Everything to Know About Biden’s New Student Loan Debt Relief Plan & What It Means For You

By Victoria Sado

What a blow. The Supreme Court has struck down the Biden-Harris administration’s student loan debt forgiveness plan. This disappointing (depressing, disheartening … we could go on … ) decision denies 43 million borrowers from receiving up to $20,000 in federal relief for student loans. In other words, the student loan crisis continues.

Sure, Biden maintains “the fight is not over,” and the administration’s backup plan is in the works. But us borrowers ‌can’t wait to see what happens: We’re officially back on the hook.

Mark your cal for these important dates:

  • Student loan interest starts accruing on September 1, 2023

  • Student loan payments restart in October 2023

So, what should you do right now? Well, new repayment options are on the table that might offer some relief (more on that below). Once you consider those, don’t wait until October to make a plan. Read our up-to-date guide on how to prepare for student loan payments so that when they resume this fall, your financial foundation is as solid as possible.

More questions? We’re here for it. Keep reading, or click to jump to a section below. Or get in touch with one of our financial planners directly via a 30-minute call where we’ll answer your most pressing questions — and recommend the next steps on your financial journey. (Ellevest clients get 50% off all 1:1 sessions.)

    Does the Supreme Court decision mean the end of student loan debt forgiveness as we know it?

    Unfortunately, yes. The court’s 6-3 decision, featuring conservative justices in the majority, stops the US Department of Education from moving forward with the one-time student loan relief program, which would have canceled $10,000 for those whose federal income was $125,000 a year or less ($250,000 a year or less for married filing jointly or head of household) in 2021 or 2020 — and canceled $20,000 for people with Pell Grants. Erase that from your memory.

    But I applied for student loan debt relief and was approved. Will I still receive that relief?

    No. Even if you were one of the 26 million people who applied for relief, the court’s ruling doesn’t allow the Department of Education to discharge any loans under the one-time student loan relief program, since it’s been shot down.

    What’s the Biden-Harris administration’s plan for student debt forgiveness now?

    Remember the Higher Education Act? The law that the Biden-Harris administration used in 2021 to forgive $6 billion in student loans for borrowers who were duped by their colleges? The White House thinks that’s the ticket to opening an alternative route to debt relief. Using a provision in this approach, the Education Secretary would have the authority to “compromise, waive, or release” student loans, though it’s unclear what that'll look like in practice.

    While the administration is considering new ways to provide debt relief for borrowers, there’s no timeline or idea of how relief will look in the future. There’s no harm in hoping … as long as you press “go” on your game plan to pay off debt and take control of your money.

    Are there any new options available to help me pay back student loans?

    Two things:

    1. Let’s talk about the “on-ramp.” While the Department of Education legally can’t extend the pause on student loan debt again, it's set up a “12-month ‘on-ramp’ to repayment,” running from October 1, 2023, to September 30, 2024. No action is needed to qualify for the “on-ramp.”

    2. During this grace period, payments will still be due and interest will still accrue. But borrowers who miss payments wouldn’t be subjected to the worst consequences of missing their billing due dates: No delinquency or default status. No referrals to collection agencies. No hits on their credit scores. Borrowers who can pay should pay to avoid the interest creep, but this option gives ‌people who need more adjustment time exactly that.

      If you’re still in a vulnerable financial position after the grace period ends, you can ask your servicer if you qualify for a deferment or forbearance (though, remember, interest will still accure).

    3. A new way to lower monthly payments. Meet the Saving on a Valuable Education (SAVE) plan, aka “the most affordable repayment plan ever created.” Why the hype? Because the Biden-Harris administration says the finalized income-based repayment plan provides the lowest monthly payments to nearly all borrowers by:

    • Increasing the income exemption from 150% to 225% of the poverty line. That means you won't owe loan payments if you’re a single borrower earning $32,800 or less or a family of four earning $67,500 or less (amounts are higher in Alaska and Hawaii). Borrowers earning more than these amounts will save at least $1,000 per year, compared to the current income-driven repayment plans.

    • Cutting 100% of remaining interest for both subsidized and unsubsidized loans after a scheduled payment is made under the SAVE Plan. If you make your monthly payment, your loan balance won’t grow due to unpaid interest.

    • Excluding spousal income for borrowers who are married and file separately. This change removes the need for your spouse to cosign your IDR application.

    All student borrowers will be eligible to enroll in this income-driven repayment plan later this summer, before any monthly payments are due. If you’ve already signed up for the current Revides Pay As You Earn plan (REPAYE) — or apply for the plan now — you’ll be automatically enrolled in SAVE once the plan begins.

    What do I need to know before the student loan payments resume?

    When am I going to be required to start paying my student loans again?

    Interest on federal (not private) student loan payments resumes on September 1, 2023, and payments will be due starting in October. That’s when your loan servicer will start coming around again, probably in the form of a notice or billing statement, letting you know that your next payment is due. (Don’t worry, it should come at least three weeks before the due date.)

    Has my final payoff date been pushed back? If so, by how long?

