The Battle for Loan Cancellation, and Santa “Pause”

If you haven’t already seen it, President Biden (predictably) extended the payment and interest pause on federal student loans until August 30^th, 2023, or until 60 days after the Supreme Court settles the case, whichever comes first. Now millions of you are back in limbo wondering when payments will resume, and how much you’ll owe.  

The extension was a direct response to Biden’s loan cancellation program being struck down in court. We reported as much on November 14^th, and the administration responded the following week stating that it would take the case the Supreme Court. This has set off a domino effect impacting several other areas of student loans. Let us explain: 

Income-Driven Repayment (IDR) Recertifications 

As a result of the CARES extension, borrowers in IDR plans prior to COVID will now have their recertification dates pushed back yet again. This impacts married couples whose tax filing strategies are intertwined with their loan repayment strategies. The “6-to-12 month rule” is still in effect. But without an exact end date for CARES, tax planning will be difficult for many. And the impact to tax liabilities can be over $10k for high earners.  

Cancellation and Forgiveness are NOT the Same 

We’ve been monitoring a few social media threads and noticed much confusion among borrowers when it comes Biden’s cancellation plan vs. PSLF. Some are commenting that positioning for PSLF is pointless because the court is just going to strike down the whole thing. Don’t confuse the programs here. Biden’s student loan forgiveness plan has nothing to do with Public Service Loan Forgiveness. That plan was approved by Congress in 2007, and no President can cancel it. On the contrary, ED recently announced several improvements to the program which we reported on here. 

A New IDR Plan 

Finally, Biden’s big student loan announcement back in August also included the introduction of a new (and nameless as of yet) Income-driven repayment plan. The White House teased the plan highlights and said full details would follow in November, but we’re still waiting for clarity on several items left unanswered about the new plan, such as whether it offers 20 or 25 year forgiveness for grad students, how income will be assessed for married borrowers, and what calculation will be used for consolidated loans. We can only presume that these court battles have stakeholders completely occupied and that the new IDR plan is on the back burner for now.  

We’ll continue updating this blog as things develop.

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.