The Biden student loan forgiveness plan is dead. Now what?

Many student loan borrowers were excited in August 2022, when the Biden Administration announced a plan to forgive between $10,000 and $20,000 in student loan debt for millions. However, the plan was put on hold while the Supreme Court heard arguments and then scuttled in July 2023, once the court ruled the plan unconstitutional.

The bad news comes just as borrowers were set to resume student loan payments after a pandemic-related three-year pause. So, is student debt relief still happening? And what can you expect from some of the most recent developments?

Let’s take a look at Biden’s SAVE plan, the latest forgiveness under income-driven repayment (IDR) and your options for student loan debt relief.

Will I still get student loan forgiveness?

A big question on the minds of borrowers has to do with loan forgiveness. In 2022, the Biden Administration announced that it would pursue student loan forgiveness of up to $20,000 for borrowers. The news came as the administration announced that it would bring an end to the current student loan payment and interest pause.

Almost immediately, though, the forgiveness plan was challenged in the courts. The process was paused while the Supreme Court took up the case and heard arguments. Then, in June 2023, the court announced its decision: The Biden forgiveness plan was unconstitutional and couldn’t go forward.

While this specific student loan forgiveness plan is no longer an option for millions of borrowers, there are still other ways to obtain student loan forgiveness.

• If you qualify for Public Service Loan Forgiveness (PSLF), that’s still an option.
• Borrowers on an income-driven repayment (IDR) plan can receive forgiveness of the balance remaining after 20 or 25 years.
• Other federal and state student loan forgiveness programs, such as those offered to teachers and healthcare professionals, are still available.

Expanded IDR student loan forgiveness

In July 2023, the Biden Administration announced that it’s paving the way for 804,000 borrowers to receive student loan debt relief under the current IDR waiver. The move amounts to another $39 billion in student loan forgiveness. According to the White House, the latest round of discharge is the result of some IDR payments not properly being counted toward forgiveness.

In some cases, borrowers didn’t have their monthly payments—even if those payments were for $0—counted toward their qualification toward forgiveness under IDR. The administration claims that closing this loophole will result in more forgiveness and the eligible loans will be automatically discharged.

Biden SAVE plan

Another component of Biden’s student loan debt relief plan is the addition of another IDR plan. The main components of the Biden SAVE plan include:

• Borrowers will be eligible for $0 per month payments if they make less than 225% of the poverty line, or about $32,800 as a single person as of 2023. The current requirement for $0 payments is 150% of the poverty line, or $22,000 for a single person. This expands the number of borrowers who qualify for payments of $0 per month.
• Extra interest won’t accrue as long as monthly payments are made. In the past, IDR plans have had interest accrue and then added to the loan balance. Many borrowers found that after making payments for years, their balances continued to grow, because their payments weren’t enough to counter the added interest, and thus they could not pay down the principal balance (a phenomenon that credit card borrowers understand quite well). Under the Biden SAVE plan, interest will be waived, even for payments of $0 a month.
• Payments capped at 5% of discretionary income. As written, the SAVE plan will include a lower cap on undergraduate loans. Currently, the lowest amount you might pay on an IDR plan is 10%. After the 2024 changes, some borrowers could see their monthly payments reduced by half.
• Quicker loan forgiveness on an IDR plan. Additionally starting in 2024, borrowers on Biden’s SAVE plan will be eligible for forgiveness after 10 years if their initial balances were $12,000 or less. For those with initial balances over $12,000, loan forgiveness comes after an additional year for each extra $1,000. For example, someone with an initial balance of $15,000 would receive forgiveness after making payments for 13 years under the SAVE plan.
• Current payments count toward forgiveness. Even though the forgiveness aspect of the SAVE plan doesn’t kick in until 2024, payments made on student loans prior to 2024 will still count toward forgiveness.

Getting on the Biden SAVE plan

All borrowers currently enrolled in the Revised Pay as You Earn (REPAYE) plan will be moved to the SAVE plan. However, if you’re not on the REPAYE plan, you might need to apply to the SAVE plan. The application is expected to be available from the Department of Education later in summer 2023. You’ll need to contact your loan servicer to apply for the SAVE plan and see if you qualify to make the switch to this plan.

Is student debt relief still happening?

Even though blanket loan forgiveness appears to be off the table for now, many borrowers will see some level of debt relief, especially with the updated IDR forgiveness.

However, there are some doubts about whether the SAVE plan will be implemented. Some lawmakers and others are already vowing to look for a plaintiff to sue to stop the plan, taking it all the way to the Supreme Court if necessary.

So far, while there has been speculation that another student loan interest and payment pause extension might be in the offing, there haven’t been any moves—so far—to extend the current pause, so borrowers should prepare to resume their payments this fall.

The bottom line

Blanket student loan forgiveness probably isn’t happening, but you might still have options for student loan debt relief. Check the status of your student loans by logging into the National Student Loan Data System—and check in with your servicer as well—to see your repayment plan options.

Then, watch for the enrollment period to begin for the new SAVE plan. You can contact your servicer to see if you’re eligible for that plan, and can make the switch to lower your monthly payments and get forgiveness earlier.

Finally, make a plan to pay off your student loan debt. The student loan interest pause ends September 1, 2023, so loans will accrue interest again from that date. Payments resume in October 2023. Being prepared with a new budget can help you get ready for this change without missing your student loan payments.