It’s time to get ready for student loan repayment, and don’t expect any decreases in your balance because of the Biden student loan forgiveness plan. The U.S. Supreme Court has issued their decision and decided unanimously that Department of Education v. Brown has no standing. However, in a vote of 6-3, the court decided that in the case of Biden v. Nebraska, the Biden administration does not have the authority to create the Biden-Harris Student Loan forgiveness plan.
Meaning, student loan forgiveness under this plan will not be happening. While the Biden administration has previously stated that they are looking at other methods, if the decision were to go this way, no further plans have been announced. Here's what you need to know about today's decision.
Mass Student Loan Forgiveness
Back in Aug. 2022, President Biden announced his plan for a one-time mass student loan forgiveness of up to $10,000 for student loan borrowers and up to $20,000 for Federal Pell Grant recipients. The plan does require borrowers to meet certain criteria, and unfortunately, not all federal student loan borrowers would qualify.
The Supreme Court Ruling
The U.S. Supreme Court has ruled unanimously that there is no standing in Department of Education v. Brown, one of two cases brought before the court. This was the argument brought by two individuals who would not benefit from the plan. They argued that the forgiveness plan did not follow the negotiated rulemaking and therefore was not lawful. The Supreme Court said that this argument does not have merit.
In Biden v Nebraska, the court ruled 6-3 to overturn the Biden Student Loan Forgiveness plan. They found that the HEROES Act did allow authority for this type of mass forgiveness plan. The HEROES Act allows the authority to modify existing statute but not make new statute, as stated by Justice Roberts, “created a novel and fundamentally different loan forgiveness plan.” He did continue to explain how this type of authority has not been used like this in the past.
Justice Kagan dissents from the court’s opinion. She states that the plaintiffs, “…six States that have no personal stake in the Secretary’ loan forgiveness plan. They are classic ideological plaintiffs…”
The full opinion of Biden v. Nebraska can be read here: https://www.supremecourt.gov/opinions/22pdf/22-506_nmip.pdf
Time to Restart Payments
The federal student loan freeze will end in September and first payments will be due in October. That means you need to get yourself on track because zero percent interest will end in September, which means you will be charged for every dollar that you have outstanding on your student loan balance—remember the cost of borrowing money is interest.
For those who have been benefitting from the student loan pause, you can expect your payments to be based on your current outstanding balance. However, log in and double check. There are other types of forgiveness plans and opportunities which may have applied to you. Such as, Public Service Loan Forgiveness and the waivers offered by the Biden administration, or the one-time adjustment to the payment counter for income-driven repayment plans.
Never Been in Repayment?
It’s actually quite interesting if you have never been in student loan repayment. However, borrowers who graduated during the COVID-19 pandemic have yet to make a single mandatory payment on their student loans. Which means, it’s time to log into your accounts to find out what you need to do.
Look at your balance and look at the repayment plan options you have. If you don’t choose a repayment plan, you will be placed in a 10-year Standard fixed payment plan. That means your federal student loan servicer will look at your outstanding balance and determine your monthly payment based on that balance and your interest rate.
While the 10-year Standard Repayment Plan will have you repay the least over 10 years, it may have one of the highest monthly payments. If you can’t afford that, it’s time to explore your options. There are options for a Graduated Plan (which will allow you to start making small payments which will increase over 10 years), and income-driven repayment plans which will base your payments on your income and not your outstanding balance and interest rate.
If you don’t have a budget yet, it’s time to make one!
Did You Get a Student Loan Refund?
The recommendation: send the money back and take advantage of payments being made while your loan has zero percent interest. Already spent some or all of you refund? Life happens and you may have needed that money, but in the next few months try to send some of it back.
LEARN MORE >>> Student Loan Refund and Student Loan Forgiveness
What Student Loan Borrowers Need to Do Now!
It is my recommendation that you log into your student loan account. Look around, remind yourself of what is going on with your balance and situation. If you have any questions about how you can qualify for other types of forgiveness, a lower monthly payment, or just understanding your student loan account, it is highly recommended that you reach out to your student loan servicer.