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Key takeaways
- The U.S. Supreme Court will review stalled attempts to streamline the borrower defense to repayment program.
- The outgoing Biden administration plans to focus on providing federal student loan forgiveness through existing avenues and helping borrowers avoid default in its final days.
- As of January, the administration has provided partial or full student loan forgiveness to more than 5 million borrowers.
The United States Supreme Court recently said it would examine a current block on improvements to the borrower defense to repayment program. This may be among the Biden administration’s final impacts on American student loan borrowers. Toward the end of 2024, the Biden administration quietly withdrew plans to allow the Secretary of Education to waive federal student loan debt due to hardship.
With time running out for an administration that focused on student loan forgiveness, borrowers should prepare for an incoming administration that will likely not make it a priority.
Supreme Court to examine blocked borrower defense rule
On January 10, the Supreme Court announced plans to review a stalled Biden administration tweak to the borrower defense to repayment rule. This 2022 update to the existing rule sought to improve the relief program to deliver timelier forgiveness to defrauded students. As it was, the existing program was inefficient and backlogged, attracting lawsuits from borrowers.
The U.S. Court of Appeals for the 5th Circuit originally blocked the rule update’s rollout in 2023 at the request of Career Colleges and Schools of Texas (CCST), which represents more than 70 trade and career-focused schools in Texas — many for-profit.
“Borrowers whose schools lied to them can’t pursue litigation because restrictive and unfair arbitration requirements and class action bans were foisted on them by their colleges. Borrowers should not have to jump through hoops to get the relief they deserve,” said U.S. Secretary of Education Miguel Cardona in a statement about the rule change.
CCST argued the rule made it too easy for borrowers to claim fraud and filed an injunction. The lower court ruled the government could only offer forgiveness after initiating legal action to collect a defaulted-on loan. In other words, borrowers would have to cease making payments and face harm to their credit scores to be eligible for forgiveness.
Soon, the Supreme Court will hear arguments and determine whether the original ruling needs correction. If the Supreme Court rules in favor of CCST, it will deliver another blow to President Joe Biden’s track record of student loan forgiveness, a focal point of his presidency. On June 30, 2023, the Supreme Court ruled against the Biden administration’s effort to provide sweeping loan forgiveness of up to $20,000 for millions of Americans.
What this means for borrowers
Student loan borrowers defrauded by their schools should closely follow the Supreme Court’s actions. In the meantime, Biden continues finding avenues for forgiving student loan debt — especially for defrauded, permanently disabled and public service borrowers. On January 13, the administration announced over $4.2 billion of additional debt relief for another 150,000 borrowers. This group included 85,000 students “cheated” by their schools, 61,000 borrowers with total and permanent disability and 6,100 public service workers. More than 5 million federal student loan borrowers have received relief during the Biden administration.
Generally, student loan borrowers should expect to continue repaying their student loans and make a plan for a future that may not include forgiveness. While it remains unclear how Trump will handle student loan debt during his presidency, experts predict it won’t be a priority. And with days left of his presidency, Biden lacks time to push more regulations through.
Biden administration withdraws recent student loan forgiveness plan as end of presidency nears
The Department of Education has withdrawn its proposed guidelines to bring student debt relief to borrowers facing hardship. First proposed on Oct. 31, 2024, these guidelines would have given the Secretary of Education authority to waive federal student loan repayment for borrowers experiencing hardship. The now-canceled proposals could have provided debt relief to millions of Americans.
The secretary filed to withdraw these proposed rules on Dec. 20, 2024, citing “operational challenges” with implementing the proposals before Biden leaves office. The department will instead focus on priorities such as helping existing borrowers avoid default after resuming student loan payments.
What this means for borrowers
Borrowers shouldn’t expect new proposals and plans for student loan forgiveness. However, the administration continues to provide forgiveness through existing programs, such as Public Service Loan Forgiveness (PSLF). Borrowers on the path to forgiveness should make sure they continue meeting requirements.
While borrowers enrolled in the SAVE plan are on an extended payment pause due to ongoing litigation, they aren’t getting credit toward forgiveness and may want to consider another plan or a buy-back credit.
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