The Biden-Harris administration's plans to lessen the burden of student loan payments have had a bumpy road. The Supreme Court's June 30, 2023, decision blocked the Biden-Harris administration's student loan relief plan to wipe out up to $20,000 for each qualified borrower. Unfortunately for those who requested a refund for payments made during the student loan pause, no loan forgiveness means that borrowers now owe any previously refunded amount and will once again be responsible for eventually paying those funds back over the life of their loan(s).
Key Takeaways
- The Biden-Harris one-time student loan forgiveness plan was blocked by the Supreme Court.
- Any payments made during the payment pause that were refunded will now have to be repaid since the student debt forgiveness plan that would have covered these amounts has been struck down.
- The income-driven repayment (IDR) plan called Saving on a Valuable Education (SAVE) was implemented to speed up student loan forgiveness for those making steady payments.
- Other forgiveness programs may offer relief based on public service, profession, or attending a school charged with fraud.
What Happened With Biden's Plan?
Biden's plan to forgive up to $20,000 in student loans per borrower was struck down by the Supreme Court on June 30, 2023. With its demise came the resumption of interest accrual and payments due. Interest began accruing on Sept. 1, 2023, and payments resumed on Oct. 1, 2023.
Before the Supreme Court blocked Biden's plan, more than 16 million borrowers were conditionally approved for student loan forgiveness. While the plan was on hold, no debt was forgiven. Since then, borrowers have resumed repaying their loans.
On June 24, 2024, two federal courts approved injunctions that block parts of the Saving on a Valuable Education (SAVE) plan. A Kansas federal court temporarily blocked, among other things, the reduction in payments from 10% to 5% that was due to start July 1. A Missouri federal court, meanwhile, moved to halt forgiveness of any more loans for borrowers who had made the required number of payments, but it didn't reverse the loans that had already been granted forgiveness. Secretary of Education Miguel Cardona has stated the administration will defend the SAVE Plan, but until there are final judgments, student loan relief will remain in limbo.
On July 18, the 8th Circuit Court of Appeals issued a stay preventing any part of the SAVE plan from operating until a final rule can be made. Borrowers currently enrolled will be placed on an administrative forbearance. This forbearance won't count toward months of payment for income forgiveness. New applications are currently on hold.
Income-Driven Plans Offer Student Loan Forgiveness
Several repayment plans forgive student loans after a set number of payments. Income-Driven Repayment (IDR) plans include:
- Saving on a Valuable Education (SAVE): Replacing the Revised Pay as You Earn (REPAYE) plan, the SAVE plan should lower monthly payments for millions of Americans by increasing the amount of income protected from 150% of the federal poverty line to 225%. Some borrowers' payments may be as low as $0. If interest payments are higher than the minimum payment, interest amounts won't be added to the loan balance, ensuring that your student debt will not grow over time. The SAVE plan also allows for loan forgiveness after 120 payments for initial loan balances of $12,000 or less. Balances above that will be required to make 12 more payments for every $1,000 borrowed, with a cap of 20 years for undergraduate degrees and 25 years for graduate degrees.
- Pay as You Earn (PAYE) Plan: In the PAYE plan, payments are 10% of the borrower's discretionary income but will never exceed the standard repayment plan amount. Loans are forgiven after 20 years.
- Income-Based Repayment (IBR): Payment amounts depend on when you borrowed the money. If you borrowed after 2014, payments will be the same as on the PAYE plan. If you borrowed before 2014, they will be 15% of your discretionary income but not more than the standard repayment amount.
- Income-Contingent Repayment (ICR): The ICR plan requires either 20% of your discretionary income or what you would pay on a fixed payment plan of 12 years, adjusted according to income, whichever is lower. Loans are forgiven after 25 years.
The U.S. Department of Education has been in the process of executing a one-time payment count adjustment so that payments or months that weren't credited toward IDR forgiveness or Public Service Loan Forgiveness (PSLF) may now be included. This adjustment will apply to borrowers with William D. Ford direct loans and Federal Family Education Loan (FFEL) Program loans, in addition to previously consolidated Health Education Assistance Loan (HEAL) Program loans and Perkins loans.
