The Supreme Court ruled today that President Biden does not have the authority to follow through with his almost $400 billion student loan relief plan, which would have forgiven up to $20,000 in debt per borrower making less than $125,000 per year (or $250,000 for married couples). Biden's plan would have created a clean slate for about 20 million Americans. 43 million borrowers who have had their payments suspended since March 2020 will now officially need to begin repayment starting on September 1.
Is There Any Chance of Future Forgiveness?
To answer this, it helps to first understand the background of the suit that was elevated to the Supreme Court. Challengers to Biden's plan contended at court that it did not comply with the HEROES Act and several other federal laws. They were able to find financial standing in Missouri through the damage it would cause to one of their state-sponsored loan providers, MOHELA.
The court found that Biden's plan indeed does not comply with the HEROES Act, which gives the education secretary the right to "modify" laws and regulations surrounding student loan programs, because his plan is a sweeping overhaul rather than a mere modification. The full reasons for the 6-3 ideological majority vote can be found in the opinion written by Chief Justice John Roberts here.
Biden has issued a statement that says he is not giving up on his plans for student loan forgiveness. Although he can no longer pursue it on the basis of the powers granted as part of the HEROES Act, his administration is already pursuing other options. For example, they are considering the Higher Education Act of 1965. Legal experts are skeptical that this will grant the powers necessary.
Will There Be Any More Repayment Extensions?
When congress raised the debt ceiling, they signed into law (sections 270 and 271) the September 1 student loan payment restart date. After three years and 8 extensions, there's now no longer a way for Biden and the executive branch to further extend the deadline.
How to Prepare for Repayment
The Federal Reserve estimates that the average person with student loans will be paying back $200-299 per month. After three years of most borrowers not budgeting for this expense, it may come as quite a pill to swallow come September 1. Here's what you should do:
1) Subscribe to the Education Department's Official Updates
You can sign up for their newsletter here. You're able to select which topics you're interested in, the very first checkbox of which relates to student loans.
If the Biden administration or the Education Department announce any new programs, you'll find out the soonest by remaining on their list and checking their emails. Make sure their email clears your spam filters.
2) Review the Status of Your Loans
If it's been awhile since you've looked at your loans, now may be a good time refresh yourself. You can log in at studentaid.gov.
Some loan servicers that you may have been working with pre-pandemic have passed along their loan servicing to other organizations. Your login should tell you who is now servicing each of your loans. You can also call the Federal Student Aid Information Center at (800) 433-3243 for more information.
3) Try FSA's Student Loan Simulator
FSA's Student Loan Simulator will help you calculate your payments and compare repayment options (including consolidation) to help you decide which approach to tackling your loans will be most efficient and doable for your finances.
4) Read Our Article on the Best Ways to Pay Off Student Loans
Finer Finances Staff
