Supreme Court blocks student loan forgiveness: What should borrowers do now?

The Supreme Court has made its final ruling on student debt relief, ending the almost yearlong uncertainty borrowers have had on the future of their loans. 

In a 6-3 decision, the conservative majority of the Supreme Court struck down Biden’s plan that would have given up to $20,000 in loan forgiveness for more than 40 million borrowers. 

“The Secretary asserts that the HEROES Act grants him the authority to cancel $430 billion of student loan principal. It does not,” Chief Justice John Roberts wrote in the majority opinion.

Earlier this month, borrowers also got a concrete answer on the timeline of student loan repayments restarting; the Biden administration declared interest will begin accruing Sept. 1 and payments will resume in October.

Now that borrowers know the fate of both student debt situations, here’s what they should do next:

Access your student loan account

It has been three years since borrowers have had to log into their student loan accounts. During that pandemic pause, some borrowers graduated and haven’t ever checked their accounts.

Ensuring you know your account information — including which company holds the loans — is important to figure out now, so you’re not scrambling near the end. 

Even if you were paying student loans before the pause, the Consumer Financial Protection Bureau (CFPB) calculates more than 17 million accounts were moved to other servicers over the payment pause. More accounts could be switched in upcoming months. 

For example, accounts with FedLoan were moved to other servicers during the pandemic after the company ended its contract with the federal government. 

The CFPB predicts that around 30 million accounts will be moved, with some borrowers having easy transitions while others will have to make new logins and re-enter all their information. 

Questions? Contact your student loan servicer

If you have any questions regarding your student loans or are looking into different payment options, now is the time to talk to your servicer. 

Student loan servicers have been warning for months they do not have enough funding or staffing for their customer service departments in order to meet the expected high demand from borrowers as payments begin or resume.

The Department of Education blames the lack of staffing on inadequate funding from Congress, while opponents say the department has wasted the money on other issues. 

To avoid the extremely long waits on the phone lines, borrowers are advised to call now to get their information updated and plans for repayment solidified. 

Watch for repayment option changes

The Biden administration is pushing through changes to income-driven repayment (IDR) options.

The changes could allow individuals making less than $30,500 annually, or a family of four making less than $62,400 annually, to have no monthly payments.

Those with higher incomes could also see benefits, as the changes would allow 5 percent of discretionary income per month to go toward student loans, in place of the current 10 percent. 

“These proposed regulations will cut monthly payments for undergraduate borrowers in half and create faster pathways to forgiveness, so borrowers can better manage repayment, avoid delinquency and default, and focus on building brighter futures for themselves and their families,” Education Secretary Miguel Cardona said when announcing the proposed changes. 

The proposal has already gone through a public comment period, but there have been multiple delays to this proposal in the past. It is likely the changes take full effect for all borrowers in 2024, but that is not yet certain.