Supreme Court Nixes Biden's Loan Forgiveness Plan: What's Next for Borrowers?
Looking Forward to Biden’s Next Plan
The Biden administration has already announced a new plan designed to provide student loan relief to American borrowers. That plan would use the Higher Education Act as its avenue for offering student debt forgiveness (presumably, that plan would also forgive up to $10,000 in debt for most borrowers and up to $20,000 in debt for Pell Grant recipients).
Under the HEA, the U.S. Department of Education is entitled to “enforce, pay, compromise, waive, or release any right, title, claim, lien, or demand” related to federal student debt.
However, a public notice and comment period is required under the law. The Department of Education has already initiated the rulemaking process to begin a notice and comment period with respect to the new loan forgiveness plan.
Student borrowers should also note that the Department of Education has offered new relief for borrowers who will be required to restart payments later this year. Under that plan, financially vulnerable individuals who miss student loan payments between Oct. 1, 2023, and Sept. 30, 2024, will not be considered delinquent. That means those borrowers will not be reported to credit bureaus, placed in default or referred to collection agencies.
The Biden administration has also modified the income-based repayment programs that currently exist to provide relief for student borrowers. For borrowers with undergraduate loans, the percentage that borrowers will have to pay each month will be cut from 10% to 5% of discretionary income.
Individuals who earn less than $30,500 annually ($62,400 for married taxpayers) could have no monthly payments at all under the new plan. However, it is unclear when these new rules would take effect before payments resume in October.
Conclusion
Clients with student loan debt have faced months of uncertainty over the fate of Biden’s student loan forgiveness plan. For now, they should plan on restarting payments in a few short months — and pay close attention as the administration’s new plan progresses.
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