What’s the latest with student loan forgiveness and the payment pause?
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:
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.
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.
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.
Now, payments on federal student loans will resume either:
At the very latest, payments seem likely to resume by the end of August.
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.
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.
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