Source: The College Investor
The U.S. Supreme Court struck down President Biden's student loan forgiveness plan. This plan would have provided up to $20,000 in student loan relief to eligible borrowers.
The Supreme Court ruled the plan unconstitutional, saying the President exceeded his authority allowed using executive orders - specifically the powers granted under the HEROES Act.
For student loan borrowers, this is a big setback in getting student loan relief. Here's what you need to know.
US Supreme Court Strikes Down Biden Loan Forgiveness
In a 6-3 ruling on June 30, 2023, The U.S. Supreme Court found President Biden's student loan forgiveness plan to be unconstitutional - effectively permanently blocking the plan for taking effect.
While one case was tossed out for lacking standing, the MOHELA case was found to have standing (Biden v. Nebraska), and this is where the Supreme Court ruled against loan forgiveness.
As a refresher, President Biden wanted to use authority that he believed was granted under the HEROES Act to forgive $10,000 to $20,000 in student loans for eligible borrowers.
Borrowers who previously received a Federal Pell Grant will receive up to $20,000 in federal student loan forgiveness. All other eligible borrowers will receive up to $10,000 in federal student loan forgiveness.
To have been eligible, the borrower’s income during the pandemic (2020 or 2021) must have been less than $125,000 for individuals and $250,000 for married couples or heads of households.
Only Direct student loans that were owned by the government would have been eligible. This would have never applied to private student loans.
What This Means For Borrowers
For student loan borrowers, this is a setback. Many borrowers were counting on this relief before student loan payments resume.
As a result, borrowers will not be seeing their balances change.
Also, the student loan payment pause and interest waiver is set to expire on August 30, 2023. This means that interest on borrowers' loans will resume in September, and payments will be due again starting in October.
Other Paths To Student Loan Forgiveness
It's important to remember that, even without Biden's loan forgiveness plan, roughly 50% of all Federal student loan borrowers qualify for some type of loan forgiveness plan.
This includes popular programs like Public Service Loan Forgiveness, Teacher Loan Forgiveness, and loan forgiveness tied to borrowers' income-driven repayment plans. There are even state-based student loan forgiveness programs available - some are very generous!
Check out the complete list of loan forgiveness programs here.
Final Thoughts
While the U.S. Supreme Court ruling is disappointing for borrowers, the 42 months of the payment pause provided a lot of relief for many. Furthermore, borrowers shouldn't dismiss the changes coming next year with the new REPAYE student loan repayment plan - which could significantly lower borrowers' monthly payments.
Plus, many borrowers already qualify for various student loan forgiveness programs that exist via other legislation.
For borrowers who want to see action - contact your Congressional representative. One of the biggest issues that the Supreme Court ruled on was Presidential Power. There is no constitutional doubt that Congress can pass a law allowing loan forgiveness if it want's to.
Editor: Colin Graves Reviewed by: Chris Muller
Robert Farrington is the founder of The College Investor and is widely recognized as one of the nation’s leading voices on student loan debt and saving for college. He holds an MBA from UC San Diego Rady School of Management and has spent over 15 years researching, writing, and advising on student loans, 529 plans, financial aid programs, and saving and investing for young professionals.
Robert has been featured in the The New York Times, The Wall Street Journal, The Washington Post, NBC News, and Forbes, where he has been a regular personal finance contributor for over a decade. His work combines both professional expertise and personal experience – he successfully navigated his own student loan repayment journey and has helped thousands of readers do the same.
He is committed to making the intersection of personal finance and education transparent and accessible. You can learn more about Robert on the About Page or on his personal site RobertFarrington.com.