The Verdict is in on Student Loan Forgiveness: What’s the Next Move?

The Supreme Court issued its final ruling on student debt relief, ending a year-long period of uncertainty for borrowers. In a 6-3 decision, the conservative majority struck down President Biden’s plan to provide up to $20,000 in loan forgiveness to over 40 million borrowers. Chief Justice John Roberts wrote in the majority opinion, “The Secretary [of Education] asserts that the HEROES Act grants him the authority to cancel $430 billion of student loan principal. It does not.” “The question here is not whether something should be done; it is who has the authority to do it,” Roberts wrote, asserting that the administration needed direct authorization from Congress. Writing for the three liberal justices, Justice Elena Kagan said that the Court overreached its role in the nation’s governance in striking down the debt-relief program by granting the states standing and then determining that the HEROES Act does not authorize the plan. “Wielding its judicially manufactured heightened-specificity requirement, the Court refuses to acknowledge the plain words of the HEROES Act,” she wrote. “It declines to respect Congress’s decision to give broad emergency powers to the Secretary. It strikes down his lawful use of that authority to provide student-loan assistance. It does not let the political system, with its mechanisms of accountability, operate as normal. It makes itself the decision maker on, of all things, federal student-loan policy.”

So, what now?

Another path for debt relief:

President Biden announced that his administration will pursue an alternative path to providing student debt relief, using the Secretary of Education’s authority under the Higher Education Act of 1965. This path requires the administration to follow the regulatory rule-making process, which the HEROES Act avoided. The first step in the process of issuing new regulations is for the Department to issue a notice, which it did on Friday, June 30. The notice announced a virtual public hearing on July 18 (10 a.m. to 12 p.m. and 1-3 p.m. ET) and invites written comments from stakeholders. Information about the public hearing is available on the Department’s website.

New Repayment Plan:

The Department of Education has finalized the Saving on a Valuable Education (SAVE) plan, which replaces the Revised Pay As You Earn (REPAYE) plan. This new income-driven repayment plan offers benefits including reduced monthly payments, expanded financial protection, accelerated loan forgiveness, and interest-free relief.

All student borrowers in repayment will be eligible to enroll in the SAVE plan. Enrollment will begin this summer. Existing borrowers enrolled in the Revised Pay as You Earn (REPAYE) plan will be automatically transferred to the SAVE plan.

Protecting Borrowers:

The Department of Education has implemented a temporary “on-ramp” program. This program offers a 12-month period where late, missed, or partial payments will not result in credit bureau reporting, default status, or debt collection agency referrals. Existing borrowers do not need to take any action to qualify for this on-ramp.

What should borrowers be doing?

The Biden administration announced that student loan payments will resume in October, and interest will begin accruing on September 1.

• Access your student loan account to make sure that you know your account information and which company holds your loans. Your loan holder likely changed during the three-year payment pause.
• Watch for enrollment information for the SAVE plan later this summer.

Additionally, familiarize yourself with the negotiated rulemaking process and then participate. Attend the virtual public hearing on July 18 (registration coming soon) and consider submitting a written comment. Stay tuned for the Department to begin accepting written comments through the Federal eRulemaking portal (Docket ID ED-2023-OPE-0123. The comment period will go through July 18, 2023.