There are other student loan relief options after Supreme Court strikes down Biden’s plan

The Supreme Court struck down President Joe Biden’s student loan forgiveness plan Friday. With payments set to resume soon, here’s you should know about other options for forgiveness:

How did the Supreme Court rule on student loan forgiveness?

The court ruled 6-3 along party lines that Biden’s administration overstepped its authority, killing the $400 billion (the estimated cost over the next 30 years) plan that would have canceled or reduced federal student loans for 43 million people, the Associated Press reported.

Twenty-six million people were already approved. Borrowers would have been eligible for $10,000 in relief, or up to $20,000 for Pell Grant recipients, if they made less than $125,000 or under $250,000 for households.

“My plan would not only have been life changing for millions of Americans but it would have been good for the American economy,” Biden said during a speech Friday afternoon, adding it would have allowed for more people to buy more homes, start businesses and raise families. “Millions of people would have felt they could get on with their lives.”

Student loan payments have been paused since March 2020. They’re set to resume in October, with interest resuming in September. Interest hasn’t been accumulating since the pause began.

The median monthly payment before the pause was $222; the average monthly payment was $393.

What’s next?

Biden announced Friday that he would pursue a new path to provide student relief based on the Higher Education Act.

The plan struck down by the Supreme Court was introduced under the HEROES Act, which was passed by Congress in 2003 after the 9/11 attacks, to ensure that federal student loan borrowers will not be economically disadvantaged during a national emergency, war or disaster.

That is how, during the pandemic, both the Trump and Biden administrations were able to pause student loans payments.

Biden said the new path will take longer but that his administration won’t waste time.

He also announced a temporary on-ramp repayment program. Monthly payments are still due and interest is still adding up. But, the plan removes the threat of defaulting or having your credit harmed.

The on-ramp runs from Oct. 1 to Sept. 30, 2024. You don’t have to take any action to qualify.

The Biden administration, he said, has finalized the Saving on a Valuable Education Plan, an income-driven plan that does the following:

• Cuts the amount borrowers have to pay from 10% to 5% of discretionary income.

• Raises how much income is considered non-discretionary, meaning borrowers earning under 225% of the federal poverty level (or about $15 an hour) will not have monthly payments.

• Forgives loan balances after 10 years of payments (down from 20 years) for those who originally borrowed $12,000 or less.

• Doesn’t charge unpaid monthly interest so loan balances don’t grow, as long as you make monthly payments.

You’ll be able to enroll in the SAVE plan later this summer. If you’re already signed up for the Revised Pay as You Earn plan, you’ll be automatically enrolled in SAVE.

What other options do you have?

There are other forgiveness options. Most states also have forgiveness plans, Investopedia reported. Let’s break down the federal options:

• Income-Driven Repayment Forgiveness: You can possibly lower your payment with an income-based repayment plan. This means your payment is based on your income and family size. Dependent on your plan, remaining balances will be forgiven after a certain number of payments over time.

• Public Service Loan Forgiveness: The Department of Education announced in May that 615,000 borrowers were approved for $42 billion in relief. If you work for a government or qualified nonprofit, you could get your loans forgiven after 10 years of payments. You also need to repay under an income-driven plan to qualify. If you consolidate Federal Family Education Loans and Perkins Loans, those may be eligible for PSLF.

• Teacher Loan Forgiveness: Some teachers are eligible to get forgiveness of up to $17,500 for five full years in a row of teaching in a low-income elementary school, secondary school or educational service agency.

• Military Service: Special benefits, such as interest rate caps and repayment programs, are available from the education and defense departments.

• AmeriCorps: A Segal AmeriCorps Education Award can be used to repay some student loans.

What about getting your loan discharged? These are the categories where you might qualify for your loan to be discharged:

• Closed School Discharge: Did you school close while you were enrolled or shortly after you withdrew? You might be eligible.

• Perkins Loan Cancellation and Discharge: Based on your employment or volunteer service and under certain conditions, you could have your Perkins Loan canceled or discharged.

• Total and Permanent Disability Discharge: You could qualify for a federal student loan discharge or the Teacher Education Assistance for College and Higher Education Grant service obligation.

• Discharge in Bankruptcy: This is rare and not an automatic process.

• Borrower Defense to Repayment: You could qualify for this if your school did something or failed to do something related to your loan or the education the loan paid for.

• False Certification Discharge: You could qualify for this if your school falsely certified your loan eligibility.

• Unpaid Refund Discharge: Did you withdraw from school and the school didn’t return the loan to the servicer? You could be eligible for this.

• Forgery Discharge: You could be eligible for a discharge of loans fraudulently made in your name.

• Death Discharge: Loans can be discharged if the borrower or the student benefiting from a PLUS loan dies.

How to get ready for repayment?

To prepare yourself for repayment, here’s what the Education Department recommends:

1. Update your contact information on your loan’s servicer’s website and your StudentAid.gov profile.

2. Review or sign up for auto-pay.

3. Use the department’s loan simulator to find a repayment plan.

4. Consider applying for an income-driven repayment plan.

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