To pay or not to pay?
The student loan forgiveness news of late may have borrowers feeling the whiplash of changing policy developments coming out of the White House, as well as from judges in a handful of states.
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On Oct. 1, a federal judge in the Southern District of Georgia allowed an existing order on Biden's student loan forgiveness program to expire. The expiration meant 25 million Americans could have their loans forgiven.
Then, just two days later, another judge — this one in Missouri — issued a preliminary injunction, one sought by the states involved in the lawsuit. This legal action successfully blocked the student loan forgiveness plan — again.
Now, at the end of the month, a new announcement has arrived from the White House.
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Student loan forgiveness takes the form of a pause in payments
On Oct. 25, the U.S. Department of Education announced that payments for some student loans will remain on pause for at least the next six months. The news affects around 8 million borrowers under the federal Saving on a Valuable Education, or SAVE, plan.
According to the department's announcement, if the plan is approved, students facing "hardship" could have the balance of their loans waived. It will be up to the department to determine whether or not a hardship is likely to impair the borrower's ability to repay loans, either partially or fully.
Hardship could include unexpected medical bills, high child care costs, significant expenses related to caring for loved ones with chronic illnesses, or devastating economic circumstances from the impacts of a natural disaster.
The latest proposal would help borrowers who do not "sufficiently benefit from other currently available forgiveness options," according to the statement.
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Under the proposal, people who are currently enrolled in SAVE will be able to pause monthly payments for six months, and their current balances will not accumulate interest.
The proposed regulations will be published in the Federal Register in the upcoming weeks. After the proposed regulations are published, the public may submit comments through the Regulations.gov website for 30 days. The Department expects to finalize the regulations in 2025, according to the statement.
The SAVE plan has not been without controversy: Earlier this year, a federal court issued an injunction stopping the implementation of part of the SAVE plan. The plan calculates payments based on the borrower’s income and family size rather than loan balances or repayment time frame.
When the SAVE plan was announced in 2022, the White House said it would reduce many borrowers’ monthly payments to zero and would save others around $1,000 a year.
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The Biden administration continues to support several student loan forgiveness programs
The Biden Administration is pushing forward with many plans to relieve the financial burdens facing millions of students.
"For far too long, our broken student loan system has made it too hard for borrowers experiencing heartbreaking and financially devastating hardships to access relief, and it’s not right," U.S. Secretary of Education Miguel Cardona said in a statement. “The rules proposed by the Biden-Harris Administration today would provide hope to millions of struggling Americans whose challenges may make them eligible for student debt relief. President Biden, Vice President Harris, and I will not stop fighting to deliver student debt relief and create a fairer, more just, and more affordable student loan system for all borrowers.”
Related: Student loan forgiveness takes another big hit
Just last week, President Biden announced $4.5 billion in student debt was canceled for public servants including firefighters, teachers, social workers and nurses who are part of the Public Service Loan Forgiveness (PSLF) program. More than 1 million borrowers are part of the PSLF program, and they carry around $74 billion in loan debt.
Last week's PLSF announcement brought the total of loan forgiveness approved by the Administration to over $175 billion for more than 4.8 million Americans.
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