Everything you need to know about President Biden’s loan forgiveness plan

August 24^th, 2022

After months of speculation, President Biden finally announced his student loan forgiveness plan:

• Cancellation is available to all federal student loan borrowers whose Adjusted Gross Income (AGI) is under $125k, or under $250k for married couples or heads of households.
• If you received a Pell Grant in college, you’ll be eligible for up to $20,000 in debt cancellation. If not, you’re eligible for up to $10k.
• Income qualifications for Dependent students will be based on their parents’ incomes.
• Independent students (which includes all medical students) will be based on their own income.
• Applies to federal student loan balances outstanding as of June 30^th, 2022.

September 29^th, 2022

Six Republican-led states sued President Biden in an effort to block his forgiveness plans. The underlying plaintiff in the lawsuit is MOHELA, who services commercially held FFEL loans and argues it would lose interest and servicing revenue if forgiveness were to happen. In response the White House quickly and quietly amended the qualifications to exclude commercially held FFEL loans, impacting an estimated 770k borrowers.

October 13^th, 2022

U.S. District Judge Henry Autrey heard arguments from both sides of the case but did not make an immediate ruling.

October 17^th, 2022

The Dept. of Education formally launched a simple forgiveness application, attesting that meet the eligibility requirements and requiring no supporting documentation. The application can be found HERE, only takes one or two minutes to complete, and is mobile friendly.

October 21^st, 2022

After being dismissed by Judge Autrey the day prior, a federal appeals court blocked President Biden’s forgiveness plan. This is not a ruling against the forgiveness, but rather a “temporary stay” which stops any forgiveness activity while the case is properly vetted in the court.

Our recommendation is that everyone who believes they are eligible go ahead and complete the application as soon as possible. As we are in uncharted territory, we don’t have an expectation as to how this might play out.

November 10^th and 11^th, 2022

A Federal judge in Texas blocked Biden’s student loan initiative, calling it “unconstitutional” and describing it as one of the largest executive branch overreaches in US history. Judge Mark Pittman directly refuted Biden’s/ED’s claim that the Heroes Act gives them the authority to forgive debt on a large scale. The Department of Justice immediately filed an appeal to the 5th Circuit Court of Appeals, which has a reputation of being very conservative. Meanwhile, the Federal Student Aid website has stopped accepting applications.

November 14^th, 2022

The Eighth Circuit Court of Appeals dealt another blow to Biden’s forgiveness plan on Monday, granting an (permanent) injunction for the suit originally filed by six state AG’s on September 29^th. Even after Mohela itself publicly stated they were not participating in the case, the appeals court acknowledged the original complaint saying that Mohela did appear to be financially harmed by the forgiveness plan. As a result, the state’s revenue would also be impacted, giving them standing to sue. The court also said it saw “no workable path” for the administration to narrow the scope of the forgiveness plan either. Next stop… the Supreme Court…assumedly.

November 22^nd, 2022

In light of the continuing lawsuits aiming to block his student loan forgiveness plan, the Biden administration today announced yet another extension to the nearly three year pause on student loan payments, interest, and IDR recertifications. Payments will resume 60 days after the forgiveness plan is allowed to continue. If the Supreme Court ultimately strikes down the Biden plan, or the case(s) is still pending, payments will resume September 1^st.

December 5^th, 2022

The 5^th circuit court of appeals also struck down Biden’s forgiveness plan last week. The administration appealed to the Supreme Court for immediate relief. The court denied that request to vacate the current injunctions, but did agree to hear oral arguments in February. If the court sides with the administration payments could resume as early as April. Stay tuned!

January 6^th, 2023

The Biden administration filed it’s brief with the Supreme Court this week, essentially laying out the merits of it’s case. Much of it is the same two things we’ve heard (from the administration) from the start: 1) the claimants have failed to show that they were harmed by the policy, and 2) that the president does have the authority to do this. We’re posting this here only because the news outlets turned it into a story and didn’t want you to think we missed anything. But this brief is a nothingburger. This case is basically unchanged, and could go either way.

February 28^th, 2023

Today the Supreme Court heard the oral arguments for both cases in a combined session. This went somewhat predictably as the more conservative justices focused on executive overreach and whether canceling this much debt should have been a congressional decision instead of a presidential one.

• Chief Justice Roberts made three separate comments about the sheer cost of Biden’s plan (roughly $400B), and said plainly that spending on that scale, and a policy impacting 43 million people, should be a congressional matter.
• Justice Kavanaugh drew a lot of attention when he stated that “some of the finest moments in the court’s history were pushing back against presidential assertions of emergency power.”

On the other side of the argument is whether the plaintiffs have standing. Many opinions have been written over the past few months stating the plaintiffs’ really don’t have the right to bring this case in the first place. Here we saw nearly all of the conservative and liberal Justices raising questions about the standing, and all seeming to have some doubt. Justice Barrett seemed particularly doubtful in her questioning, leaving many to wonder if she could be a swing vote in Biden’s favor.

There is no doubt the conservative majority sees this as a clear case of executive overreach. Many outlets seem to be stuck on that point and are saying that it doesn’t look good for team Biden. But it is important to note that, procedurally, the question of standing comes first. A majority of the court will have to (or at least should) first conclude that the standing is really there, before deciding whether the president has overstepped his authority. We honestly think this case could still go either way.

So what’s next? Typically the court takes a few months to formally decide cases. Then they tend to release their decisions at the end of the term in June or July. So we don’t expect an immediate decision on this. That said, there is no rule stopping them from releasing a decision sooner. So now it’s just a waiting game.

For PSLF Candidates in Arkansas, California, Indiana, Minnesota, Mississippi, North Carolina, and Wisconsin:

Loan cancellation may be taxable in your state. Because Public Service Loan Forgiveness is not taxable at the Federal or state level due to an IRS provision, opting out of President Biden’s forgiveness plan may reduce your tax liability without increasing your payments.

Brandon Barfield

Brandon Barfield is the President and Co-Founder of Student Loan Professor, and is nationally known as student loan expert for graduate health professions. Since 2011, Brandon has given hundreds of loan repayment presentations for schools, hospitals, and medical conferences across the country. With his diverse background in financial aid, financial planning and student loan advisory, Brandon has a broad understanding of the intricacies surrounding student loans, loan repayment strategies, and how they should be considered when graduates make other financial decisions.