On Thursday, the US District Court for the Southern District of Georgia placed a temporary restraining order on the Biden Administration’s most recent attempt at broader federal student-loan forgiveness. The halted forgiveness categories had been proposed under the Higher Education Act (HEA) and would have impacted nearly 30 million borrowers. This relief was scheduled to go into effect in October for borrowers meeting the criteria outlined below:

• Growth Balance (balance greater than the initial amount borrowed due to accrued interest)
• Eligible for forgiveness under existing programs but have not yet applied
• Have been in federal student loan repayment for 20 years or longer on undergraduate loans or 25 years for graduate loans
• Attended institutions that show low financial value

Last month, eligible borrowers were contacted and asked to opt out of participation. Those eligible could have seen forgiveness as early as October.This legal action is another blow to the Administration after having their initial forgiveness proposal stuck down by the US Supreme Court last June. The Administration is also facing legal challenges regarding the SAVE repayment program that has been halted since last month as well, impacting about 8 million borrowers. All borrowers enrolled in SAVE are placed in an administrative forbearance until the cases are resolved.

Confusion for borrowers

We recognize all of the legislative activity creates confusion for borrowers. While this legislation winds through the legal process, we cannot underscore enough that borrowers must focus on taking action on their federal student loans if they have not done so. Borrowers who are currently enrolled in SAVE are placed in an interest-free administrative forbearance and are not currently making payments. All other borrowers must communicate with their loan servicers regarding their payments due. Borrowers should be communicating with their servicers if struggling with meeting loan obligations to review any income driven or extended repayment options or hardship opportunities that might be available to them.

Otherwise, borrowers should be focused on repayment. When Federal student loans returned to repayment last fall, borrowers were given an “On-Ramp” period to begin repayment. The ramp up period is ending, and student loan delinquencies will be reported to credit bureaus at the end of the month. It is important that borrowers not ignore these obligations as doing so could harm their credit for years to come.