SCOTUS Strikes Down Student Loan Forgiveness. What’s Next?
4 min read
Posted on July 7, 2023
[Note: the following post is based on the official White House FACT SHEET released June 30, 2023]
On June 30, 2023, the Supreme Court of the United States (SCOTUS) struck down President Biden’s Federal Student Loan Forgiveness Plan with a 6-3 majority.
The ruling denies relief to up to 40+ million federal student loan borrowers who once had a chance at up to $20,000 in one-time forgiveness. And now, many are asking “What’s next?”
In this article, we’ll cover what this means for existing federal student loan borrowers, new proposed debt relief efforts made by the Biden Administration, and how to prepare for student loan payments to restart.
What Does This Mean for Existing Federal Student Loan Borrowers?
It appears unlikely that one-time federal student loan cancellation similar to what was proposed will move forward. The Supreme Court ruling makes it clear that Congress would need to act to cancel student loan debt and with the current makeup of Congress, this seems unlikely.
Nevertheless, this means it’s time to prepare now for your federal student loan payments to restart. Below are some important dates and details to help you think ahead!
Interest Will Start Accruing September 1
On September 1, 2023, interest will start accruing on federal student loans – with borrowers expected to make their first payment in October. Interest has not accrued on federal student loans during the payment freeze.
Remember, most student loans start accruing interest as soon as they are disbursed and are added to your total loan balance daily.
Payments Will Resume October 2023
You should receive your student loan bill around September - October. Be prepared for these payments in your budget – which could be pretty jarring to your personal finances.
Other Proposed Student Loan Debt Relief Efforts
Next, let’s dive into other student loan debt relief options the Biden Administration announced just hours after the Supreme Court decision. It’s worth noting that these new debt relief efforts may face legal challenges.
While the Department of Education has already initiated rulemaking under the Higher Education Act aimed at opening an alternative path to debt relief – it’s known to be a lengthy process. But be sure to keep an eye out for further updates from news organizations on its progress.
“On-Ramp” to Repayment
The U.S. Department of Education is creating a 12-month “on-ramp” repayment program from October 1, 2023, to September 30, 2024.
The on-ramp period is intended to help borrowers who miss payments during this timespan to avoid the harsh consequences of missed, partial, or late payments. Meaning, any missed, partial, or late payments will not lead to negative credit reporting, default, or loans being sent to collection agencies. Although keep in mind, interest will still accrue during this time.
According to the White House, borrowers do not need to take any action to qualify for this on-ramp.
Income-Driven Repayment (IDR) Plan Changes
Although there is no expected one-time loan forgiveness at this time, the government has proposed changes to Income-Driven Repayment (IDR) Plans. IDR Plans help qualifying borrowers set an affordable monthly loan payment amount based on their income and family size.
More specifically, the Saving on a Valuable Education (SAVE) Plan will include new benefits – and is expected to provide the lowest monthly payments of any IDR plan available to nearly all student borrowers. Some changes will begin this summer, and additional updates will go into effect in 2024.
Note that the SAVE Plan replaces the current Revised Pay As You Earn (REPAYE) Plan. So if you’re already signed up for the REPAYE Plan or sign up before payments resume, you’ll automatically be put on the SAVE Plan once it becomes available.
Furthermore, find out if you’re already on an IDR plan by logging into your StudentAid.gov account. Additionally, contact your loan servicer and ask if an IDR plan could be a good option for you.
Next, let’s talk about steps you can take to prepare for your student loan payments to restart.
How to Prepare for Payments to Restart
After over 3 years of a federal student loan payment freeze, it's crucial to start preparing for payments to resume in October 2023.
For example, here are some things you can do now:
- Update your contact information. Login to StudentAid.gov to ensure your contact information is current with the federal government.
- Confirm your loan servicer. If you’re unsure about who your servicer is, you can find out while logged in to your account. Additionally, make sure they have your current contact information.
- Explore your repayment plan options. Make sure you’re clear on your loan repayment details with your servicer. And, as we discussed earlier, you could explore income-driven repayment plans you may qualify for.
- Review your budget. Adjust your monthly budget accordingly in order to start making your payments in full and on time. Also, confirm with your servicer if you’re enrolled in auto-debit payments – this can help make your life a little easier.
Lastly, keep in mind that there are other student loan forgiveness programs that already exist – like Public Service Loan Forgiveness (PSLF) and Teacher Student Loan Forgiveness. Depending on your circumstances, they could be worth exploring eligibility for.
Our Mission at Splash
At Splash, our mission is to make people more powerful than their debt. Our goal to help people get out of student loan debt is core to this.
Our CEO, Steve Muszynski, said it best:
"We believe that change is needed to make higher education and student loan debt more affordable, but we also accept the reality of the decision provided by the Supreme Court. This will have a major impact on the lives of 40+ million Americans. Splash will continue our work to find solutions for student loan borrowers that get them out of debt sooner and cheaper, regardless of the prevailing climate in Washington, DC."
Splash offers student loan refinancing which may be able to help you lock in a lower interest rate and pay off your debt faster. Check your rate through Splash to see what you could qualify for – with no impact on your credit score.1
The information provided in this blog post is not intended to provide legal, financial or tax advice. We recommend consulting with a financial adviser before making a major financial decision.