    There’s no simple answer to this. No matter which student loan payment plan you’re on, you’ll need to log in to your provider’s website and check your account to confirm your new payoff date. 

    So, will I just start paying the same amount again?

    Maybe, but also maybe not. The government has said it’s possible that your minimums could change. A few possible reasons for that could be:

    • Normally, monthly minimum payments get split between the “principal amount” (usually the amount you borrowed) and the interest that’s accrued on that balance. But the moratorium included a pause on any interest, which means that if you’ve made any payments since the forbearance period started, those payments will have gone toward the principal. That decreases the total amount you owe faster than if you’d also had to pay interest, so once the moratorium is over, your monthly minimum should be lower.

    • If you’re enrolled in REPAYE, or apply for REPAYE now, your income-based repayment plan is slated to get a big makeover this summer (before payments are due) as the Saving on a Valuable Education (SAVE) plan. This plan provides the lowest monthly payments ever, as we outlined above.

    • If you’re on other income-based repayment plans your payments will start up again exactly where they left off, unless (a) you’ve made payments during the moratorium, and / or (b) your income has changed and you’ve “recertified” (aka officially notified your loan servicer of the change).

    But anything is possible. In other words, we recommend double-checking what your monthly payment amount will be before student loan payments resume.

    I’m enrolled in the Public Service Loan Forgiveness Program. Did the government still count the months of the moratorium as part of my service?

    Good news for PSLF folks! Even though you weren’t required to make payments during the moratorium, all those months still counted toward your 120 qualifying monthly payments, as though you had been. (Although note: You have to have been working for a qualified employer when you applied and for the entire moratorium period — any months when you weren’t didn’t count.)

    If you started working for a qualified employer during the moratorium, you can still apply for the program.

    I’m not ready to start paying student loans again! Any tips on preparing myself for this?

    Don’t panic! If you’ve taken your student loan payment minimums out of your budget, now’s the time to add them back in — don’t wait until October. If it’s too big a budget shock right away, start lower and scale it up over the next few months. (Make a plan for specific amounts each month if you’re worried about sticking to it.)

    So then the question becomes, what should you do with the money set aside in your budget between now and October?

    Should I start making student loan payments again?

    The short answer: Probably not yet. At Ellevest, we like to recommend a set of steps we call the financial foundation, and they go in a specific order — tackling debt is only one part of the process. So we recommend looking at what’s left of this moratorium as an opportunity to build up the other areas of your financial health, wherever you can.  

    First, confirm what your monthly payment amount is going to look like come October. From there … 

    If you don’t have at least one month’s worth of take-home pay saved for emergencies …

    We recommend starting with that. While your federal student loans are still on hold, take what you would have been paying toward those and put that amount away in a dedicated savings account every month instead, to build up that emergency fund.

    If your one-month emergency fund is all set ... 

    It’s time to tackle any high-interest debt you have. This will most likely include your credit cards and maybe even private student loans — basically, anything with an interest rate above 10%. Same goes here: Take what you would have been paying toward your federal student loans and start putting that money toward the higher-interest debt instead.

    Emergency fund looking great and high-interest debt paid off?

    First of all, high five. Now you have a few options. You can either:

    1. Go back and finish building your emergency fund (we recommend aiming for three to six months’ take-home pay, total).

    2. Focus on paying off any (non-federal-loan) debt with an interest rate between 5–10%.

    3. Save up to put a dent in any federal loans that have interest rates greater than 5% (or will, once the no-interest period ends). Between now and October, put the amount of your future loan payments into a dedicated savings account each month. Then, just before your student loan payments resume, take that money (plus any interest it’s earned) and put it all toward those federal loans. This way, you’ll still be paying down your principal interest-free.

    Now, once your regular payments start up again, you’ll have gotten back into the swing of making payments. Plus, depending on which route you took, your payment amount may be less overall, and you’ll ultimately pay less in interest.

    What if I still can’t afford my student loan payments come October?

    You have some options.

    If your income has been reduced (or eliminated), you can request to switch to an Income Driven Repayment (IDR) plan. That decreases your monthly minimum payments based on how much you make now. 

    If you have private student loans — which weren’t covered by the federal moratorium — you might consider refinancing and / or consolidating those, depending on your credit. (We don’t typically recommend refinancing federal loans.)

    Whatever you do, the goal here is to avoid defaulting on your loans. If even an IDR plan will be too much of a burden, you can try applying for an additional deferment or forbearance. But even then, keep in mind that a deferment isn’t completely payment free: Normally (aka not in pandemic times), interest will continue to accrue on your outstanding balance, so it can help to at least keep paying that interest as it builds up, if possible. Otherwise, the interest will be rolled into your principal balance (meaning you’ll pay interest on that interest when the deferment is over).

    Need more advice navigating your student loans? We’ve got you covered. Schedule a free 15-minute consultation call with an Ellevest financial planner to begin taking a closer look at all your debts and discover which financial planning session is right for you at this time.


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Victoria Sado

Victoria Sado is a CFP® Professional at Ellevest. She works with Ellevest clients to help them take financial control and make a plan to hit their money goals.