Student Loan Forgiveness Update – 2024
August 22, 2024
Student Loan Forgiveness Update – The Biden administration first announced that it would cancel federal student loan debt back in 2022, with a plan to 鈥渇orgive鈥� $20,000 in loans for Pell grant recipients and $10,000 in loans for those who had never received the income-based Pell grant. Since then, it鈥檚 been a long, hard road for people looking to have their debt canceled. There have been court cases, legal arguments, appeals, and dismissals.听
In June 2023, Biden鈥檚 first debt cancellation proposal was blocked by the conservative-led Supreme Court. The back-and-forth has meant a lot of headaches for people who have been trying to free up their financial lives and get out from under the burden of student loan debt. And there are a lot of them.听
鈥淢ore than 43 million Americans鈥攐ne in five adults鈥攃ollectively owe more than $1.7 trillion in federal and private student loans,鈥� according to . 听
In this post, we鈥檒l walk you through the latest developments in President Biden鈥檚 student loan forgiveness plan, the recent history that got us here, and what borrowers can do to get themselves closer to being debt-free.听
The SAVE Plan in 2024: Stuck in Legal Gridlock听听
In 2023, President Biden announced SAVE鈥攖he Saving on a Valuable Education plan. SAVE is an income-driven repayment plan that uses the borrower鈥檚 income and family size to determine their monthly payments, sometimes zeroing out monthly payments entirely. After a certain number of years, the remaining balance is eliminated. If you were already enrolled in the Revised Pay as You Earn (REPAYE) program, you were automatically enrolled in SAVE. Otherwise, borrowers had to sign up for SAVE. The Biden administration has estimated the SAVE has allowed 4.3 million borrowers to have a $0 monthly payment.听
According to the , 鈥�Ultimately, the typical borrower has about $12,000 of interest payments waived and upwards of 95% of their principal forgiven under SAVE.鈥�
In February of this year, President Joe Biden the approval of $1.2 billion in student debt cancellation currently enrolled in the SAVE repayment plan.听
According to the Biden administration, the SAVE loan cancellation announcement applies to borrowers who:听
- Have been in repayment for 10 years or more听
- Took out $12,000 or fewer in federal student loans听
The administration also noted that the SAVE cancellation was originally slated to be rolled out in July of 2024. However, it was able to save borrowers more money by being rolled out six months earlier.听
Joe Biden Student Loan Forgiveness Update (Continued)
Unfortunately, court cases brought forward by attorneys general in Kansas and Missouri鈥攁nd more than a dozen Republican-led states鈥攑ut the SAVE loan cancellation plan in limbo. These cases are currently being heard by the Supreme Court, as of August 2024. The legal gridlock has resulted in the loans for 8 million SAVE borrowers going into forbearance. This means that those borrowers are not required to make payments for the time being. Yet, the future of their debt status remains uncertain.听
The Department of Justice (which functions as a part of the presidential branch) has asked the Supreme Court to essentially 鈥渦nblock鈥� the SAVE plan until the Kansas and Missouri cases are resolved. This came as the 8th Circuit Court of Appeals formally issued an injunction against the SAVE plan. This caused some experts to say that the courts would likely strike the plan down altogether, eliminating any possible savings for borrowers. The cases brought forward by those Republican-held states claim that the SAVE plan is illegal because it goes beyond the original intentions of Congress when it created income-driven repayment plans.听
PSLF Cancellation in 2024: A Viable Option for Some听听
In July 2024, the Biden administration announced that it was canceling another $1.2 billion in student loans for people who work in public service. Those workers include teachers, firefighters, nurses, law enforcement, and people working for nonprofit organizations.听
This round of loan cancellation applied to those who have their loans in repayment under the Public Service Loan Forgiveness (PSLF) program. These 35,000 borrowers all completed their PSLF loan cancellation forms in October of 2022. The process did take a little bit of time for people to ultimately see debt relief. However, this is one version of President Biden鈥檚 debt relief plan that has not been held up in the federal court system.听
PSLF has been around since 2007, but the rules were so notoriously confounding, and the bureaucracy so mired in complication that the program was in need of a major facelift.听
Now, borrowers need to complete only one form to apply for loan cancellation through PSLF. To qualify for this form of debt relief, borrowers must:听
- Be employed by a United States federal, state, local, or tribal government or qualifying not-for-profit organization (this includes U.S. military service);听
- Work full-time for that agency or organization;
- Have Direct Loans (or consolidate other federal student loans into a Direct Loan);听
- Repay your loans under an income-driven repayment plan or a 10-year Standard Repayment Plan; and听
- Make a total of 120 qualifying monthly payments. These payments do not need to be consecutive.听
Joe Biden Student Loan Forgiveness Update (Continued)
Once a person has made those 120 qualifying payments, they can fill out the final PSLF form certifying their employment. The biggest thing about PSLF is the 鈥減ublic service鈥� contingency. People might work a number of jobs that serve to benefit their communities, but if they don鈥檛 work for a certified employer, they don鈥檛 technically qualify.听
So, what makes an employer certified to have its employees鈥� loans applicable for the PSLF program? According to the federal government, certified employers include:听
