Yahoo Finance 7 Alternatives If Biden’s Student Loan Forgiveness Plan Doesn’t Succeed
Millions of student loan borrowers will finally learn the fate of President Joe Biden’s federal student loan forgiveness plan in the coming weeks, with the U.S. Supreme Court expected to make a ruling by the end of June 2023.
See: Student Loan Pause Ends June 30 — Here’s Why You May Not Have to Start Paying Immediately
Student Loan Payments: Here’s the Official Date You Need To Start Paying Again
The plan, unveiled last August, aims to cancel up to $20,000 in student debt per borrower. But it has faced legal challenges every step of the way, and many experts expect the conservative-majority SCOTUS to rule against it.
“The court’s conservatives have been very aggressive in striking down the decisions of Congress and the president,” Gregory Caldeira, a political science professor at Ohio State University, told CNBC before oral arguments began.
Similarly, Northeastern University law professor Dan Urman told CNBC that the Supreme Court’s conservative justices believe government agencies often “violate the separation of powers.” In the case of loan forgiveness, the SCOTUS might rule that the Biden administration overstepped its legal authority by offering to forgive up to $400 billion in federal student debt.
If the court does strike down the Biden plan, both the White House and individual borrowers can look into alternative routes to loan forgiveness. Here’s a look at seven of them.
Biden Administration Alternatives
1. Extend payment pause: If the loan forgiveness plan is shot down, the most immediate action Biden might take is to try and extend the student loan pause yet again. The current extension is set to expire 60 days after either June 30 or whenever the Supreme Court decides on the loan forgiveness plan. This alternative is not likely to work, however. All previous extensions were issued under emergency authority granted during the COVID-19 pandemic, and that emergency officially ended last month.
2. Restart the program under a provision of the Higher Education Act (HEA): As previously reported by GOBankingRates, The HEA gives broad authority to the Secretary of Education to “compromise, waive, or release any right, title, claim, lien, or demand” associated with federal student loans. One advantage of this option is that its legal authority doesn’t rely on a national emergency such as a pandemic. However, student loan expert Mark Kantrowitz recently wrote on The College Investor website that there are “several problems with this approach,” most of which have to do with the limited waiver authority of the HEA.
3. Create a new loan forgiveness plan: As Kantrowitz noted, Congress provided “broad regulatory authority” for income-contingent repayment (ICR) plans that could theoretically remake ICR into a student loan forgiveness program by changing certain elements related to discretionary income. Income-driven repayment plans include the ICR, income-based repayment (IBR), Pay As You Earn (PAYE) and Revised Pay As You Earn (REPAYE). The plans forgive the remaining debt after 20 or 25 years’ worth of payments. The law doesn’t allow the number of years in repayment to drop below five years, Kantrowitz, wrote, and “there’s some question whether it could drop below 10.” However, the administration could create a means-tested forgiveness plan that forgives the remaining debt after 10 years in repayment.
Individual Borrower Alternatives
4. Total and Permanent Disability: To qualify for TPD, Nelnet must be your loan servicer, and you must provide documentation from the U.S. Department of Veterans Affairs, the SSA or a physician that proves you have a total and permanent disability. This option is available for William D. Ford Federal Direct Loan Program loans, Federal Family Education Loan (FFEL) Program loans and Federal Perkins Loans, according to the Federal Student Aid site.
5. Borrower Defense to Repayment: This is available if you have a direct loan and you have either been misled by your school or the school was found to have violated state laws. In both cases, you’ll need to prove that this caused you financial harm.
6. Public Service Loan Forgiveness: If you work full-time for a government or not-for-profit organization, you might qualify for forgiveness of the entire remaining balance of your direct loans after you’ve made 120 qualifying payments, according to Federal Student Aid. To benefit from PSLF, you must repay your federal student loans under an income-driven repayment (IDR) plan.
Take Our Poll: Do You Think AI Will Replace Your Job?
7. Teacher Loan Forgiveness: You might be eligible to have up to $17,500 in student debt cancelled if you teach full-time for five complete and consecutive academic years in certain elementary or secondary schools or educational service agencies that serve low-income families. You must also meet certain other qualifications.
More From GOBankingRates
Dave Ramsey Says 401(k)s Have a Big Tax Downside - Pick This Retirement Plan Instead
Financial Insight in Your Inbox: Sign Up for GBR's Daily Newsletter
What's the Best Small Business in Your State? Vote For Your Favorite
This article originally appeared on GOBankingRates.com: 7 Alternatives If Biden’s Student Loan Forgiveness Plan Doesn’t Succeed
