You Could Still Qualify For Student Loan Relief Despite Supreme Court Student Loan Forgiveness Decision
If you’re like many Americans, the Supreme Court’s decision to strike down President Biden’s student loan forgiveness plan probably hurt – emotionally and financially. The Court’s decision was a big blow to financial health in America, but don’t get discouraged yet.
The Biden Administration is still working on student loan relief options. Today we’ll explore your options and what’s on the horizon as student loan payments resume.
What does the Supreme Court decision mean for me?
On June 30, 2023, the Supreme Court struck down President Biden’s student loan forgiveness plan. This decision means student loan payments will resume this fall for the first time in three years.
According to the US Department of Education, interest will begin accruing on student loans on September 1, 2023. Most borrowers will see their student loan payments resume in October of 2023.
While the Supreme Court’s decision presents difficulties for millions of Americans, changes are still coming to the student loan landscape that could provide some relief.
On-Ramp Option as Payments Resume
The first thing President Biden’s administration has done to help borrowers is create an “on-ramp.”
What is a loan “on-ramp?”
The on-ramp will run from October 1, 2023, to September 30, 2024. During this time, payments will be due. But if you can’t pay or can only make partial payments, the late or missed payments will not be reported to credit bureaus.
You also will not find yourself in default or collections for failure to pay.
And while interest will be accruing during this time, it won’t capitalize after September 30, 2024. This means unpaid interest won’t be added to the principal balance during the on-ramp period.
It’s important to note that missed payments will not count towards forgiveness under any of the income-driven repayment plans or Public Service Loan Forgiveness.
How does a loan “on-ramp” help me?
This on-ramp period provides a chance to build up to full payments and adjust your budget a bit more gradually instead of all at once. With inflation high and so many budgets already tight, this will be helpful for many.
If you can make your payments once repayments resume, it’s in your best interest to do so. But if you can’t or if you can only make partial payments, this on-ramp period can help you get back on track.
Repayment Plan Changes
Another measure the Biden administration is implementing to help borrowers on their path toward loan forgiveness is creating some changes to the current income-driven repayment (IDR) plans.
For those on IDR plans, a new plan called the Saving on a Valuable Education (SAVE) plan is being rolled out. SAVE will replace the current Revised Pay as You Earn (REPAYE) plan. If you’re currently on REPAYE, you’ll get the benefits of SAVE.
How is the SAVE plan different from the REPAYE plan?
- Like other IDR plans, SAVE calculates your payment based on your family size and your income. However, this plan will increase the income exemption from 150% of the federal poverty line to 225%.
- FOR EXAMPLE: If you’re single and make $32,800 or less a year ($67,500 for a family of four), your payment will be $0. That said, if you earn more than $32,800 per year, you could still see payment relief through SAVE.
- SAVE also eliminates 100% of the remaining interest for both subsidized and unsubsidized loans after a payment has been made.
- FOR EXAMPLE: Let’s say in a typical month, your payment is $15, but $20 of interest accrued that month. You’ll still pay $15, and the remaining $5 of interest would disappear.
What should I do about my repayment plan?
For complete information about SAVE and to apply for REPAYE now in order to be automatically shifted to SAVE when it becomes available, visit the US Department of Education here.
In addition to the SAVE plan, there are a few changes coming to other income-driven repayment (IDR) plans as well.
- When you apply for an IDR, you’ll have the option of connecting your application securely to the IRS. This will allow your tax information to be accessed securely, and you won’t have to enter it in.
- If you agree to have your information securely disclosed from the IRS, you’ll also be able to automatically re-enroll in your IDR plan annually. This will help save you time and keep you on the best repayment plan for your income.
Forgiveness Options Still Available
While the forgiveness plan proposed by President Biden is no longer an option, you could still qualify for other student loan forgiveness programs.
Public Service Loan Forgiveness
Public Service Loan Forgiveness (PSLF) is a forgiveness program available to those who work for the government or a not-for-profit organization.
To qualify, you must work full time for an eligible employer. You must also be on an income-driven repayment plan and make 120 on-time payments. These payments don’t need to be consecutive.
Learn more about PSLF and see if you qualify here.
Other Forgiveness Programs
Depending on what line of work you’re in and what state you live in, there may be other student loan forgiveness options available to you.
For example, there is a federal teacher loan forgiveness program that can help teachers reduce their student loan debt. Learn more and find out if you qualify here.
Other professions like nursing and medicine have their own loan forgiveness programs at the state level or provided by different national organizations. If you work in one of these fields, spend some time researching possible forgiveness options available to you.
Forgiveness for Long-Term Borrowers on Income-Driven Repayment Plans (IDR)
Under current IDR plans, borrowers are eligible for loan forgiveness after 20 years on an IDR plan. This forgiveness hasn’t always happened for each eligible borrower. President Biden’s administration is working to fix that.
There will be a one-time account adjustment that will affect borrowers on IDR plans.
If these borrowers should have had their debts discharged under the plan but didn’t, they will have them discharged as a result of this adjustment.
Account reviews have already started and are expected to continue into 2024.
The Department of Education will notify borrowers with enough payments to qualify for student loan cancellation. Learn more about IDR changes and if you need to take any additional steps here.
Student Loan Forgiveness Scams
As you’re looking to find legitimate student loan forgiveness options, it’s important to be aware of potential scams. These days, student loan borrowers face scams over the phone, via text, and via email.
Typically, scammers are insistent and say you must act immediately to qualify for a student loan forgiveness program before it’s discontinued, that space in the program is limited, or that your account was flagged for a program. Some scammers will even ask you to pay an upfront or monthly fee while they work on your loan cancellation.
While these offers sound good, they are often too good to be true.
To protect yourself from scammers:
- Don’t give out your student loan information to anyone other than your loan servicer or the government when asked.
- Don’t share your FSA ID or password. If you do share your FSA ID with someone then worry it’s a scam, log on and change your password immediately.
If you’re having trouble making payments on your loans, contact your servicer. They’ll be the one to help you work through your options. And if you want information about legitimate student loan forgiveness programs available to you, always start with www.studentaid.gov.
If you do find yourself being scammed on your student loan payments, contact your federal loan servicer. Then reach out to your bank or credit union to stop all payments. You can also submit a complaint to the US Department of Education.
While the up to $20,000 in student loan forgiveness originally proposed by the Biden administration has been struck down by the Supreme Court, changes are still being made to the student loan landscape. Some of these changes have the potential to change your repayments.
Just because one student loan forgiveness option is gone doesn’t mean they all are.
Consider all options. If you’re having trouble making payments or want to talk about your options, reach out to your federal loan servicer to see what is available to you.
Kimbree Redburn is an Accredited Financial Counselor® with a background in economic development. She works with her clients to help them understand their financial options and make money decisions with confidence. She believes that financial education gives people a chance to build a better life.