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Supreme Court ruling on Biden student loan forgiveness plan could come within weeks

 May 15, 2023

The fate of President Joe Biden's proposal to forgive up to $20,000 in federal student loans for over 44 million Americans now rests with the Supreme Court.

Last year, the Biden administration announced a plan to forgive $20,000 in debt for families earning less than $125,000 annually. Those not qualifying for this income bracket would be eligible for $10,000 in debt forgiveness, as reported by AlJazeera.

The court is expected to rule on two cases that sought to halt the president's plan within the next month. Its decision could erase thousands of dollars in debt for millions of federal student loan borrowers, as reported by the Hill.

Supreme Court's Expected Timeline for Decision

No definitive timeline has been set for the Supreme Court's decision, but it is expected to be made before the end of June. The court has a tradition of releasing its major rulings in May or June.

The Scale of Proposed Student Loan Forgiveness

If the Supreme Court rules in favor of student loan forgiveness, it's estimated that approximately 44 million Americans would benefit, according to previous statements from the White House.

The application process for debt relief was briefly opened before legal challenges halted it. During that time, 26 million applications were accepted, with 16.5 million fully approved and forwarded to loan servicers for discharge.

Response from the Education Department

The Education Department, responding to a Freedom of Information Act request, revealed that in most congressional districts nationwide, between 60% and 65% of eligible borrowers applied or were automatically considered eligible for student loan forgiveness.

Resumption of Student Loan Payments

Borrowers who graduated during the COVID-19 pandemic have yet to make a regular payment on their student loans. However, this will change soon, with the exact date depending on when the Supreme Court makes its ruling.

The Biden administration has previously stated that payments would resume 60 days after the Supreme Court's decision or 60 days after June 30, whichever comes first.

Possible Extension of payment pause

There have been calls for Biden to extend the payment pause—first implemented by then-President Donald Trump in early 2020—if the Supreme Court rules against the loan forgiveness. Biden declared the last extension to be the final one, and it remains uncertain if he would consider another extension.

While some experts believe another payment pause extension is likely "on the table," Education Secretary Miguel Cardona confirmed that his department is preparing for loan payments to resume this year.

"We're preparing to restart repayment because the emergency period is over, and we're preparing our borrowers to restart," Cardona said in a recent statement.

The Education Department has begun coordinating with student loan companies, setting the stage for the reinstatement of loan repayments.

As per documents accessed by Politico, these companies have been instructed to prepare for the resumption of interest on borrowers' loans come September.

The Department anticipates that the first monthly payments will be due in October. Additionally, the companies have been mandated to alert borrowers about the recommencement of payments after August 31.

Possible Alternatives and Future Measures

Currently, it's uncertain what alternative measures the Biden administration may have if the Supreme Court rules against the student loan forgiveness plan.

Experts suggest that the administration would likely focus on other initiatives to address student loan debts. These could include reforming income-driven repayments and changes to the Public Service Loan Forgiveness program, among others.