Student (Loan) Saga – Status
In August 2022, President Biden announced his plan to forgive $10,000 – $20,000 of student loan debt for many qualified borrowers. Not long after, a court order blocked the forgiveness until the Supreme Court could hear the case (but applications were still being accepted and borrowers were in limbo as to whether they’d receive any forgiveness). The Supreme Court eventually ruled against and struck down this plan. Over 16 million applications had been approved during this time but, unfortunately, those borrowers will not get relief under the proposed one-time plan.
Although this major 2022 forgiveness push was blocked by the Supreme Court, the Biden Administration has seen 3.4 million Americans have student loans discharged (to the tune of $116 billion) and are seeing another 804,000 people head toward forgiveness as we speak.
Some important updates and details on the 804,000 borrowers receiving forgiveness soon:
- The student loan payment pause will come to an end. Interest will again begin accruing on September 1st and payments will restart on October 1st.
- With the repayment pause ending, the U.S. Department of Education is working hard to make sure borrowers know and will be able to restart their monthly payments.
- An on-ramp period is being created to help borrowers who cannot afford their payments at this time. Over the next year, missed payments will not cause negative credit reports, defaults, or collections agencies to get involved.
- Learn more here.
- The U.S. Department of Education has created a new income-driven repayment plan called the SAVE Plan, which stands for Saving on a Valuable Education.
- Borrowers on the existing REPAYE (Revised Pay As You Earn) plan will be automatically shifted to the new SAVE Plan.
- This plan will reduce monthly payments for all borrowers on it and stop “runaway interest” that allows loan balances to grow to more than the initial balance.
- You can learn more here.
- In the past, there have been administrative failures that haven’t given accurate credit to some borrowers on income-driven repayment plans. President Biden is determined to fix this and it is in progress!
- An estimated 804,000 borrowers will be receiving (deserved) forgiveness totaling $39 billion through this most recent effort which will (accurately) increase the credits these borrowers have against their repayment terms. Most of these forgiveness programs require payments for 20-25 years before the loans are discharged and, with additional credits, many borrowers will eclipse that requirement for forgiveness.
- This plan was challenged in court and the judge threw the case out mid-August, so forgiveness is now underway.
We’ll continue to stay updated on the topic and share what we learn with you. Have questions? Contact us!