3 things to know about student loan forgiveness and the payment pause for 2023

December 30, 2022

What’s the latest with student loan forgiveness and the payment pause?

3 things to know about student loan forgiveness and the payment pause for 2023

Whether you’re someone with student debt, a company looking for ways to help your employees with their debt burden, or just someone with a general interest in student loan news, here are 3 things you should know about student loan forgiveness and the payment pause going into 2023:

  1. Student loan forgiveness is on hold until February 2023
  2. Payments on federal student loans are paused but will likely resume by Summer 2023
  3. Companies can help their employees reduce their student loan debt in 2023 with a tax-free benefit! 

#1) Student Loan Forgiveness is on hold until at least Feb 2023

It’s been an eventful few months for student loan forgiveness! After applications for forgiveness opened up in October, things were quickly and temporarily put on hold when the U.S. 8th Circuit Court of Appeals granted an emergency petition to freeze loan forgiveness filed by six states: Nebraska, Missouri, Arkansas, Iowa, Kansas, and South Carolina. These six states had filed a lawsuit that was quickly dismissed and asked for an emergency injunction while they appealed their case. 

On November 14, the U.S. 8th Circuit Court of Appeals in St. Louis issued a longer-term injunction against Biden’s student loan forgiveness program, preventing the program from being implemented until the Appeals Court or the Supreme Court could rule on the injunction. A few days later, the Biden administration asked Justice Kavanaugh to lift the injunction but the request was deferred. 

In early December, the Supreme Court officially announced that it would hear oral arguments challenging the legality of the program during their February 2023 session and on Dec 12, the Supreme Court agreed to hear arguments in a second case alongside the first. 

Oral arguments are scheduled to start on February 28, 2023.

So where does that leave student loan forgiveness?

Student loan forgiveness is effectively on pause until the Supreme Court makes a decision on the pending lawsuits and injunctions.  

After a federal judge in Texas struck down Biden’s program and the longer-term injunction was granted by the Appeals Court in November, the U.S. Department of Education stopped accepting applications for student loan forgiveness until the litigation is resolved.

Before the program was paused, nearly 26 million people had applied (and 16 million had been approved) for student loan forgiveness. Now all applicants, approved or prospective, will have to wait and see what the Court decides in 2023. 

#2) Payments on Federal Student Loans are still paused but will likely resume by Summer 2023 

You may recall that back in August, when President Biden announced his student loan forgiveness plan, he extended the freeze on student loan payments until Jan 1, 2023 and claimed this would be the final extension of the payment pause. Well, the lawsuits against Biden’s forgiveness policy threw a wrench into those plans. 

In November, the U.S. Department of Education announced they were extending the payment pause once again to alleviate uncertainty while the forgiveness plan is under legal review. 

So when will payments on federal student loans resume?

Now, payments on federal student loans will resume either:

  • 60 days after the Supreme Court rules on the forgiveness program or, if the program hasn’t been implemented and litigation is still pending, 
  • 60 days after June 30, 2023 (the end of August 2023).

At the very latest, payments seem likely to resume by the end of August.   

Will the payment pause be extended again? 

While anything can happen, it seems unlikely that the payment pause will be extended again after the Supreme Court rules on the legality of Biden’s student loan forgiveness plan. Their decision could settle all questions of legality once and for all. 

#3) Companies can help employees significantly reduce their student loan debt in 2023 with a tax-free benefit!

Through 2025, companies can help their employees make a meaningful dent on their outstanding student loan balances by offering tax-free employer student loan contributions as a benefit

Even if the U.S. Department of Education was allowed to resume implementing Biden’s student loan forgiveness policy tomorrow, ⅔ of borrowers in the US workforce would still hold some amount of student debt. While student loan payments and forgiveness are paused, companies can help employees pay down the remainder of their outstanding loan balances (federal OR private) with a student loan contribution benefit. This could potentially save employees with student debt thousands of dollars in accrued interest and large amounts of financial stress.  

At Highway Benefits, we believe this benefit is one of the best ways to tackle the student debt crisis in the US. Talk to our team today to learn more about how we can help. 

Disclaimer: This article is purely information and is not intended as financial advice. If you have federal student loans and want to know how these changes will affect your particular situation, visit StudentAid.gov or speak with a financial advisor.

About the Author
The author of the blog post
The Highway Team
Highway Benefits is an employee benefits platform that increases retention and attraction of top talent through modernized benefits. Highway's first product, a student loan matching platform, allows employers to design a custom plan which gives them the ability to contribute directly to their employees' student loans.
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