Although the Supreme Court blocked President Joe Biden’s original student debt relief plan, hope for some sort of loan forgiveness is not entirely lost. The Biden Administration has updated income-driven repayment plans to erase $39 billion of student loan debt.
Final decision: The Supreme Court ruling blocks the President’s plan to forgive student loans
Biden tried to put a loan forgiveness plan in place, but the Supreme Court put an end to it. Now the White House is moving forward with a different variation of debt relief.
The Plan
President Biden had originally planned to forgive up to $20,000 in student loans for around 40 million Americans. Low-income students who received Pell Grants would see up to $20,000 erased from their debt, and the majority of other borrowers would have had up to $10,000 stricken from their amount owed.
The Ruling
Biden’s plan relied on a 2003 law that gave the Secretary of Education the power to grant debt relief during national emergencies. Six states filed lawsuits against the plan, and the Supreme Court ultimately decided in a 6-3 ruling that the Biden Administration and the Secretary of Education did not have the authority to forgive those loans.
The SAVE Plan
When Biden learned his plan wasn’t going to pan out, he put out a statement telling Americans he was moving forward with a new idea: the Saving on Valuable Education (SAVE) Plan. The SAVE Plan keeps monthly payments small and protects borrowers from having interest stack up.
With the SAVE Plan, anyone who borrowed $12,000 or less would have their loans forgiven after 10 years. Every additional thousand dollars borrowed adds one year of monthly payments before a person’s debt is forgiven.
Income-Driven Relief
Income-driven repayment plans allow a person’s monthly payments on their student loan debt to be based on how much they earn in their jobs. Depending on the payment plan, borrowers have their loans forgiven after either 240 or 300 months of payments.
The Biden Administration says the companies that bill borrowers have been making mistakes that have put over 800,000 people years behind in paying off their loans. With the adjustments meant to fix those mistakes, many people will have met the threshold to have their loans forgiven.
Can the Supreme Court decision be challenged or appealed?
No, Supreme Court decisions cannot be appealed. The Supreme Court is considered the final judicial arbiter of federal law or the final decision-maker.
Can you still apply for debt cancellation?
Programs are available to forgive student loan debt, depending on your career choices and other circumstances.
Are you expected to return the refunded payments?
If you got a refund check for your student loan payments, you may still be on the hook for the full amount now that the Supreme Court struck down Biden’s plan. You should check with your lender to verify the amount you owe.
What if you cannot afford to make payments?
The amount you owe on your student loans can be adjusted depending on your income. Some people may be eligible to pay as little as $0 per month.
1. Apply for the new income-driven repayment plan
The federal government has four different types of income-driven repayment plans, each of which is based on the amount of money you earn. Learn more here for any of these four offered by the federal government.
- Revised Pay As You Earn Repayment Plan (REPAYE Plan)
- Pay As You Earn Repayment Plan (PAYE Plan)
- Income-Based Repayment Plan (IBR Plan)
- Income-Contingent Repayment Plan (ICR Plan)
2. Research unemployment deferment
If you are unemployed, you can fill out a form here to be allowed to defer your monthly payments for up to three years. You must be receiving unemployment benefits or working part-time while seeking full-time work.
3. Consolidate loans
Debt consolidation means you roll all of your debt, from a credit card or another loan, into one monthly payment. It helps some people keep track of payments and may result in a lower interest rate on some of your debt.
4. Refinance loans
Refinancing is often done to reach a lower interest rate. In some cases, people may save money because they won’t owe as much by the end of their loan. In other cases, people can move their loan to a longer period of time, which will accumulate more interest in total but result in a lower monthly payment.
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5. Consider the other loan forgiveness programs
The Biden Administration’s new debt forgiveness programs are not the only ones available. Check to see if you’re eligible for other types of student debt relief.
Public service loan forgiveness (PSLF)
People working for the government or for a nonprofit may be eligible for forgiveness of their student debt after 120 months of eligible payments.
Loan forgiveness for teachers and nurses
Perkins Loans allow certain teachers and nurses to have their student loan debt completely forgiven after five years of service. Others may have their debt partially forgiven. The Teacher Loan Forgiveness Program also grants relief to educators working in low-income areas.
State forgiveness programs
Individual states also have programs that assist with payments on student loans. Rather than erasing debt, you’re given money to help pay it off. This benefit is usually in exchange for employment in certain sectors. There’s also assistance for those who served in the military and in other public service sectors.
6. Look for student loan discharge programs
In some cases, student loans may be discharged altogether. This benefit may apply if the borrower has passed away or if the school the borrower was attending closed. Victims of forgery and people misled by schools can also be eligible for discharge.
Relief Lies Ahead
Although Biden’s original plan to forgive student loan debt fell through, changes are still happening that will benefit hundreds of thousands of people. You should also research different varieties of loan forgiveness to see if you’re eligible.
FAQ
Will the Supreme Court decision on student loan forgiveness impact private loan borrowers as well?
No, Biden’s plan is related to federal student loans.
How will the Supreme Court decision affect the borrowers who have already paid off their student loans?
Anyone who has paid off their student loans already will not be impacted.
Does the Supreme Court decision on student loan forgiveness affect all states equally?
Because this was a federal decision, all states are impacted in the same way. However, certain states have more people with student loan debt than others, so those areas would have stood to benefit more from loan forgiveness.
