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The first student debt cancellation plan proposed by President Joe Biden had a brief but intense life. Biden declared in August 2022 that qualified borrowers would have up to $20,000 in federal student debt forgiven. By November, federal judges had frozen the proposal. The Supreme Court declared the plan unconstitutional in June.
Following the Supreme Court decision, Biden stated in a press conference that “today’s decision has closed one path.” “Now, we’re going to pursue another. I’m never going to stop fighting for you. To help you achieve your goals and get the student loan relief you require, we’ll use every resource at our disposal. ”.
This fall, the regulatory procedure for this new route commenced, providing information about what it might contain. Its purview is more limited, it is supported by a different statute, and the earliest debt forgiveness possible is 2025.
But don’t count on success yet. This is what we currently know—and don’t know—about Biden’s “Plan B” for canceling student loans.
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Just months before student loan payments are scheduled to resume after a years-long break, the Supreme Court invalidated President Joe Biden’s student loan forgiveness program on Friday, preventing millions of borrowers from receiving up to $20,000 in federal student debt relief.
Although Biden had announced the student loan forgiveness program in August of last year, it was never implemented because it was delayed by months of legal issues.
Later on Friday, the president declared that, in accordance with a separate statute from the one that the now-defunct student loan forgiveness program was connected to, his administration will pursue an alternative route to provide some relief from student debt.
This route necessitates a formal rule-making procedure by the Department of Education, which usually takes months. Information about who might gain if that process is successful was not made public on Friday.
Additionally, Biden stated that when monthly student loan repayments start up again in October, the administration will take action to make the transition easier for borrowers. Borrowers will be able to avoid penalties if they miss a payment during the first 12 months thanks to this “on-ramp” period.
Ways borrowers can still seek debt relief
Many borrowers now find it simpler to apply for federal student loan forgiveness through a number of debt cancellation programs that are already in place thanks to the Biden administration.
Aiming to assist government and nonprofit workers, the Public Service Loan Forgiveness program may expand eligibility under new rules that go into effect in July.
Additionally, a new income-driven repayment plan proposal aims to decrease the monthly payments made by qualified borrowers as well as the total amount repaid over time. According to the administration, this plan was completed on Friday, and borrowers will be able to utilize it before their loan payments are due this summer.
Under a program called borrower defense to repayment, the Department of Education has also made it simpler for borrowers who were deceived by their for-profit college to apply for student loan forgiveness, as well as for those who are permanently disabled.
The Biden administration has authorized targeted loan relief totaling more than $66 billion to nearly 2 2 million borrowers.
Student loan payments will restart soon
Payments for student loans are due in October, according to the Biden administration, regardless of how the Supreme Court rules on the program’s one-time forgiveness.
Since March 2020, when Congress passed a comprehensive aid program to assist people struggling financially due to the Covid-19 pandemic, the majority of student loan borrowers are not required to make payments on their federal student loans.
Eight pause extensions have been made since then, during the administrations of both Trump and Biden.
A bill pertaining to the debt ceiling that was passed in early June forbids extending the pause once more.
However, the Biden administration announced on Friday that it will give borrowers who are reentering payments a 12-month on-ramp period.
Miguel Cardona, the education secretary, stated in a statement that “borrowers who can make payments should do so as payments will resume and interest will accrue.”
“However, the on-ramp to repayment will assist borrowers in avoiding the most severe repercussions of missing, partial, or late payments, such as having loans referred to collection agencies and negative credit reports,” he continued.
A White House fact sheet states that during the on-ramp period, borrowers will not be reported to credit bureaus, be deemed in default, or be referred to collection agencies for late, missed, or partial payments.
Here’s what borrowers should do now
Experts on student loans advise borrowers to contact their loan servicer as soon as possible with any inquiries they may have regarding their loans.
Following such an extended break, many debtors might be unclear about their debt amounts, due dates, and payment options. Since their last payment, millions of borrowers’ student loans will be managed by a different servicer.
If borrowers are concerned that they won’t be able to make their monthly payment, they should also get in touch with their servicer. They might qualify for an income-driven repayment plan, which bases payments on family size and income but necessitates certain documentation submission from the borrower.
Federal student loan borrowers can check the FSA website for updates on resuming payments.
Even if they gave their approval for the withdrawals prior to the pause starting, borrowers will still need to reauthorize the automatic debit from their accounts in order to cover their monthly loan bill.
The National Association of Student Financial Aid Administrators advises borrowers to exercise patience when getting in touch with their student loan servicer, as they may currently be overloaded with requests.
The organization states, “It’s possible you won’t get through to your servicer the first time you call, and you might have to call a few times before connecting.”
What happened to the student loan forgiveness program
Despite the Biden administration receiving roughly 26 million applications for relief last year and approving 16 million of them, no debt had been cancelled.
The $400 billion program would have satisfied Biden’s campaign pledge to waive part of the debt associated with student loans. However, a number of states with Republican governors and other conservative organizations sued the administration over the program, arguing that the executive branch lacked the authority to cancel student loans in such a broad way as was suggested.
Additionally, detractors point out that the one-time student loan forgiveness program raises the possibility of tuition increases while doing nothing to address the expense of education for incoming students. Republicans and a few Democrats voted in favor of a bill that would stop the program. The measure was approved by the Senate and the House, but Biden vetoed it in the first few days of June.
Who would have received debt relief?
Individual borrowers making less than $125,000 in 2020 or 2021, as well as married couples or heads of households making less than $250,000 annually, would have had up to $10,000 of their federal student loan debt forgiven under Biden’s proposal for student loan forgiveness.
A qualified borrower would have been eligible for up to $20,000 in debt forgiveness if they had also been awarded a federal Pell grant while attending college.
Millions of low-income students receive Pell grants every year, which are determined by a number of factors such as the size and income of their family and the cost of their college. These borrowers also have a higher probability of having difficulty repaying their student loans and going into default.
The administration estimated that roughly 20 million borrowers would have seen their entire federal student loan balance wiped away.
An independent analysis from the Penn Wharton Budget Model found that about two-thirds of the student debt cancellation would have gone to households making $88,000 a year or less.
This story has been updated with additional information. Ad Feedback Ad Feedback Ad Feedback Ad Feedback Ad Feedback.
FAQ
Has student loan forgiveness been approved?
With today’s announcement, the Biden-Harris Administration has authorized $136 in total loan forgiveness. 6 billion for more than 3. 7 million Americans.
Has anyone actually gotten student loan forgiveness?
Under the Biden administration, more than 3. A number of executive actions have resulted in the forgiveness of debt for 7 million borrowers of student loans.
How will I know if my student loan will be forgiven?
How can I find out if my student loans are forgiven? You will receive a notification letter from the loan servicer or Department of Education if you are eligible for loan forgiveness under PSLF, Teacher Loan Forgiveness, or IDR discharge. Your account settings will determine whether you receive the letter by mail or electronically.
Is it too late for student loan forgiveness?
Student Loan Forgiveness Considerations As Student Loan Payments Resume. The Education Department states that borrowers must use the federal Direct consolidation program to combine their loans in order to be eligible for student loan forgiveness under the IDR Account Adjustment by December 31, 2023.
Read More :
https://www.cnn.com/2023/06/30/politics/biden-student-loan-forgiveness-supreme-court/index.html
https://www.ed.gov/news/press-releases/biden-harris-administration-announces-additional-9-billion-student-debt-relief