Student Loan Forgiveness: What Borrowers Need to Know in December 2024

President Biden’s student loan relief efforts have faced significant challenges, including a Supreme Court ruling blocking his initial proposal. In response, the administration introduced the SAVE plan and a backup forgiveness plan under the Higher Education Act. 

But with a new administration likely to shift policies, current relief measures hang in the balance. Here’s what you need to know about the ongoing legal battles, future policies, and how student loan forgiveness may unfold in the coming years.

What is the status of President Biden’s student loan forgiveness proposal? 

The Biden administration’s journey toward student loan forgiveness has been marked by ambitious proposals, intense opposition, and significant legal battles. 

Starting in 2022 with a plan under the Health and Economic Recovery Omnibus Emergency Solutions (HEROES) Act, the administration aimed to relieve millions of borrowers from student debt, offering up to $20,000 in forgiveness for Pell Grant recipients. 

However, lawsuits from Republican-led states and a Supreme Court ruling halted the original plan. In response, President Biden’s team introduced the Saving on a Valuable Education (SAVE) plan and later announced a backup relief strategy in 2024 under the Higher Education Act.

This timeline provides a concise look at the pivotal moments in this unfolding story, highlighting the administration’s efforts and the ongoing legal hurdles:

• August 2022: The Biden administration announces a student loan forgiveness plan under the HEROES Act, offering up to $10,000 in relief for most borrowers and $20,000 for Pell Grant recipients under specific income limits ($125,000 for individuals, $250,000 for couples).
• September 2022: Six Republican-led states file lawsuits challenging the forgiveness plan.
• October 2022: The Department of Education (ED) opens applications for forgiveness amid ongoing legal battles.
• November 2022: ED halts forgiveness applications due to court rulings against the plan.
• June 2023: U.S. Supreme Court blocks the Biden administration’s forgiveness plan, ruling in favor of the states.
• July 2023: The Biden administration launches the SAVE income-driven repayment plan, targeting forgiveness for borrowers with low balances. Approximately $1.2 billion in debt is canceled under SAVE.
• April 2024: The Biden administration proposes a “plan B” debt relief initiative under the Higher Education Act, aiming to assist over 30 million borrowers.
• July 2024: Legal challenges arise as Republican-led states attempt to halt the SAVE plan.
• September 2024: Republican-led states file lawsuits to block the new debt relief proposal under the Higher Education Act.

In total, the Biden administration has forgiven over $175 billion in student loan debt for 5.5 million borrowers through the ED’s authority and by enacting borrower-friendly policies, including making Public Service Loan Forgiveness (PSLF) and income-driven repayment more accessible. 

I advise staying put and making payments as agreed if your student loans are in repayment. Once you have more clarity, you can look to make changes.

Chloe Moore, CFP®

What is the future of student loan forgiveness?

The Biden administration’s plans for student loan relief, including SAVE and the “plan B” forgiveness proposal, face ongoing legal battles that could drag on for months. If the courts rule against these proposals, the new Trump administration will likely not appeal.

While we can’t predict policy changes with certainty, Trump has criticized Biden’s loan forgiveness efforts. The GOP has also introduced its own legislation—the College Cost Reduction Act (CCRA)—which, if passed, would impact current borrowers by tightening forgiveness rules. 

Key changes could include rolling back protections like Borrower Defense and Closed School discharges and replacing SAVE with an income-driven repayment plan that raises monthly payments.

On the bright side, PSLF appears safe. Previous GOP efforts to repeal it failed due to Senate vote requirements, and the same barriers remain today. Still, it may be wise to boost your savings to prepare for any policy shifts that could impact your loans.

Given the current policy climate, I encourage my clients to remain patient while we wait for more clarity. In the meantime, I work with my clients to monitor their budgets so they have the flexibility to pay down debt or free up cash for potentially higher payments in the future.

Chloe Moore, CFP®

Should I keep paying my loans or wait for forgiveness?

Don’t count on your student loans being forgiven under the incoming Trump administration, and keep making your monthly payments if your loans aren’t in forbearance. Doing so will help you avoid delinquency and default, as well as the potential consequences that come along with them. 

Missed payments and default could harm your credit, result in wage garnishment, and have other negative effects.

It’s worth noting that many borrowers who applied for a SAVE IDR plan before legal issues arose are currently in forbearance due to pending court cases. The ED is currently accepting new applications for SAVE and income-based repayment plans, though it’s unclear when or if applications will be processed. Prepare yourself for a long wait. 

As of November 2024, you can still apply for loan forgiveness through PSLF, Teacher Loan Forgiveness, Permanent and Total Disability Discharge, and other ED programs. 

That said, forgiveness options could be more limited or eliminated completely in the future, depending on policy changes. Unfortunately, it’s impossible to tell what the future holds, but we’ll keep you updated on new developments.