4 Major Student Loan Relief Updates Borrowers Should Know About

It can be hard to keep track of the whirlwind of student loan news that has developed over the last week. But within a matter of days, there have been several major updates that will impact borrowers seeking student loan forgiveness and discharge, as well as those who might have difficulty resuming payments this winter.

Here's what you need to know. 

Biden's student loan forgiveness plan is going before the Supreme Court

The United States Supreme Court will probably have the final say over President Biden's unprecedented widescale student loan forgiveness plan. 

Under the initiative, millions of borrowers were set to receive $10,000 or more in student loan forgiveness. But two federal courts have blocked the program in response to legal challenges. A federal court in Texas declared the program unconstitutional and struck it down, while the federal 8^th Circuit Court of Appeals issued a preliminary injunction halting the program’s implementation while the legal fight continues. 

Related: Advocacy groups urge Supreme Court to uphold Biden’s student loan forgiveness plan

Borrowers notified of application status

The result is that 26 million borrowers have applied for student loan forgiveness under the program, the Education Department has approved 16 million borrowers, and exactly zero borrowers have received any relief. The application process has also been suspended in response to the court orders.

This week, the administration has been sending mass emails to borrowers notifying them that the Education Department has approved their student loan forgiveness applications but that they cannot award any actual debt relief until the court orders are overturned. 

“Your application is complete and approved, and we will discharge your approved debt if and when we prevail in court,” says the notice.

Case appealed to the Supreme Court

The Biden administration has appealed the 8^th Circuit’s decision to the Supreme Court. And the Texas court’s decision will likely end up at the Supreme Court as well, after an interim appeal to the 5^th Circuit Court of Appeals. No one knows how the Supreme Court will rule or when, but judges will start considering legal arguments as early as this week. 

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Biden administration extends student loan pause again in the face of pressure

The ongoing legal battle over Biden’s student debt relief plan placed the soon-to-expire student loan payment pause back at the top of policy discussions. The pandemic-related student loan pause has stopped all payments and frozen interest accrual on all government-held federal student loans since March 2020. 

Biden’s most recent extension was scheduled to expire at the end of the year — just as the one-time debt cancellation plan was supposed to ramp up.

This week, a coalition of over 200 organizations advocating for borrowers sent a letter to President Biden urging him to extend the student loan pause again.  

“In fewer than 45 days, as tens of millions of student loan borrowers remain closer than ever to historic debt relief, student loan payments are set to resume for the first time in nearly three years,” wrote the coalition of civil rights, consumer protection, and labor groups.

The President agreed, and extended the pause on Tuesday November 22 until 60 days after June 30, or earlier if a court rules in favor or against his cancellation plan.

This extension of the student loan pause will almost certainly invite scrutiny from Republicans, who are set to have a narrow majority in the House of Representatives following the midterm elections. 

Student loan borrowers seeking relief due to school misconduct get some good news

While millions of federal student loan borrowers face uncertainty about payments and loan forgiveness under Biden’s one-time debt relief plan, borrowers seeking discharges through the Borrower Defense to Repayment program got some good news last week. 

The Borrower Defense to Repayment program can cancel the federal student loan debt for borrowers who were misled by their schools about key aspects of their educational program. 

Borrower Defense settlement

Last week, a federal judge issued final approval for a settlement to resolve Sweet v. Cardona, a multi-year class action lawsuit first filed during the Trump administration over delayed Borrower Defense applications. Under the terms of the settlement, nearly a quarter million borrowers who attended a list of dozens of institutions will receive $6 billion in student loan forgiveness, as well as refunds of payments and credit repair. 

Approval notices for borrowers

Also last week, the Education Department started sending out mass notices approving over 700,000 borrowers for group discharges for those who attended well-known, and now defunct, for-profit institutions like Corinthian Colleges and ITT Technical Institutes. The relief, which was first announced last summer, will provide automatic loan forgiveness for borrowers through the Borrower Defense program, even for borrowers who never submitted a formal Borrower Defense application. 

The vast majority of these borrowers are still waiting on relief. 

Biden administration updates student loan bankruptcy discharge policy

Last week, the Department of Education and Department of Justice announced new policies that, they say, will make it easier for federal student loan borrowers to discharge their loans in bankruptcy. 

Student loans are difficult to discharge in bankruptcy because, under the bankruptcy code, a discharge can only be granted if the borrower can demonstrate that repaying their student loans would be an “undue hardship.” While the code does not expressly define “undue hardship,” bankruptcy courts have created standards and tests that are often very difficult for borrowers to meet. 

Justice Department may no longer oppose discharge request

The student loan bankruptcy discharge process has historically been grueling, as well. Borrowers must file an “adversary proceeding” — effectively a lawsuit within the bankruptcy process — to prove that they meet the standard. Student loan lenders, including the federal government, typically oppose the borrower in these proceedings, and they usually have significantly more resources at their disposal. 

But under the newly unveiled policies, the Biden administration will allow borrowers to complete a self-attestation form detailing their financial situation and hardships. If the borrower meets certain financial criteria demonstrating undue hardship, the Justice Department may not oppose a borrower’s request to discharge their federal student loans in bankruptcy, paving the way for a court’s approval.

It is far too early to say how impactful the policy change will ultimately be. Still, advocates for student loan borrowers are cautiously optimistic that it will make a real difference.