What the SCOTUS student loan forgiveness decisions means for borrowers: VERIFY Fact Sheet

The Supreme Court ruled on June 30 that President Joe Biden’s administration overstepped its authority in trying to implement a one-time student debt relief plan.

Biden’s plan would have forgiven between $10,000 and $20,000 of federal student loan debt for people with annual incomes of less than $125,000 for individual borrowers and less than $250,000 for households. 

VERIFY is breaking down what borrowers need to know after the Supreme Court’s decision, including when payments will restart.

THE SOURCES

WHAT WE FOUND

When will student loan payments restart?

Student loan interest will start accruing on Sept. 1, 2023 and payments will be due starting in October, according to the Department of Education’s website. The department says it will “notify borrowers well before payments restart.” 

During the pause, federal student loan borrowers have not been required to make monthly payments and their loans have not accrued interest.

The Biden administration has previously extended the pause. But the debt ceiling agreement prevents that, since it codifies the end date into law. 

How does student debt relief differ from Paycheck Protection Program (PPP) loan forgiveness?

Some people, including U.S. lawmakers, have compared proposed student debt relief to Paycheck Protection Program (PPP) loan forgiveness.

The PPP, aimed at helping businesses keep their workers employed during the COVID-19 pandemic, offered loans worth up to $10 million to most small businesses, individuals and nonprofit organizations with fewer than 500 employees through May 2021. 

The Pandemic Response Accountability Committee (PRAC), which tracks how pandemic relief funds are used, said in its October 2022 update that the average amount of PPP loan forgiveness was $72,100 – over $50,000 more than the maximum amount of Biden’s proposed student loan forgiveness.

But student debt relief and PPP loan forgiveness is “not quite an apples to apples comparison,” Andrew Lautz, director of federal policy at the National Taxpayers Union Foundation, told VERIFY.

While Congress created the PPP and its accompanying loan forgiveness through federal law, the Biden administration tried to use other methods for student debt relief. 

“The law that President Biden is using is not as overtly clear as when these types of mass forgiveness programs can be done,” Nicholas Creel, a constitutional law expert at Georgia College and State University, said.

Do borrowers have other options to suspend student loan payments?

Student loan borrowers who are in a “short-term financial bind” may qualify for deferment or forbearance, the Department of Education says. Both of these options allow borrowers to temporarily suspend their payments. 

However, loan interest will typically still accrue while your loan is in deferment or forbearance – you just won’t be penalized for failing to make payments. This means your balance will increase and you will end up paying more over the life of your loan.

Are there any other federal student loan forgiveness programs?

A number of other student loan forgiveness programs that have existed for years remain in place after the Supreme Court ruling. However, only borrowers who meet specific conditions qualify for them.

One program is Public Service Loan Forgiveness (PSLF), which forgives a borrower’s Direct Loans if they work in certain public service jobs and make 120 payments on their loans. The Department of Education says it has approved $42 billion for 615,000 borrowers in PSLF since Oct. 2021.

Any borrower with an IDR plan will have their remaining loans forgiven after making 20 to 25 years of payments. Whether you have balance left over to forgive depends on how large your income is relative to your debt, the Education Department says.

The Education Department also regularly eliminates student loan debt for borrowers who have been misled or suffered from misconduct by certain colleges in a program called borrower defense. These are usually for students who attended defunct for-profit colleges, such as ITT Technical Institute.

Other forgiveness programs listed by the Education Department’s Federal Student Aid website include forgiveness programs for teachers, people with disabilities, people who have died and people who have filed for bankruptcy.

VERIFY digital journalist Emery Winter contributed to this report.