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The Biden-Harris Administration’s Student Debt Relief Plan Explained
Supreme Court Strikes Down Biden Student Loan Debt Relief Plan
On June 30, 2023, the Supreme Court ruled 6 to 3 against the Biden-Harris Administration’s student debt relief program. Biden’s one-time federal student loan debt relief would’ve given eligible borrowers a full or partial discharge of federal student loans up to $20,000.
This ruling does NOT affect programs like Public Service Loan Forgiveness (PSLF), Teacher Loan Forgiveness (TLF), or income-driven repayment (IDR). It also does not affect the IDR Account Adjustment.
The June 30th Supreme Court decision was related to the Higher Education Relief Opportunities for Students Act of 2003, or “HEROES Act”, which President Biden invoked in August 2022 to launch his administration’s debt relief program.
By contrast, the PSLF program was established under the College Cost Reduction and Access Act of 2007. It is an entirely different program that allows government and non-profit employees to have their remaining loan balances forgiven after 120 qualifying monthly payments while working full-time for a qualifying employer.
What happens next
The Federal Student Aid’s website, studentaid.gov, updated its homepage with a brief announcement:
“The Supreme Court has issued a ruling on whether we can move forward with our student debt relief program. We are reviewing the Court’s decision to determine next steps…. We will post more information as soon as updates are available.”
The Supreme Court’s decision effectively starts the countdown to the end of the federal student loan payment pause. Payments and interest were already set to resume 60 days after the Supreme Court issued its ruling on Biden’s Student Debt Relief plan, or 60 days after June 30. Student loan interest will begin accruing September 1, and payments will restart October 1.
The administration is pursuing a “Plan B” and has initiated the rulemaking process under the Higher Education Act. For more information on other actions the Biden administration and Department of Education are pursuing, click here. To learn more about the existing IDR Account Adjustment, click here.
Final Extension of the Student Loan Repayment Pause
Initiatives Providing Relief to Borrowers
Make the Student Loan System More Manageable for Current and Future Borrowers
FREQUENTLY ASKED QUESTIONS
Does the Supreme Court ruling affect programs like Public Service Loan Forgiveness (PSLF)?
- This ruling does NOT affect programs like Public Service Loan Forgiveness (PSLF), Teacher Loan Forgiveness (TLF), or income-driven repayment (IDR). The Supreme Court decision centered on around the Higher Education Relief Opportunities for Students Act of 2003, or “HEROES Act”, while ruling the PSLF program was established under the College Cost Reduction and Access Act of 2007.
Are there are other opportunities for relief?
The Income-Driven Repayment (IDR) Account Adjustment, announced in April 2022, offers a one-time revision of IDR payment counts for eligible borrowers. The initiative includes:
- Credit for previously ineligible payments
- Credit for certain periods of deferment and forbearance
- Loan forgiveness for borrowers with a cumulative repayment time of 20+ or 25+ years, tax-free
Which loans are eligible for the adjustment?
- Federal Direct loans or ED-managed Federal Family Education Loans (FFEL)
- Commercially-managed FFEL, Perkins, HEAL Program, Parent PLUS
- Borrowers with other non-Direct federal student loans must act in 2023 to receive credit.
Who benefits from the IDR Account Adjustment?
The IDR account adjustment applies to all borrowers with federal student loans, including individuals in both public-service and private-sector jobs.
This includes borrowers:
- on an income-driven repayment (IDR) plan or were on one in the past;
- in the Public Service Loan Forgiveness (PSLF) program; or
- not on an IDR plan but are interested and have Direct or Federal Family Education Loan (FFEL) Program loans held by the U.S. Department of Education (ED)
Borrowers must be in the proper programs by the year’s end (2023) to benefit from this initiative.
The Biden Administration’s Plan for Student Loan Relief
Final extension of the student loan repayment pause
Due to the economic challenges created by the COVID-19 pandemic, the Biden-Harris Administration has extended the student loan repayment pause a number of times. Because of this, no one with a federally held loan has had to pay a single dollar in loan payments since President Biden took office.
On June 3, President Biden signed the Fiscal Responsibility Act of 2023, more commonly known as the debt ceiling bill, into law. As part of the negotiations, Biden agreed to put an end to the moratorium on federal student loan repayment. The pause may not be extended without Congressional approval.
MAKE THE STUDENT LOAN SYSTEM MORE MANAGEABLE FOR CURRENT AND FUTURE BORROWERS
FAMILIES
Income-based repayment plans have long existed within the U.S. Department of Education. However, the Biden-Harris Administration is proposing a rule to create a new income-driven repayment plan that will substantially reduce future monthly payments for lower- and middle-income borrowers.
The rule would:
- Require borrowers to pay no more than 5% of their discretionary income monthly on undergraduate loans. This is down from the 10% available under the most recent income-driven repayment plan.
- Raise the amount of income that is considered non-discretionary income and therefore is protected from repayment, guaranteeing that no borrower earning under 225% of the federal poverty level—about the annual equivalent of a $15 minimum wage for a single borrower—will have to make a monthly payment.
- Forgive loan balances after 10 years of payments, instead of 20 years, for borrowers with loan balances of $12,000 or less.
- Cover the borrower’s unpaid monthly interest, so that, unlike other existing income-driven repayment plans, no borrower’s loan balance will grow as long as they make their monthly payments—even when that monthly payment is $0 because their income is low.
The Biden-Harris Administration is working to quickly implement improvements to student loans. Check back to this page for updates on progress. If you’d like to be the first to know, sign up for email updates from the U.S. Department of Education.
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