Focused Financial Coach Blog

The student loan rollercoaster ride of the past three and a half years has been nothing short of chaotic, to put it mildly. From payment pauses to dashed hopes of forgiveness, borrowers have been through a whirlwind of government decisions, enough to make anyone feel like they could sue for whiplash.

But the reality check is here: federal student loan payments are making a comeback this October (yes, it’s for real this time). And those student loan interest rates? Well, they’ve already returned to what they were before the pandemic hit.

Now that borrowers are finally picking up the pieces with their student loans, let’s take a closer look at some of the highlights (or should we say lowlights) in student loan updates since 2020, starting with President Joe Biden’s shiny new SAVE plan.

SAVE Plan: Biden’s New Student Loan Repayment Plan Opens (August 2023)

In August 2023, President Biden’s fresh income-driven repayment (IDR) plan, called the Saving on a Valuable Education (SAVE) plan, officially hit the scene. This replaces the current REPAYE plan, so if you’re already enrolled in REPAYE, you’ll be automatically transitioned to SAVE.

So, what’s the buzz about the SAVE plan? Well, similar to other IDR plans, your monthly payment is based on your income and family size. But with SAVE, the income exemption jumps from 150% to 225% of the poverty line, and you won’t be charged for unpaid monthly interest.

In simple terms, this means borrowers could have significantly lower monthly payments—some might even see a $0 monthly bill. But here’s the catch: smaller payments also mean slower progress in paying off your student loans. If you find yourself in this plan, it’s still a good idea to aim to pay more each month!

Supreme Court Strikes Down Biden’s Student Loan Forgiveness Plan (June 2023)

In a 6-to-3 decision, the Supreme Court struck down Biden’s student loan debt relief program, which aimed to forgive up to $20,000 in student loans per borrower.

Biden initially announced this forgiveness plan in August 2022. After nearly a year of legal battles, the Supreme Court ruled that the Department of Education lacked the authority to make significant economic changes without congressional approval. The Biden administration argued that the forgiveness plan was legal under the 2003 HEROES Act.

While this news left many student loan borrowers disappointed, it served as a reminder: relying on the government to solve your problems, especially when it comes to student loans, may not be the best bet.

Payment Pause Extended, Again (November 2022)

By November 2022, federal student loan payments had been extended (for the seventh time, but who’s counting?) until January 1, 2023. But Biden had also been banking on his student loan forgiveness plan to significantly reduce borrowers’ balances by then. Since court orders had blocked the forgiveness indefinitely, the president extended student loan relief through June 30, 2023, pending a final decision on his forgiveness plan. With the Supreme Court ruling against it, the payment pause officially ended on September 1, 2023.

Biden Announces Plan to Forgive Student Loans (August 2022)

After years of campaign promises, President Biden unveiled his plan to automatically forgive student loan debt for millions of borrowers in August 2022.

Under this plan, those earning less than $125,000 (or $250,000 per household) would have seen up to $10,000 of their student loans forgiven. If they also received a Pell Grant in college, that’s an additional $10,000 in forgiveness—adding up to a potential total of $20,000.

Such massive student loan forgiveness had never been attempted before, and it faced challenges due to uncertainty about whether the president had the authority to cancel student loan debt via executive order. As it turned out, he didn’t.

Federal Student Loan Payments Paused With CARES Act (March 2020)

Back in March 2020, when the COVID-19 pandemic hit hard, people faced financial struggles, including paying rent and student loans. To address this, President Trump signed the CARES Act, which not only provided stimulus checks but also paused federal student loan payments and set federal student loan interest rates to 0%. The CARES Act officially expired on March 27, 2022, but both Trump and Biden extended the payment pause several times.

Student Loan Debt Help

As of September 1, 2023, federal student loan interest rates are no longer set to 0%, and federal student loan payments are set to resume in October 2023.

Are you ready? If not, we suggest you get a financial coach to help you reestablish a payment plan that works for you and actually pays off your student loan debt.