3 Million Student Loan Borrowers To Be Placed In Payment Pause

By Elena Cordelia

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3 Million Student Loan Borrowers To Be Placed In Payment Pause

This week, the Biden administration announced a new plan to help about 3 million student loan borrowers.

Due to recent court rulings blocking parts of a student loan policy, the administration will pause payments for many borrowers. This pause is similar to the pandemic-era student loan break, where no payments were required and no interest accumulated.


What is the SAVE Plan?

The SAVE Plan is President Joe Biden’s main effort to make student debt more manageable. It is the most affordable plan for borrowers.

However, two Republican-led lawsuits have challenged this plan. Courts in Kansas and Missouri ruled that the Biden administration cannot move forward with parts of the SAVE Plan. This decision affects around 8 million people who use this plan.


Court Rulings Impact on Borrowers

The court rulings stopped the Department of Education from reducing borrowers’ payments from 10% to 5% of their discretionary income for those with undergraduate loans.

They also halted the cancelation of loans for those who have been paying small loan balances for over a decade. So far, 414,000 people have qualified for such debt relief.


Temporary Payment Pause

To handle this situation, the Biden administration plans to pause payments for many borrowers. This pause will last several months. During this time, borrowers won’t need to make payments, and no interest will build up on their loans.

However, this pause won’t count towards debt relief programs like the Public Service Loan Forgiveness (PSLF) or other income-driven repayment plans.


SAVE Borrowers Already in Forbearance

Borrowers in the SAVE Plan were already placed in forbearance, or a payment pause, for July to transition to the new payment calculation. If the court does not approve the federal government’s request, this forbearance will continue for the coming months.

The payment pause will affect nearly half of the 8 million people in the SAVE Plan. About 4.5 million people with $0 payments due to low incomes will not be included in the pause.


Benefits of the SAVE Plan

Despite the setback, the Department of Education believes the SAVE Plan still offers strong benefits for borrowers.

It provides the lowest monthly payment for most borrowers and prevents unpaid interest from growing as long as qualified borrowers make their monthly payments, even if that amount is $0.


Biden’s Efforts on Student Loan Debt

Biden’s attempts to cancel student loan debt have faced many challenges. His initial plan to cancel $10,000 to $20,000 in debt was overturned by the U.S. Supreme Court. Now, Biden is working on smaller, targeted debt relief efforts. These efforts have helped nearly 4.75 million borrowers. Most of the debt relief has come from fixes to programs like PSLF and income-driven repayment plans or targeting colleges that have defrauded students.

Future Plans for Debt Relief

The administration is working on a new plan to offer debt relief to about 30 million people. This plan will be more targeted and will look at factors like income, assets, and other debts.


It will also consider whether borrowers received Pell Grants, which are for low-income students, and if they use other government support programs. This new plan is expected to face lawsuits but aims to avoid being overturned by courts.

The Biden administration’s pause on student loan payments is a temporary solution to recent court rulings. While the SAVE Plan faces challenges, efforts to provide debt relief continue. The administration is working on a new plan to help more borrowers in the future. Stay informed about these changes and how they might affect you.


Disclaimer- We are committed to fair and transparent journalism. Our Journalists verify all details before publishing any news. For any issues with our content, please contact us via email. 

Elena Cordelia

Elena is a seasoned tax consultant with a decade of expertise in income tax management. Graduating with top honors in Finance, she embarked on a career journey focused on simplifying tax complexities. Elena's insightful articles on thecsc.org provide practical guidance to taxpayers.

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