by Tamisha Singletary

Since March 13, 2020, a pause on all federal student loan payments has been in effect, and in a few weeks this payment hiatus is ending. According to studentaid.gov, interest will resume accruing on Sept 1st, and in October, monthly payments will be due for federally held student loans. Borrowers will receive their bills, including payment amounts and due dates, at least 21 days before their first payments are due.

As a Coalition, we are disappointed by the Supreme Court decision to strike down the Biden-Harris Administration’s plan for eliminating federal student loan debt via the Higher Education Relief Opportunities for Students (HEROES) Act of 2003. In response to this decision, White House Domestic Policy Advisor Neera Tanden and Secretary of Education Dr. Miguel Cardona announced what they call “another important step in the President’s plan to provide relief to borrowers,” the launch of the Savings on a Valuable Education (SAVE) Plan.

The SAVE Plan is an income-driven repayment plan that calculates payments based on a borrower’s income and family size — not their loan balances — and forgives remaining balances after [20 or 25] years. Through the SAVE Plan, which is the most affordable income-based repayment plan in history, millions of borrowers will have their monthly payments cut to zero dollars. Others will save nearly $1,000 per year — $1,000 per year. Anyone who makes under $32,000 — or $67,000 for a family of four — will have $0 due in monthly payments.

Conceived of as part of a 12 month “on-ramp” to repayment, the SAVE Plan has the potential to shield borrowers from some of the worst economic harms associated with falling behind if loan payments cannot be made. Borrowers who miss payments won’t be reported to credit agencies for 12 months, temporarily removing the threat of default. The SAVE plan also eliminates 100% of remaining interest for both subsidized and unsubsidized loans after a scheduled payment is made. So, if a borrower makes a monthly payment, the loan balance won’t grow due to unpaid interest. Borrowers previously enrolled in the Revised Pay As You Earn (REPAYE) plan will automatically receive the benefits of the Saving on a Valuable Education SAVE Repayment plan.

Prior to the SCOTUS ruling that the Biden-Harris administration did not have the authority to cancel student debt under the HEROES Act, some politicians argued that voters should find this program unfair to taxpayers without student loans, those who had the resources to pay their debt outright or over time, and those who chose not to attend college. In reality, tax paying individuals can and have fully paid for this program tenfold in a single fiscal year. Just last year the Congressional Budget Office reported that individual taxpayers provided $2.6 trillion dollars (10.5% GDP) in federal tax revenues on top of $1.5 trillion in payroll taxes (5.9% GDP). This is roughly $4.1 trillion (16.1% GDP) in total paid to the government through U.S. residents’ incomes in 2022. Meanwhile, the estimated cost of the entire Biden-Harris Administrations federal student debt relief program would have only been 10.25% of what taxpayers paid to the Federal Reserve last year.

As frustrating as the Supreme Court decision was, SCOTUS did not completely close the door to other potential avenues for federal student debt relief. By limiting its decision to the President’s use of emergency powers connected to the pandemic, SCOTUS did not rule on whether the President or the Secretary of Education can cancel student debt using a different legal basis (e.g. using the Higher Education Act).

In the meantime, the SAVE plan will provide some relief for student borrowers that are in line with the proposed Federal Assistance to Initiate Repayment (FAIR) and Responsible Education Assistance through Loan (REAL) Reforms Acts. Enrolling now takes about 10 minutes, and borrowers can choose to have their income tax information automatically updated every year, which further streamlines the process for enrollees.

This newly announced relief option comes in addition to the roughly $116.6 billion in total federal student loan forgiveness that the Biden-Harris Administration has approved for more than 3.4 million borrowers. On July 14th, the Department of Education notified more than 804,000 borrowers that they have a total of $39 billion in federal student loans that would be automatically discharged. This was the result of a payment count adjustment implemented by the Administration to ensure an accurate count of the number of monthly payments that qualify for forgiveness under income-driven repayment (IDR) plans–previously too many qualifying payments made under IDR plans were not accounted for. Borrowers are eligible for forgiveness if they have accumulated the equivalent of either 20 (for all loans accrued during undergraduate education) or 25 years (with grad or professional study loans) of qualifying months. 

To break down the running total of $116.6 billion, the Administration has also approved:

• $45 billion for 653,800 public servants through improvements to Public Service Loan Forgiveness (PSLF), including all months during the pause counting towards the program;
• $10.5 billion for 491,000 borrowers who have a total and permanent disability; and
• $22 billion for nearly 1.3 million borrowers who were cheated by their schools, saw their schools precipitously close, or are covered by related court settlements.

In summary, for student borrowers in our network to consider:

• Looking over the recommendations made by studentaid.gov in preparation for interest accrual and payments restarting
• Enrolling in the SAVE Plan if you haven’t already and double-check with your servicer that you have been auto-enrolled if you were previously on the REPAYE Plan
• Check your eligibility for the PSLF program. If you have previously attempted to apply to the program, please be advised that some of the requirements have been reduced and the process has become more simplified, especially with the institution of the online help tool.
• Stay up to date with the continuing fight for student debt cancellation at https://protectborrowers.org/
• Filling out this form to automatically send a legal memo to the Department of Education requesting student debt cancellation for all using this tool developed by the Debt Collective
• Continue to engage with us on this issue by sending emails with your student borrower and student cancellation program experience, as well as what student debt cancellation would mean for you, to tamisha@youngfarmers.org