US President Joe Biden waves as he boards Air Force One at Joint Base Andrews in Maryland on March … [+]
The Biden administration’s student loan forgiveness and debt relief initiatives continue to evolve. Timelines, deadlines, and key dates have been in flux, and it can be challenging for borrowers to keep track.
Here’s where things stand.
Supreme Court’s Student Loan Forgiveness Ruling
Biden unveiled his unprecedented mass student loan forgiveness initiative last year. The plan would provide up to $20,000 in one-time student debt relief for up to 40 million borrowers. The Education Department estimates that over 26 million borrowers applied for relief under the plan, and over 16 million were approved.
But before anyone could receive relief, federal courts blocked the program last fall in response to multiple lawsuits. The Biden administration appealed two adverse court decisions to the U.S. Supreme Court, which held a hearing last month. Top Biden officials, including the President himself, have expressed confidence in the program’s legality. But it is unclear how the Supreme Court will ultimately rule.
Court observers widely expect the Supreme Court to issue a decision by June 30. If a majority of justices green-light the program, borrowers may start receiving student loan forgiveness within weeks of that ruling. But if the Court strikes down the program, the Biden administration may have to go back to the drawing board.
New Student Loan Forgiveness Regulations Are Coming
The Biden administration has finalized sweeping new regulations that will impact many existing federal student loan forgiveness and discharge programs, including:
- For Public Service Loan Forgiveness (PSLF), the new regulations will expand the definition of “qualifying payments” to include additional periods of deferment and forbearances, and borrowers can receive credit toward student loan forgiveness for payments that were made late, in installments, or in a lump sum.
- For Borrower Defense to Repayment — a program that can discharge the federal student loan debt for borrowers who were misled or defrauded by their school — the new regulations will expand the categories of school misconduct that can be the basis for a student loan discharge, will make it easier for the Education Department to grant group discharges, and will provide a formal appeal and reconsideration process for borrowers denied relief.
- For the Total and Permanent Disability (TPD) discharge program, which can discharge the federal student loan debt for medically disabled borrowers, the new regulations will make it easier for Social Security disability benefits recipients to qualify, and will expand the categories of medical professionals who can certify that a borrower qualifies for a TPD discharge. The regulations will also eliminate post-discharge income monitoring.
The new regulations will go into effect on July 1, and will also include other significant changes, including limiting future interest capitalization.
Student Loan Pause Likely Ending
The national student loan pause is now entering its fourth year. Originally enacted in response to the Covid-19 pandemic, the pause has suspended payments and interest on government-held federal student loans, and stopped all collections efforts against defaulted federal student loan borrowers, since March 2020.
President Biden’s most recent extension of the student loan pause is set to end 60 days after either June 30 or the date that the Supreme Court rules on the administration’s student loan forgiveness plan (whichever occurs first). That means that effectively, federal student loans covered by the pause would resume repayment by around August 30.
There is always the possibility that Biden could extend the student loan pause yet again. That seems somewhat less likely to happen now if the administration ends the Covid-19 national emergency in May, as officials have previously announced they will do. However, if the Supreme Court rules against Biden’s student loan forgiveness plan, advocates are calling on the administration to extend the pause further.
Student Loan Forgiveness Under IDR Account Adjustment
Last year, the Biden administration announced the IDR Account Adjustment, a one-time initiative designed to give millions of borrowers retroactive credit toward student loan forgiveness under income-driven repayment (IDR) plans. Under the initiative, the Education Department will conduct a one-time adjustment that will count many past periods of repayment, as well as some past periods of deferment and forbearance, toward a borrower’s 20- or 25-year student loan forgiveness term, even for borrowers who aren’t currently in IDR plans.
According to the Education Department, borrowers who receive enough credit to reach or surpass the 20- or 25-years of credit needed for student loan forgiveness “will begin to see their loans forgiven in spring 2023.” Another 3.6 million borrowers are expected to receive three or more years of retroactive credit toward loan forgiveness, effectively shortening their remaining time in repayment.
Borrowers who already have government held or Direct federal student loans can benefit from the IDR Account Adjustment automatically. “Borrowers who have commercially managed FFEL, Perkins, or Health Education Assistance Loan (HEAL) Program loans should apply for a Direct Consolidation Loan” in order to benefit from the initiative, according to the Education Department. The department has moved the consolidation deadline several times — first, it was January 1, 2023, and then May 1, 2023. Last week, the department quietly moved the deadline again to December 31, 2023.
Further Student Loan Forgiveness Reading
4 Student Loan Forgiveness Updates After Supreme Court Hearing
What Happens If The Supreme Court Strikes Down Biden’s Student Loan Forgiveness Plan?
