Student Loan Forgiveness: What to Know About the Supreme Court's Ruling
On June 30th, the Supreme Court struck down the Biden administration's widespread student loan debt forgiveness plan, which was set to impact millions of borrowers. The administration vowed to pursue other avenues. On July 14th, they announced over 800,000 borrowers will have their debt forgiven, totaling $39 billion worth of debt as part of reforms to the student loan system’s income-driven repayment plans.1 This is a developing story. Visit studentaid.gov/debtrelief for the most up-to-date information regarding student loan debt forgiveness.
Student loan debt forgiveness has become an increasingly pressing concern in recent years. On June 30th, the Supreme Court reached a verdict that ultimately struck down President Biden’s forgiveness plan. This guide sheds light on how this came to be and what borrowers can expect moving forward.
What happened to student loan forgiveness?
President Biden announced a plan for student loan debt forgiveness in August of 2022. Since then, legal challenges placed borrowers in limbo. Despite this, the Department of Education launched an online application for borrowers in October of the same year. A federal judge ruling in November prompted the Biden administration to stop accepting new applications, but by then they had already received 26 million.2 The issue went before the Supreme Court in June of 2023, where it was ultimately struck down.
Are borrowers on the hook for their outstanding student loan debt?
Yes. Student loan payments have been in limbo for some time. They were initially paused in March 2020 in response to the COVID-19 pandemic. Since then, the pause has been extended both by former President Trump and now President Biden. The pause expired on June 30th. Borrowers are expected to continue paying their student loan bill starting in October – even if their application for forgiveness was previously accepted – according to the Department of Education.
How should borrowers prepare?
Borrowers should reach out to their loan servicer as soon as possible. The loan servicer can answer questions unique to each borrower, such as the due date for their next payment, and provide information about possible repayment plans.
Can borrowers refinance their student loans?
Yes, borrowers can refinance both private and federal student loans. This may be beneficial if a loan’s rate is lower or if borrowers are consolidating multiple loans to simplify debt pay off. Note that refinancing a federal student loan would require borrowers to forfeit certain benefits and protections, such as income-driven repayment plans. Weigh the pros and cons before refinancing.