Creating transparency around student loan forgiveness policy changes

This summer, President Joe Biden announced the forgiveness of up to $10,000 for borrowers who have an individual income of less than $125,000 or a combined household income of less than $250,000, or up to $20,000 for former Pell Grant recipients.

It was an unprecedented move intended to help support low- and middle-income individuals cover the rapidly-increasing cost of college (which has nearly tripled since 1980) and has since generated significant debate over the past couple of months. If you initially qualified and applied for relief, you may have recently received an email from the Department of Education regarding the status of your loan forgiveness or seen in the news that Biden’s forgiveness plan is facing extensive new legal challenges.

As news is rapidly changing and with hundreds of students on our campuses affected by this issue, we decided to take this as an opportunity to summarize the current status of student loan forgiveness so students can be properly informed and are able to plan ahead financially.

After President Biden announced the decision in late summer, the Department of Education started accepting applications for loan forgiveness in October. Recently, they announced they are no longer taking applications due to legal challenges to the plan. On Nov. 10, a federal judge in Texas struck down the program nationwide—a legal blow big enough to put the whole program on hold. This challenge came days before another lawsuit ruling by six Republican-led states in the 8th Circuit Court of Appeals. Because this decision came after the ruling in Texas, it has no different legal implications, but it does potentially create another hurdle for the plan to overcome in order to take effect once again.

So how does this impact students who were previously eligible for loan forgiveness? It creates a big waiting game. Biden had already extended the student loan payment pause that he initiated due to the COVID pandemic that was slated to expire on Dec. 31. The lawsuits prompted him to prolong it until June 30, 2023. If the legal challenges are decided by then—which is inherently unlikely—then the result will be dependent on the court decision.

If the legal challenges are not decided by June, payments are expected to restart, barring yet another extension by Biden. For transparency, we also feel inclined to mention that this proposed student loan forgiveness only applies to outstanding debt, meaning that it will not apply to new debt taken out before July 2022.Therefore, it will apply to three years of current senior debt, two years of junior debt, one year of sophomore debt and no debt taken out by current first-years.

For students who applied for forgiveness, keep track of this issue as the legal battle unfolds. It will likely be a while until the dust settles. If you have questions, reach out to the CSB+SJU Financial Aid office.