Student loan forgiveness put on hold again. Experts explain what’s next for debt relief

Not even a full day after the Biden administration’s student loan issue forgiveness plan got the green lighta Missouri judge blocked the plan again. If you have student debt, experts say you can expect a bumpy ride as this plan is fought out in court.

Student loan forgiveness programs and repayment plans have been ping-ponging the courts all year, leaving borrowers with whiplash and uncertainty about what comes next.

I spoke with two student loan experts to explain what’s happening with student loan debt relief plans and help you plan for all possible outcomes.

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What is Biden’s student loan forgiveness plan?

In April, the Biden administration announced a second attempt at broad student loan forgiveness, a plan that would provide relief to more than 25 million borrowers. Experts have been referring to the White House’s “Plan B” for broad forgiveness since the Supreme Court rejected its first plan in 2023.

You may be eligible for compensation through this plan if:

• Your federal student debt is more than the amount you initially borrowed, after interest has been deducted.
• Your federal student loan is more than 20 or 25 years old.
• Your trade school degree resulted in large amounts of federal student debt or low income.
• You are eligible for a federal forgiveness program, but have not applied.
• Your federal student loan has accrued $20,000 in interest, or you are a single borrower making less than $120,000 (less than $240,000 for married filers) and are enrolled in an income-driven repayment plan.

This plan is expected to be ready in the autumn. In preparation, the Department of Education emailed borrowers in August to let them know they may be eligible for this new plan and give them one month to opt out if they did not want to receive forgiveness.

Why is the student loan forgiveness plan ‘Plan B’ being put on hold?

In September, Republicans petitioned a federal court in Georgia to suspend this student loan plan. Although the courts generally do not suspend a plan until it is finalized, Mark Kantrowitz, a student loan and financial aid expert, explained to CNET in September that there were concerns that the Department of Education was planning to grant forgiveness grant as soon as the rule came into effect. went live. Typically, there is a 60-day review period after a rule goes live before it can be acted upon.

As a result, the Georgian court has imposed a temporary restraining order on this debt relief plan in September, blocking attempts at forgiveness. On October 2, the court decided to let the restraining order expire on October 3, transferring the case to a federal court in Missouri.

Republican-led states quickly petitioned to have the plan blocked again. Late in the evening of October 3, U.S. District Judge Matthew Schlep spoke granted a provisional injunction against the student loan debt relief plan, putting it on hold again until a final court decision is made.

What about SAVE? Is it still on hold?

The Biden administration’s Saving on a Valuable Education program, or SAVE, has been on hold for months.

SAVE is an income-driven repayment plan, or IDR, that first launched in 2023. Among IDRs, it offers some of the best student loan benefits for borrowers, including low monthly payments. Another benefit of SAVE is the opportunity to earn debt relief after paying off debt for 10 to 25 years.

This repayment and debt relief plan has been put on hold, pending two final court rulings, and may go to the Supreme Court for a final decision. If you are enrolled in SAVE, your payments will be suspended until the legal issues are resolved.

Is there anything borrowers can do to prepare?

Right now, Elaine Rubin, a student loan and policy expert at Edvisors, suggests preparing for all repayment scenarios.

“While both comprehensive forgiveness and the SAVE Plan are in jeopardy, borrowers need to understand the monthly costs of repaying their debts,” Rubin said.

If your payments are currently on hold, checking your balance and using the payment calculators on the StudentAid.gov site is a good place to start. Rubin suggests repaying your loans until they are fully paid off, in case either plan is rejected by the court.

“Borrowers should not make decisions based on the expectation of forgiveness. Even if forgiveness is approved, not all borrowers will qualify for forgiveness,” Rubin said.

There is one exception. If you qualify for forgiveness through a program like Public Student Loan Forgiveness and you are enrolled in SAVE, you may want to apply for a different income-driven repayment plan to get forgiveness faster. You will need to complete the online PDF and send it to your borrower. Expect this process to take several months.

Kantrowitz added that there isn’t much borrowers can do while these cases move through the courts. Expect final court decisions and likely appeals in the coming months. When a ruling is final, you can expect an update from the Department of Education explaining your options.

Read more: My student loan payments have been paused due to SAVE’s legal challenges. Here’s why