- U.S.-based government organizations at any level, including the U.S. military, AmeriCorps, and the Peace Corps听听
- Not-for-profit organization that are tax-exempt under Section 501(c)(3) of the Internal Revenue Code听
- Other not-for-profit organizations that devote a majority of their full-time equivalent employees to providing certain qualifying public services听
Employers that do not qualify for PSLF include:听
- For-profit organizations, including for-profit contracted organizations听
- Labor unions
- Partisan political organizations听
Joe Biden Student Loan Forgiveness Update (Continued)
The other important thing to remember when you鈥檙e looking at PSLF is that the type of loan is also very important. Only some federal loan types are applicable for PSLF, and those are Direct Loans of any type. They include:听
- Direct Subsidized Loans
- Direct Unsubsidized Loans
- Direct PLUS Loans听
- Direct Consolidation Loans听
Loan types that do not qualify for PSLF include:听
- Federal Family Education Loans (FFEL)听
- Federal Perkins Loans听
- Student loans from private lenders听
These loan types can become eligible, however, if you consolidate them into a Direct Consolidation Loan. It鈥檚 important to note, however, that consolidating other loan types into a Direct Loan will change the number of qualifying payments you have made (the number of which needs to reach 120 before you qualify for cancellation). According to the office of :听
鈥�For example, a borrower with 60 qualifying payments on a Direct Loan with a balance of $30,000 who consolidates their loan with another Direct Loan with a balance of $30,000 with zero qualifying payments will have a new qualifying payment count of 30 payments credited to the new consolidation loan.鈥澨�
How Did We Get Here?听
The conversation around student loan forgiveness in the Biden administration is nothing new.听
When President Biden took office in 2021, he 鈥�vowed to fix the student loan system and make sure higher education is a pathway to the middle class 鈥� not a barrier to opportunity,鈥� his administration said.听
But the road to that forgiveness has been rocky.听
President Biden鈥檚 first announcement about forgiving nearly $400 billion in federal student loans ran through the public consciousness like a lightning bolt. For people who had been living with debt for years鈥攐r even decades鈥攖he announcement felt like relief that was thought to never come. Additionally, as we talked about at the start of this post, President Biden鈥檚 initial plan was sweeping in its reach. It would forgive $10,000 in federal student loan debt for any borrower. Additionally it would cover up to $20,000 for people who had qualified for Pell grants. These are grants dedicated to help low-income students pay for college.听
How Did We Get Here? (Continued)
This first plan by President Biden used something known as the HEROES Act to wrench open the possibility of student debt cancellation. The HEROES Act allows the Secretary of Education to 鈥�鈥� 鈥渟tatutory or regulatory provisions applicable to federal student financial assistance programs鈥� so that 鈥渂orrowers are not placed in a worse position financially in relation to their student loans as a result of a war, other military operation, or national emergency.鈥�
Because the COVID-19 pandemic was relegated as a national emergency, the Biden administration had invoked the HEROES Act to do just what it was intended to do: keep borrowers from being in a worse financial position because of their loans under the state of national emergency.听
But by June 2023, the Supreme Court had struck down the implementation of the Biden administration鈥檚 first debt cancellation plan. They stated that it violated the HEROES Act, however.听
Ultimately, Judge Roberts, the presiding judge on the Supreme Court in this case, the HEROES Act allowed for the modification of existing provisions for student loan debt, but that the Biden administration鈥檚 plan had created a 鈥渘ovel and fundamentally different loan forgiveness program,鈥� not provided for by the HEROES Act.听
So, SCOTUS said: do not pass go, do not forgive 400 billion student loan dollars.听
This opened up the Biden administration to move toward a 鈥淧lan B鈥�. This is the current piecemeal approach to debt cancellation that we are currently watching play out.听
What Can Borrowers Do?听
Those who qualify for PSLF and do not have their loans consolidated into a Direct Loan could consider doing so and beginning to verify their employer and keep track of their qualifying payments.听
Those enrolled in the SAVE Plan will have to continue watching and waiting to see what happens in terms of its legality. However unlikely it may be, SAVE might survive its current iteration in court.听
Borrowers can also get involved with trying to make change. The group The Debt Collective has been organizing for years to help people get free of all types of debt. Their hosts an online demand letter to call on the Department of Education to use its power under the 1965 Higher Education Act to 鈥渃ompromise, waive, settle or release鈥� all federal student debt. They also host workshops and group meetings to get people involved in the fight to cancel student loan debt.听
Lastly, if you鈥檙e just heading off to college鈥攐r thinking about how to do it鈥攜ou should also check out our other blog posts on how to fill out your FAFSA form and request federal financial aid, how to get in-state tuition and save yourself some big bucks, and the 40 colleges with full-ride scholarships that might help you avoid taking out loans all together.听听
Joe Biden Student Loan Forgiveness Update – Additional Resources
- 100 Great Scholarships for High School Seniors
- 26 Most Expensive Colleges in 2024
- How to Win a Coca Cola Scholarship听
- Infographics: How Need-Based and Merit Aid Vary by College Selectivity and Tuition
- Infographics: The ROI of a College Degree: Earnings, Investment, and Long-Term Value by College
