What’s Next for Biden’s Student Loan Forgiveness Plan, and How to Prepare for Anything

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President Biden’s plan to forgive student loan debt for millions of borrowers is officially on ice. 

After facing multiple lawsuits challenging his plan, the Biden administration shut down its application for student loan forgiveness last week. For borrowers, experts say the main takeaway should be as clear as it is disappointing: The Biden administration isn’t allowed to cancel any federal student loan debt right now, and it’s unclear if the administration will ever be able to.

While its ultimate legal fate remains uncertain, there are smart steps borrowers can take right now, no matter what’s ahead.

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We asked three experts what they think will happen next. Here are three of the likeliest scenarios based on their predictions, and what borrowers can do in the meantime to get ahead.

Borrowers Unlikely to See Balances Forgiven Before 2023

There’s very little chance borrowers will see any of their balances forgiven before the end of the year, given the pending legal challenges, according to Nika Booth, a student loan expert and the creator behind Debt Free Gonna Be. 

“The fact that student loan forgiveness is still blocked in federal court is concerning, and my concern grows as more time goes by without an update and more lawsuits are filed and decided upon not in favor of Biden’s student debt relief,” she says.

It may take weeks or months for the various appeals to be resolved. The average time for an appeal is about six months, however several of the judges have said that they will expedite cases involving the student loan forgiveness plan, says higher education expert Mark Kantrowitz

“Borrowers should sit tight,” he says. “It can take time for the cases to work their way through the courts.”

Robert Farrington, founder of The College Investor, says the Department of Education’s decision to remove the application doesn’t “bode well for the future” of the blanket loan forgiveness plan. 

If the administration thought it could see a resolution quickly in court, it would have left the application open, he says. “With that change, it highlights the roadblocks the administration faces to implement this program.”

What Borrowers Should Do 

Don’t wait on the government to get a handle on your student loan debt. While experts have long recommended taking advantage of the payment pause to prioritize other aspects of your finances, like saving or paying down high-interest debt, borrowers can get ahead and best prepare for whatever comes next by staying informed. That means both signing up for student debt relief updates with the Department of Education and verifying your contact information is up to date with your loan servicer. Booth recommends taking the extra time to research other student loan forgiveness programs or repayment assistance, such as Public Service Loan Forgiveness (PSLF), Teacher Loan Forgiveness (TLF), and state- or career-specific repayment programs. If you can qualify for another forgiveness program, it could make a huge difference to your monthly payments or long-term financial goals.

Student Loan Payment Pause Could Get Extended Again

Student loan payments and interest are set to resume after Dec. 31, but the student loan payment pause may be extended for an eighth time if the court cases drag on or the Biden administration’s appeal isn’t successful. 

Experts say it’s unlikely that the Biden administration will restart payments for student loan borrowers before there’s an outcome in the appeals — especially while the U.S. economy wrestles with inflation, rising interest rates, and a possible upcoming unemployment wave.

Before last week’s lawsuit, there was a push from the administration to apply for student loan forgiveness before Nov. 15 to ensure the forgiveness request is processed and applied before the end of the year when the student loan payment pause expires. Borrowers who rushed to apply before Nov. 15, the Biden administration’s recommended deadline, are now unlikely to see the benefit from that urgency.

Farrington points to the president extending the state of emergency for the COVID-19 pandemic last week as a possible precursor to pushing the payment pause back. A state of emergency is needed to extend the pause, he says.

“It appears extending the student loan pause could be back on the table,” Farrington says. 

What Borrowers Should Do 

While there’s a chance the payment pause could be extended again, borrowers shouldn’t count on it. Borrowers should still prepare to resume payments because, as we know from the last few extensions, the actual extension might not come until days before payments are due. Experts recommend doing the following before the payment extension ends:

  • Review your student loan balance and payment plan before the end of the year to determine if it’s the best one for your financial situation. Use these loan simulators with the Department of Education to choose a loan repayment option that best meets your goals.
  • Look at your current spending and budget, and make necessary adjustments to prepare to resume making payments in January. 
  • If your budget allows, start saving the amount of your student loan payment in November and December to ease your way into repayment. Set the money aside in a high-yield savings account so you can earn interest on your savings and easily access it when the payment pause ends. This strategy gives you options: You’ll be able to apply the savings to paying down your student loan balance or use it to pay down other debts or build your emergency fund if your debt eventually is forgiven.
  • Sign up for autopay, if you haven’t already. Not only are your payments less likely to get lost in the confusion when repayment restarts, but you’ll also get a 0.25 percentage point interest rate reduction, says Kantrowitz. 

Student Loan Forgiveness May Go to the Supreme Court

The losing side in either federal court case may appeal the decision to the Supreme Court. 

“Regardless of the outcome of the appeals, either the plaintiff(s) or the Biden administration will appeal the decision of the appellate court if the judge doesn’t rule in their favor,” Booth says.

It’s difficult to predict how the nation’s highest court would respond, should either party appeal. Two cases aimed at halting loan forgiveness have already gone up to the Supreme Court, and both have been rejected. If the Supreme Court agreed to take on a case related to student loan forgiveness, Booth says it would likely block student loan forgiveness since there are more conservative justices than liberals (6-3). 

“It’s disappointing and surprising since previous lawsuits were dismissed,” she says. “Borrowers should be prepared for them to take up an appeal.”

What Borrowers Should Do

Borrowers are allowed to request a refund on payments made during the COVID-19 pandemic, but Booth recommends exercising caution since it’s unclear what will happen with Biden’s student loan forgiveness plan. It’s possible that if the plan is permanently blocked, those who received refunds may have to pay that money back. So if you have already or plan to request a refund, hold onto it for as long as possible or at least until there’s more clarity on Biden’s relief plan.