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Student Debt Forgiveness: What Happened? What Might Happen?

Since President Biden announced his policy to forgive up to $20,000 of student debt for borrowers with outstanding balances, there has been a flurry of controversary around the matter. Lawsuits were filed, injunctions were contested, and now the issue is headed to the Supreme Court. As this is an unfolding story, we’ll continue to cover developments on our website, but we’d like to cover what’s happened so far for you.

On August 24th, President Biden announced a plan to provide targeted cancellation of student debt to borrowers whose loans are held by the Department of Education. The policy would allow for up to $10,000 of debt cancellation for borrowers whose annual income is under $125,000 (for individuals) or under $250,000 (for married couples or heads of households), with an additional $10,000 of potential relief for borrowers who received a Pell Grant in college. The Administration’s position is that this relief is necessary to reduce financial harm resulting from the pandemic and reduce the likelihood of default for borrowers when payments resumed. Approximately 26 million borrowers filed for relief by November 2022.

On September 29, 2022, Nebraska, Missouri, Arkansas, Iowa, Kansas, and South Carolina sued to stop the program, arguing the Administration lacked Congressional authority. An injunction was granted by the 8th Circuit Court of Appeals on November 14, 2022. The Supreme Court is scheduled to hear arguments on the matter in February 2023. The Court has agreed to fast-track the challenge, but it could still be months after oral arguments before a decision is finalized.

Check back on our website, hcmwealthadvisors.com/blog, where we’ll cover the Supreme Court arguments and the resulting decision.

Return to January 2023 Newsletter

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