What is Happening with Student Loan Forgiveness Now?
This article breaks down current news and questions regarding student loan forgiveness.
By Al Dickenson — August 2, 2023
In the last few weeks, there have been countless headlines about student loan forgiveness. Most of them are centered around questions like the following: What is happening with the program? Is it legal or authorized? When will student loan payments resume? Are there other options for forgiveness, and, if so, are the action items for me to take on or the federal government? With all of that, it is understandable why people could be confused. Before diving into some of the answers to the above questions, a little context may be beneficial.
What is the Student Loan Forgiveness Program?
In late June, the United States Supreme Court ruled that the federal government could not unilaterally forgive billions of dollars of student loans to millions of borrowers by using the Higher Education Relief Opportunities for Students (HEROES) Act. That legislation was passed in 2003, in the wake of the September 11, 2001, terrorist attacks and the War on Terror in Iraq and Afghanistan. Its intention was to relieve students who borrowed their loans if they had been impacted by military conflicts or other national emergencies. In August 2022, President Joe Biden's Secretary of Education, Dr. Miguel Cordona, reasoned instances like the COVID-19 pandemic constituted a national emergency. However, given the unprecedented nature surrounding this decision, among them the pandemic and the sheer dollar amount discussed, the Supreme Court unanimously decided that there was no standing for this case. This program would have forgiven up to $20,000 for Pell Grant recipients and half of that to other borrowers, which would have impacted the economy in many ways, perhaps both positively and negatively.
What is Happening Now?
In the wake of the Supreme Court's ruling, several other options have gained notoriety concerning student loan forgiveness. Since the decision, the federal government has forgiven loans for over 800,000 borrowers, totaling more than $39 billion. The basis for this is the timeline for payment plans. Under the newly unveiled program, borrowers can use the Saving for a Valuable Education (SAVE) plan to reduce their payment burden. This program allows borrowers to pay as little as $0 every month towards their loans, whereas the average required payments are much higher. Similarly, while this plan is in effect, borrowers could see a continued freeze in their interest accrual. While this plan would not "forgive" the loans, at least not right away, it would greatly reduce the financial hardships experienced by borrowers. There is no lump sum forgiveness. Instead, this would be a time intensive and complex process, but potentially worth the effort, should borrowers need the assistance. The SAVE plan stems from the Department of Education's previous iteration of an extended repayment plan, called the Revised Pay as You Earn (REPAYE) plan.
While the proposed forgiveness plan, now shot down by the Supreme Court, would have cost taxpayers over $400 billion, this new plan could range in costs from $138 to $360, depending on which estimate is considered. This new plan is part of the new push to highlight income driven repayment programs. Since the Court's ruling, and even beforehand, some were pushing for President Biden to enact this legislation or executive order. Some argue that the amount forgiven under this newly proposed plan could actually be more than the $10,000 originally thought.
There are other options for those seeking forgiveness. If a person works in the public sector and has been paying off their loans for a decade, they can apply for the Public Service Loan Forgiveness after they have made 120 qualifying payments to their loan servicer. While this usually takes a great deal of time to accomplish (at least a decade, barring unforeseen circumstances), it is possible to have your loans forgiven this way as well.
It is also important to note that student loan interest accrual is still frozen through September 2023, meaning payments do not resume until October 1, 2023. The freeze began in March 2020, under President Donald Trump, as a temporary forbearance on interest. Since those freezes began, borrowers could have paid off part or all of their loans. However, many individuals choose to allocate funds elsewhere, in hopes that the loans would be forgiven under President Biden. The freeze has been extended a total of nine times under both presidents, which has helped an estimated 44 million borrowers. For those who were denied student loans, there is no need to worry about this program's cancellation or succeeding programs' success.
There are other considerations when thinking about your student loan payment or forgiveness planning. Though payments and interest accrual are set to resume this fall, there could be additional waves of income driven forgiveness, similar to the one which occurred in mid-July. Additionally, data processing issues, computer glitches, and other problems could delay some work on this massive project. Remember, this is a very new program and process, and it is subject to pitfalls and setbacks like any project, like the Supreme Court's ruling. The forgiven loans have already helped thousands of borrowers across the country, from Texas to Wisconsin, North Carolina to Oregon. There will undoubtedly be more changes to this process, so the best advice for students would be to continue reading news outlets covering the topic while also being aware of scams and misinformation stemming from places like social media. There is some time before October, so borrowers also have time to prepare to send in their first payment in more than three years.
Al Dickenson
Al Dickenson graduated from Wisconsin Lutheran College with bachelor’s degrees in history, communication, and English. He currently serves as an editor for an international equine practitioners’ magazine in and around Milwaukee, Wisconsin, his hometown, where he lives with his wife.
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