What’s next after Supreme Court blocks student loan forgiveness

The Supreme Court ruled on June 30 that the administration of President Joe Biden exceeded its authority in trying to implement a one-time student loan forgiveness plan.

Biden’s plan would erase federal student loan debt from $10,000 to $20,000 for those with annual incomes of less than $125,000 for individual borrowers and less than $250,000 for households.

VERIFICATION is breaking down what borrowers need to know following the Supreme Court decision, including when to restart payments and whether the Biden administration is considering other options for debt forgiveness. .

When will student loan payments begin again?

Student loan interest will begin to accrue on September 1, 2023, and payments will be due starting October, according to the website of the ministry of education. The department said it would “notify borrowers thoroughly before restarting payments.”

This is because of the debt ceiling agreement that Biden signed into law in early June. It sets an end date for the moratorium on federal student loan payments starting on March 13, 2020ask them to continue 60 days after June 30.

Federal student loan borrowers are not required to make monthly payments as of March 2020, and their loans are interest-free during the pause.

Add word VERIFICATION: Yes, debt ceiling agreement requires student loan payments to restart

While the pause is coming to an end, some borrowers who are unable to pay their loans won’t be penalized right away.

The Department of Education is setting up an “accelerated” repayment for 12 months from October 1, 2023 to September 30, 2024, White House says. That means “financially vulnerable borrowers” ​​who fail to make their monthly payments during this period will not be considered illegalreported to credit bureaus, defaulted or referred to collection agencies.

“Skillful borrowers should, but this accelerated period gives borrowers who are unable to make immediate payments the time it takes to adjust, allowing them to eventually make their payments. monthly payments and meet their financial obligations on their loans,” the White House said.

Is the Biden administration pursuing other options for reducing student debt?

After the Supreme Court’s decision, Biden administration announced that it is taking steps “with the aim of reducing debt to as many borrowers as possible, as quickly as possible, and supporting student loan borrowers.”

Education Secretary Miguel Cardona has “initiated a rule-making process” that opens up another avenue for student debt relief under the Act. Higher Education Act, the White House said. It’s unclear what a potential student loan forgiveness plan will entail.

Cardona said in a tweet that his department is “using every tool available to provide needed relief.”

Department of Education make an announcement announced a virtual public hearing on July 18 and requested written comments from stakeholders on topics to consider in alternative pathways to student debt relief. Following the hearing, the department is expected to begin “rule-building negotiations” sessions in the fall.

Is there a new income-based repayment plan for borrowers?

As part of the Biden administration’s response to the Supreme Court’s decision, the White House also announced that it had finalized the Supreme Court’s decision. Saving for a Valued Education Plan (SAVE).

All borrowers will be eligible to enroll in this income-based repayment plan later this summer before monthly payments are due. According to the White House, borrowers who sign up for or have signed up for the existing Revised Pay as You Earn (REPAYE) plan will automatically be enrolled in SAVE once it’s rolled out.

• Reduce the amount college borrowers pay each month from 10% to 5% of Discretionary income.

• Increased income levels are considered non-discretionary and are protected from repayment, ensuring that no borrower with an annual income equivalent to the $15 minimum wage will have to make monthly payments.

• Forgive loan balances after 10 years of payments, instead of 20 years, for borrowers with an initial loan balance of $12,000 or less.

• No unpaid monthly interest is charged to the borrower, so the borrower’s loan balance will not grow as long as they make the monthly payments.

Do borrowers have other options for pausing student loan payments?

Student loan borrowers who are in “short-term financial constraints” can eligible for postponement or postponement, said the Ministry of Education. Both of these options allow borrowers to temporarily suspend their payments.

However, loan interest will usually still accrue while your loan is deferred or deferred – you won’t be penalized for non-payment. This means your balance will increase and you will end up paying more over the life of the loan.

Are there any other federal student loan forgiveness programs?

Several other student loan forgiveness programs that have existed for many years are still in place following the Supreme Court ruling. However, only borrowers who meet specific conditions are eligible for them.

One program is the Public Service Loan Loan (PSLF), which forgives a borrower’s direct loan if they work in some public service job and make 120 payments on their loan. The Department of Education says it approved $42 billion for 615,000 borrowers in the PSLF as of October 2021.

Any borrower with an IDR plan will have their remaining loans written off after making payments 20 to 25 years. The Department of Education says whether you have a balance left to forgive depends on how large your income is relative to your debt.

The Department of Education also regularly clears student loan debt for borrowers who have been scammed or misled by certain universities in a program called Borrower protection. They are usually for students who attend for-profit colleges that no longer exist, such as the Institute of Technology ITT.

Other forgiveness programs listed by the Department of Education Federal Student Aid Website includes forgiveness programs for teachers, people with disabilities, the deceased, and those who have filed for bankruptcy.

Add word VERIFICATION: No, the Supreme Court ruling does not eliminate other student debt relief programs

How is student loan forgiveness different from Paycheck Protection Program (PPP) loan forgiveness?

Some, including US lawmakers, have compared the proposed student loan forgiveness to the Paycheck Protection Program (PPP) loan forgiveness.

PPP, which aims to help businesses keep their workers employed during the COVID-19 pandemic, has provided loans worth up to $10 million to most small businesses, individuals and nonprofit organization with fewer than 500 employees through May 2021.

The Pandemic Response Accountability Commission (PRAC), which tracks how pandemic relief funds are used, said in its October 2022 update that average PPP loan forgiveness amount is $72,100 — $50,000 more than the maximum amount Biden proposed for student loan forgiveness.

Andrew Lautz, director of federal policy at the National Taxpayers Union, told VERIFY, but student loan forgiveness and PPP loan forgiveness “isn’t quite a bold comparison.” “.

While Congress created the PPP and its accompanying loan forgiveness through federal law, the Biden administration has attempted to use other methods to clear student debt.

Nicholas Creel, a constitutional law expert at the University of Georgia and State University, said: “The law President Biden is using is not very clear when these types of mass forgiveness programs can be implemented. .

More words VERIFY: Yes, the average waived PPP loan is much higher than a $20,000 student loan

VERIFY digital journalist Emery Winter contributed to this report.