Student loans have always been a topic shrouded in confusion for many individuals, Motley Fool wrote on their website, and recent developments in loan repayments and forgiveness have only added to the complexity.
Biden’s Student Debt Relief
Last year, President Joe Biden introduced a plan to forgive a portion of student loans, with up to $20,000 in forgiveness for borrowers earning under $125,000 per year (or $10,000 for non-Pell Grant recipients).
However, the plan has faced legal challenges, and its fate now rests with the Supreme Court, which is expected to announce its decision in the coming weeks.
The uncertainty surrounding the fate of loan forgiveness has led many to speculate that the plan may be struck down, particularly given the conservative majority within the Supreme Court.
Lawsuits against the forgiveness plan argue that President Biden overstepped his authority by implementing the plan without Congressional approval. In response, the White House contends that the authority to modify federal student loan laws during a national emergency, such as the COVID-19 pandemic, falls within the purview of the Secretary of Education under the HEROES Act of 2003.
However, regardless of the Supreme Court’s ruling on the loan forgiveness plan, it is important to remember that student debt relief is still a possibility. The federal government has provided relief in the past, with both Biden and former President Trump pausing loan repayments during the pandemic under the HEROES Act. Additionally, the Department of Education has already granted over $10 billion in student loan relief through the Public Service Loan Forgiveness (PSLF) program.
Biden’s Student Debt Relief Backup Plan
Even if the current forgiveness plan is struck down, the government has various avenues through which it can offer debt relief. It is conceivable that loan forgiveness could be determined on a case-by-case basis, with borrowers required to demonstrate financial hardship resulting from the pandemic to qualify for forgiveness.
While this approach may benefit fewer individuals and place the burden of proving financial hardship on borrowers, it would still assist those struggling the most with loan payments, particularly in the face of high inflation and the ongoing cost-of-living crisis.
It is important to note that Biden’s loan forgiveness plan is distinct from the pause on loan repayments, which is set to end this summer following the recent debt ceiling agreement. This means that individuals with outstanding federal student loans will likely need to resume making payments starting in late August.
If the Supreme Court upholds Biden’s plan or if the White House devises an alternative case-by-case solution, the repayment landscape may change. However, until then, it is advisable to prepare for upcoming loan payments this summer if you still have federal student loans.
While student loans remain complex and perplexing, borrowers can take solace in the fact that loan forgiveness remains a possibility, even if the Supreme Court strikes down Biden’s current plan.