions but not to the extent of canceling a substantial amount—$430 billion—of student loan principal.
The Court's rationale was rooted in the belief that such a broad and expensive plan required legislative approval, highlighting the separation of powers and the need for congressional action for substantial policy changes. It is essential to note that the HEROES Act, initially designed to protect service members during military conflicts, became a focal point during the COVID-19 pandemic, including the temporary pause on student loan payments.
Following the Supreme Court's decision, federal student loan repayment resumed in October, and interest started accruing on September 1st. However, recognizing the ongoing challenges faced by student loan borrowers, both the Biden Administration and the Department of Education have been actively working to implement targeted forgiveness and introduce more affordable payment options.
A significant development in this regard is the Administration's plan to utilize the 1965 Higher Education Act (HEA) for a new initiative to cancel debt. Under this proposal, five groups of borrowers are eligible for automatic forgiveness, including those whose balances have grown due to interest accrual, borrowers who entered repayment many years ago, and those who took out loans for programs with insufficient financial value.
Furthermore, the Administration recently announced an additional $9 billion relief package for 125,000 borrowers, addressing issues in the student loan system that hindered qualifying borrowers from obtaining relief. This brings the total student loan forgiveness under Biden's Administration to an impressive $127 billion.
Looking ahead, more proposals for student loan forgiveness are anticipated. In the meantime, borrowers are advised to explore options such as the new Saving on a Valuable Education (SAVE) plan, an updated version of Revised Pay As You Earn (REPAYE), which is deemed the most affordable income-driven repayment option. Additionally, a 12-month "on-ramp" has been implemented to provide temporary relief, during which missed payments will not be referred to collections or credit agencies.
While the landscape of student loan forgiveness is evolving, these developments underscore the ongoing commitment to addressing the challenges faced by borrowers and creating more sustainable and equitable solutions in the realm of higher education finance.
