The Supreme Court Strikes Down Student Loan Relief. Here’s What That Means For You

The Supreme Court voted to strike down President Joe Biden’s student loan forgiveness plan on Friday, putting an end to a plan that could have wiped over $400 billion in student loan debt for some 42 million Americans.

In a 6 to 3 vote, the opinion of the conservative justices prevailed, declaring Biden’s plan to forgive up to $20,000 in debt for some borrowers unconstitutional. The Court’s liberal Justices—Sonia Sotomayor, Elena Kagan and Ketanji Brown Jackson— dissented, but that was not enough to overturn the decision.

The nine-member court first heard oral arguments for two student-loan related cases in late February as they assessed whether provisions in the Higher Education Relief Opportunities for Students (HEROES) Act gave Department of Education Secretary Miguel Cardona the statutory authority to forgive loan debt.

“The Secretary asserts that the HEROES Act grants him the authority to cancel $430 billion of student loan principal. It does not,” Chief Justice John Roberts wrote for the majority opinion. “We hold today that the Act allows the Secretary to ‘waive or modify’ existing statutory or regulatory provisions applicable to financial assistance programs under the Education Act, not to rewrite that statute from the ground up.”

More than 16 million borrowers were approved for loan relief before it was put on pause by the two federal court rulings, and another 26 million people had applied.

Now, borrowers can expect their student loan interest to resume on Sept. 1. Payments will start to be due in October, as the debt ceiling deal signed on June 3 prevents the Biden Administration from extending the student loan debt moratorium without Congressional approval.

Here’s what the Supreme Court’s decision means for you:

Why was student loan forgiveness overturned?

In Biden v. Nebraska and Department of Education v. Brown, justices were assessing whether the stipulation in the HEROES Act that allows the Secretary of Education to “waive or modify any statutory or regulatory provisions” of financial assistance programs to ease financial hardship during a national emergency applied to the administration’s relief program.

“COVID-19 is the most devastating pandemic in our nation’s history and it has caused enormous disruption and economic distress,” argued Solicitor General Elizabeth Prelogar during February’s oral arguments. “Two Secretaries across two administrations invoked the HEROES Act to suspend interest and payment obligations for all Americans with federally held loans. But, if that forbearance ends without further relief, it’s undisputed that defaults and delinquencies will surge above pre-pandemic levels.”

The Court was also assessing whether plaintiffs had legal standing to sue. In Biden v. Nebraska, which was filed by six states, the Eighth Circuit Court of Appeals previously ruled that Missouri had standing to sue based on the financial harm Missouri Higher Education Loan Authority (MOHELA) would endure.

The Court, however, ruled that the Department of Education did not have the jurisdiction to forgive student loan debt under the HEROES Act, saying that it was an unlawful act of presidential power lacking explicit Congressional approval.

The one-time student loan debt relief plan would have forgiven up to $10,000 for most borrowers, and up to $20,000 for some Pell Grant recipients, whom the Education Department argued were affected by the COVID-19 pandemic.

“The result here is that the court substitutes itself for Congress and the executive branch in making national policy about student-loan forgiveness,” Justice Elena Kagan wrote for the dissenting opinion. “This court today decides that some 40 million Americans will not receive the benefits the plan provides, because that assistance is too ‘significant.’”

Is there another proposition in place for forgiveness?

Shortly after the Supreme Court decision, the Department of Education announced that they would be pursuing an alternative path to debt relief through the Higher Education Act of 1965, which experts previously told TIME grants Biden the authority to issue student loan forgiveness.

The Education Department has taken the first step towards this pursuit by issuing a notice, though the process of achieving debt relief will be lengthy. A written comment period from stakeholders will follow suit.

What about other student loan proposals Biden announced?

In addition to broader loan relief, the Biden Administration also proposed a number of other changes that would prove beneficial for borrowers.

The Education Department finalized their proposed changes to the income-driven repayment plan, which they had initially announced in January. The new Saving on a Valuable Education (SAVE) plan replaces the existing Revised Pay As You Earn (REPAYE) plan, and will provide the lowest monthly payment available to borrowers.

The plan also “eliminates 100% of remaining interest for both subsidized and unsubsidized loans,” according to the Department of Education. That means that as long as a borrower makes their monthly payments, their loan balance won’t grow due to unpaid interest.

How should borrowers prepare to start paying off their loans?

As student loan payments resume for the first time in three years, experts suggest borrowers begin to prepare for the transition into making monthly payments.

Student loan advisors that previously spoke to TIME suggested that borrowers first log into their account on studentaid.gov so they know the type of loan they have, who their loan servicer is and how much they owe. Borrowers should also ensure that the contact information on their account is the most up-to-date in case their loan servicer attempts to contact them.

Some borrowers may be eligible for an income-driven repayment plan, which could make their monthly payment as low as $0 a month. Borrowers can see their payment alternatives by using the Federal Student Loan Simulator. If a borrower has an unexpected hardship that prevents them from repaying their loans, they can apply for a forbearance or deferment, though experts say that borrowers should steer clear of these options if possible.

What happens if a borrower doesn’t pay off their student loans?

The Education Department is instituting a year-long “on-ramp” to repayment program that will last through September 30, 2024. The program will allow “financially vulnerable borrowers who miss monthly payments during this period are not considered delinquent, reported to credit bureaus, placed in default, or referred to debt collection agencies,” the White House said.

When that program expires, a borrower who misses a payment by the due date will see their loan become delinquent. Their account will remain under that status until they pay what they owe, make changes to their loan repayment plan by enrolling in another program, or apply for deferment or forbearance. If a borrowers’ loan remains delinquent for 90 days or more, a loan servicer will report it to national credit bureaus.

For most types of loans, if a borrower does not make payments for 270 days their debt will automatically go into default. (If you have a Federal Perkins loan your loan may be in default if you do not make a payment by the due date.)

Once a loan is in default borrowers cannot receive deferment or forbearance, and their loans accelerate, meaning a borrowers’ entire loan balance with interest immediately becomes due.

Defaulting damages a borrower’s credit score, affecting their ability to purchase a house, car, take out another credit card and more. The federal government also has the authority to take money from your wages, and withhold tax refunds and social security payments to collect funds towards a borrower’s student loans.