Student Loan Forgiveness Based on Profession
There are several federal and state forgiveness plans based on your career choice, such as the following:
- Public Service Loan Forgiveness (PSLF): PSLF is available to people working in the U.S. public sector as well as certain not-for-profit organizations. Student loans are eligible for forgiveness after 120 qualifying payments.
- Teacher Loan Forgiveness: This program grants $5,000 in student loan forgiveness after five years of full-time teaching in a low-income elementary school, secondary school, or educational service agency. Certain subjects, such as math and science, may be eligible for up to $17,500.
Can My Student Loans Be Forgiven Based on Fraud?
More options exist—such as discharge for those who attended fraudulent schools "Borrower defense discharge" applies to students who attended a school that they felt misled or lied to entice them to enroll and take out loans. Borrowers can apply for borrower defense repayment individually, but the Biden-Harris administration is also forgiving large swathes of loans for students of schools proven to have misled potential enrollees. Examples of such institutions include the American Career Institute, Corinthian Colleges, Court Reporting Institute, DeVry University, ITT Technical Institute, Marinello Schools of Beauty, Minnesota School of Business, and Westwood College, among others.
Pandemic Pause Refunds Are Now Unavailable
Any payments made toward a borrower's student loans during the federal forbearance period were applied directly to the principal, which lowered the amount that started accruing interest when debt payments resumed in October 2023. After Biden announced his student debt forgiveness plan, borrowers who made payments during the pause were able to request a refund. However, the time to request a refund has come to an end.
If you requested and received a refund check, you'll be responsible for paying that amount back. The good news is that if you were eligible for a refund, you should be eligible for one of the IDR plans that lead to student loan forgiveness. If you saved some of your refunded money, you can pay off a lump sum of your debt.
Are Any Student Loans Going to Be Forgiven?
Broad student debt forgiveness or cancellation is no longer being offered following the Supreme Court's decision, even if you received a notice that you were approved for forgiveness. Now, the best path to forgiveness is through PSLF or one of the IDR plans, such as SAVE. Due to legal actions in June 2024, forgiveness through the SAVE plan is now uncertain until final judgements are assessed.
Do I Have to Pay Back My Refund?
All student loan payment refunds from the pandemic pause will eventually have to be paid back over the life of the loan(s). You can pay a lump sum to try and lower your principal and the amount accruing interest, or you can make payments through the standard repayment plan or an IDR plan, the latter of which will eventually lead to loan forgiveness.
When Did Interest Start Accruing Again on Student Loans?
Interest began accruing on student loans on Sept. 1, 2023, with payments resuming in October. Keep in mind this only applies to loans impacted by the pandemic-era forbearance. Some older federal loans and all private loans continued charging interest throughout the pandemic.
What Happens in an Administrative Forbearance?
While the SAVE plan is being evaluated, all borrowers are being placed in an administrative forbearance. This means that payments are paused due to an administrative or technical issue. Since an administrative forbearance isn't initiated by a borrower, interest rates are set to zero to prevent interest from accruing.
Administrative forbearance differs from general forbearance, the latter of which must be applied for in times of economic distress. General forbearance allows borrowers to pause payments, but loans still accrue interest.
Which Income-Based Repayment Plans Are Currently Available for Loan Forgiveness?
Although the SAVE plan has been placed on hold, other income-driven plans are still available, including the Pay As You Earn (PAYE) plan, Income-Based Repayment (IBR) plan, and the Income-Contingent Repayment (ICR) plan.
The Bottom Line
Blanket student loan cancellation is off the table, but there still are paths toward debt forgiveness available. If you received a refund for student loan payments made during the pause, you must repay it as part of your original loan amount. If your budget is already strained, an income-based repayment plan may help make payments more reasonable and put loan forgiveness within your reach.
