Student Loan Forgiveness: What You Need to Know

Some of the more than 40 million student loan borrowers were excited to learn last year of President Biden’s student loan forgiveness plan. The administration wanted to forgive up to $10,000 of student loan debt for eligible borrowers, and up to $20,000 in student loan debt for eligible Pell Grant recipients. 

Unfortunately, after about half of those borrowers applied for student loan forgiveness and were essentially approved, applications for the program were put on hold due to legal challenges from organizations claiming that student loan forgiveness violates the law. Now the U.S. Supreme Court has struck down Biden's student loan forgiveness plan.

So, if you have a student loan, you’re probably wondering what all of this means for you. 

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Supreme Court strikes down Biden's student loan forgiveness plan

• The Biden administration unveiled its student loan forgiveness plan during the pandemic. 
• Now that the Court has struck down Biden's plan, Congress would have to approve student loan forgiveness. The Biden administration says it will announce some new protections for student loan borrowers. The Department of Education will also "automatically" forgive some student loans due to changes to income-driven repayment plans rules.
• The original plan was to provide debt relief to millions of borrowers by forgiving up to $10,000 of student loan debt for eligible borrowers, and up to $20,000 in student loan debt for Pell Grant recipients. To be eligible borrowers had to have individual income less than $125,000, or $250,000 for married borrowers filing jointly. 

Most borrowers who wanted student loan forgiveness needed to apply for it. (That application was blocked because of a court ruling after nearly 26 million people had already submitted applications). Borrowers were also told at that time that they could opt out of student loan forgiveness if they wanted to. 

Additionally, borrowers who worked for nonprofit organizations, the military, or other Tribal and government entities could have some, (or all) of their federal student loans forgiven if they qualify for the Public Service Loan Forgiveness (PSLF) program. (That program was temporarily expanded to make more people eligible.)

What about private student loans? Biden student loan forgiveness didn't apply to private student loans. Private student loans are issued by financial institutions (e.g., banks and credit unions), not the U.S. Department of Education. 

Is it possible to get your student loans forgiven?

The Biden administration couldn't forgive any student loans until the Supreme Court decided whether the program is legal. Now that the Court has struck down Biden's plan, Congress would have to approve a broad student loan forgiveness plan. The Biden administration says it will announce some new protections for student loan borrowers.

What happened with the Supreme Court and student loan forgiveness? The Court's ruling involved two cases brought against student loan forgiveness. (One case was dismissed by the Supreme Court and the other was upheld.) 

• Opponents of Biden’s plan said that the Biden administration didn't have the power to implement a nearly $500 billion change to student loan rules. They also argued that student loan forgiveness would create an unfair benefit and harm some states, and a major student loan servicer.
• The Biden administration argued that the authority to forgive student loans fell under the HEROES Act and that the COVID-19 pandemic warranted debt relief for millions of federal student loan borrowers. 
• However, the Supreme Court ruled on June 30, that the Biden administration didn't have the authority, without Congressional approval, to enact sweeping federal student loan forgiveness.

What happened to student loan applications?

Before applications for student loan forgiveness were blocked, 16 million borrowers had applied and been essentially approved to have some or all of their student loan debt forgiven. The Department of Education was holding onto all previously submitted applications while the case made its way through the courts. It's unclear what, if anything, happens with those applications in the future.

What about student loan payments?

Student loan payments are currently on pause but will resume this fall. Initially, those payments on federal student loans were supposed to resume at the beginning of 2023, but because of the Supreme Court ruling, the Department of Education extended the pause on student loan payments. Then, due to a debt limit agreement in Congress in June, payments are now required to resume.

Bottom line: Have a repayment plan for your student loan

When President Biden’s student loan forgiveness plan was first introduced, it was estimated that nearly 15 million borrowers could have had all of their student loan debt forgiven. Millions of others would have their balances and payments reduced. 

While that plan is gone now, it’s important to know that some reductions in student payments could still come as a result of changes the Biden administration is making to income-driven repayment plans for example. So, if you have a federal student loan, you may want to consider whether the income-driven repayment plan or other plans that aren’t affected by litigation (like PSLF), could benefit you.

The IRS is also encouraging employers and employees to consider employer education assistance programs, which can provide up to just over $5,200 tax-free per employee. For the next two years or so, employer-provided funds from those programs can be used to help repay student loans.

Also, although student loan payments are on pause and interest is not currently being charged on student loans, you still want to have a plan to repay your student loan. Student loan payments will resume this fall.

Consider whether you want to make student loan payments between now and the end of August while no interest is being charged. You will also want to sign up for updates from the Department of Education. 

And, if you have private student loans and are struggling with your payment, you may want to contact your lender to see if you can negotiate more favorable loan terms.