The Supreme Court's June 30 decision blocked the Biden-Harris administration's student loan relief plan. However, while the standardized lump sum originally proposed by Biden isn't happening, even for those who were conditionally approved, the administration has introduced a new income-driven repayment (IDR) plan.
Called the Saving on a Valuable Education (SAVE) plan, the new program can lead to lower monthly payments and eventual loan forgiveness. Unfortunately for those who requested a refund for payments made during the student loan pause, no loan forgiveness means that borrowers now owe any previously refunded amount and will once again be responsible for eventually paying those funds back over the life of their loan(s).
Key Takeaways
- The Biden-Harris one-time student loan forgiveness plan was blocked by the Supreme Court.
- Any payments made during the payment pause that were refunded will now have to be repaid, since the student debt forgiveness plan that would have covered these amounts has been struck down.
- A new income-driven repayment plan called SAVE will speed up student loan forgiveness for those making steady payments.
Are Student Loans Forgiven?
The plan to forgive up to $20,000 in student loans per borrower was struck down by the Supreme Court on June 30, 2023.With its demise came the resumption of interest accrual and payments due. Interest began accruing on September 1, 2023, and payments resumed October 1.
Before the Supreme Court blocked the plan, more than 16 million borrowers were conditionally approved for student loan forgiveness. Since the plan had been on hold, no debt had been forgiven yet. Now, those borrowers must resume paying their loans.
Outside of the now-defunct plan, several repayment plans forgive student loans after a set number of payments. IDR plans include:
- Saving on a Valuable Education (SAVE): Replacing the Revised Pay as You Earn (REPAYE) plan, the SAVE plan should lower monthly payments for millions of Americans by increasing the amount of income protected from 150% of the federal poverty line to 225%. Payments will also drop from 10% of discretionary income to 5%. Some borrowers' payments may be as low as $0. If interest payments are higher than the minimum payment, interest amounts will not be added to the loan balance, ensuring that your student loans will not grow over time. The SAVE plan also allows for loan forgiveness after 120 payments for initial loan balances of $12,000 or less. Balances above that will be required to make 12 more payments for every $1,000 borrowed, with a cap of 20 years for undergraduate degrees and 25 years for graduate degrees.
- Pay as You Earn (PAYE) Plan: In the PAYE plan, payments are 10% of discretionary income but will never exceed the standard repayment plan amount. Loans are forgiven in 20 years.
- Income-Based Repayment (IBR): Payment amounts depend on when you borrowed the money. If you borrowed after 2014, payments will be the same as on the PAYE plan. If you borrowed before 2014, they will be 15% of discretionary income but not more than the standard repayment amount.
- Income-Contingent Repayment (ICR): The ICR plan requires either 20% of discretionary income or what you would pay on a fixed payment plan of 12 years, adjusted according to income, whichever is lower. Loans are forgiven after 25 years.
There are also forgiveness plans based on your career choice.
- Public Service Loan Forgiveness (PSLF): PSLF is available to people working in the U.S. public sector as well as certain not-for-profit organizations. Student loans are eligible for forgiveness after 120 qualifying payments.
- Teacher Loan Forgiveness: This program grants $5,000 in student loan forgiveness after five years of full-time teaching in low-income elementary and secondary schools. Certain subjects, such as math and science, may be eligible for up to $17,500.
Can I Still Request a Refund?
Since the federal forbearance period has ended, the time for requesting a refund has come to an end. Any payments made toward your student loans during the payment pause were applied directly to the principal, which will lower the amount that will accrue interest starting in September.
What if I Received a Refund Check?
If you requested and received a refund check for payments made during the pause, you'll be responsible for paying that amount back. The good news is that if you were eligible for a refund, you should be eligible for one of the IDR plans that lead to student loan forgiveness. If you saved some of your refunded money, you can pay off a lump sum of your debt.
When Are Student Loan Payments Due?
The federal student loan payment forbearance period was set to expire 60 days after the Supreme Court's decisions. Interest once again began accruing on all balances on September 1, 2023. Payments resumed beginning on October 1. As there are several different student loan servicers, the exact date may be different for each borrower. Your student loan servicer will reach out to you significantly before your first payment deadline to determine your payment and due date. If you're not certain who your servicer is, as many loans were sold or transferred during the last three years, log in to your account at StudentAid.gov.
Are Any Student Loans Going To Be Forgiven?
Blanket student debt forgiveness or cancellation is off the table following the Supreme Court's decision, even if you received a notice that you were approved for forgiveness. Now, the best path to forgiveness is through one of the IDR plans, such as SAVE, or through PSLF.
Do I Have to Pay Back My Refund?
Yes, all student loan payment refunds from the pandemic pause will eventually have to be paid back over the life of the loan(s). You can pay a lump sum to try and lower your principal and the amount accruing interest, or you can make payments through the standard repayment plan or an IDR plan, the latter of which will eventually lead to loan forgiveness.
When Does Interest Start Accruing Again on Student Loans?
Interest will begin accruing on student loans on September 1, 2023, with payments beginning in October. Keep in mind this only applies to loans impacted by the pandemic-era forbearance. Some older federal loans and all private loans continued charging interest throughout the pandemic.
The Bottom Line
Blanket student loan cancellation is off the table, but there still are paths toward debt forgiveness available. If you received a refund for student loan payments made during the pause, you must repay them as part of your original loan amount. If your budget is already strained, the new SAVE program may help make payments more reasonable and put loan forgiveness within your reach.
