What student loan borrowers can expect in 2023 when Biden’s plan hits the Supreme Court

What student loan borrowers can expect in 2023 when Biden’s plan hits the Supreme Court
What student loan borrowers can expect in 2023 when Biden’s plan hits the Supreme Court
  • Student loan borrowers face a year of uncertainty in 2023.
  • Broad student debt relief is pending as the Supreme Court rules on its legality.
  • Resuming student loan payments also depends on how the legal challenges play out.
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Todd, a Washington-based student borrower, was “super excited” when President Joe Biden announced up to $20,000 in loan forgiveness at the end of August.

His excitement didn’t just stem from the fact that the relief would wipe out his entire student loan balance. Todd — who asked that his last name be withheld for privacy reasons — was eagerly waiting for nearly all federal borrowers to experience the relief Biden promised them on the campaign trail.

“I didn’t think his campaign promises were going to get anywhere but even after getting the details that it was only $10,000-20,000, it was still a good thing because it gets the ball rolling,” Todd said. “I had no hopes of anything changing so when this announcement was made it was a game changer.”

But her mood quickly changed as the lawsuits began to mount, with two so far preventing the remedy from being implemented as she headed to the Supreme Court. Following legal challenges, the request for debt relief has been on hold since October and the Ministry of Education is barred from proceeding with the processing of the relief until the highest court in the country decides on the legality of the policy.

“I was really surprised when the lawsuits were successful,” Todd said. “I’m upset with the administration about how they handled the situation because they could have made the relief universal. So now I’m back to where I was before where it’s like nothing will ever happen.”

Todd isn’t the only borrower concerned about the future of student debt – as the new year dawns, millions of Americans don’t know if they’ll see a reduction in their student loan balances, when they will have to resume payments on their loans and how the other recently announced reforms of targeted remission programs will be implemented. Here’s what’s in store.

Broad Student Debt Relief

Feb. 28 is the day the Supreme Court will take up the two lawsuits that blocked Biden’s student debt relief. A lawsuit, filed by six Republican-led states, argued that debt relief would hurt their states’ tax revenue and that of the Missouri-based student loan company MOHELA. In October, the 8th Circuit Court of Appeals suspended the implementation of debt relief in response to that lawsuit, and in November it ruled that the pause would remain in place while the Supreme Court takes the decision. case in charge.

The other lawsuit was brought by two student borrowers who sued because they did not qualify for the full $20,000 debt relief. A Texas judge ruled that the debt relief plan was illegal in response to the lawsuit, and the Supreme Court will hear the case alongside one filed by the six GOP states.

The Supreme Court will consider these two questions for GOP states: whether they are valid and whether Biden’s plan to cancel student debt exceeds the authority of the Secretary of Education or is “arbitrary and capricious.”

For the lawsuit brought by the two student loan borrowers, the Supreme Court will determine whether the plaintiffs in the case have standing and whether Biden’s debt relief was implemented in a “proper procedural manner.”

Resuming Student Loan Payments

Whether federal borrowers resume payments depends entirely on how the legal challenges play out. Just before Thanksgiving, Biden announced an extension of the student loan payment pause until June 30, 60 days after the lawsuit to block the aid is resolved, whichever comes first.

“If the program has not been implemented and the dispute has not been resolved by June 30, 2023, payments will resume 60 days after that,” the press release reads.

Payments were previously scheduled to resume after Dec. 31, 2022, but Biden noted in his announcement that it “is not fair for tens of millions of borrowers eligible for relief to resume paying their student debt while the courts examine the trial”.

The Department of Education will notify borrowers when it is time to resume payments, and those with federal loans eligible for relief will not be required to repay their debt in the meantime.

Reforms to Targeted Loan Cancellation Programs

Summer 2023 is expected to bring changes to specific student loan forgiveness programs for borrowers. When Biden announced broad debt relief, he also announced changes to income-focused repayment plans, which calculate a borrower’s monthly payment based on income with the promise of loan forgiveness after at least less than 20 years old.

But paperwork errors and administrative hurdles have plagued plans, forcing borrowers to repay much longer than expected. That’s why Biden announced reforms to fix repayment plans by requiring borrowers to pay no more than 5% of their Discretionary Income per month on their undergraduate student loans, up from 10% currently.

It would also cancel outstanding student debt for borrowers with an original balance of less than $12,000 after 10 years of payments, instead of 20 years, and prevent unpaid monthly interest from adding to the borrower’s principal balance as long as he makes monthly payments.

Biden’s education department also announced new regulations for targeted programs that are expected to go into effect this summer. These include permanent changes to the Civil Service Loan Forgiveness Program and the Total and Permanent Disability Release Program, as well as rules to prevent interest from compounding on a borrower’s original balance.

While Democratic lawmakers welcomed the changes, some Republican lawmakers argued they were too broad and should not be allowed. With Republicans taking a majority in the House next year, they may try to take legal action to block the implementation of these reforms.

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. student loan borrowers expect Bidens plan hits Supreme Court

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