Student Loan Forgiveness Applications Have Been Paused. Now What?

A college student looks back as he walks through his university with a book bag on his back and a laptop in his hand.
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Since the online form for one-time federal student loan forgiveness opened in mid-October, applications have been pouring in. The U.S. Department of Education estimates more than 26 million borrowers, or about half of those eligible, have applied for $10,000 to $20,000 in federal student debt cancellation.

But recently federal judges have found the plan unlawful and issued an injunction, closing the forgiveness application for now and throwing the future of student loan debt cancellation into uncertainty. Here’s what borrowers need to know.

What Happens Next to the Student Debt Relief Plan?

Rulings by a federal judge in Texas and the 8th U.S. Circuit Court of Appeals are part of half a dozen lawsuits against the student debt relief program. While previous legal challenges to one-time student loan forgiveness have ultimately been struck down by the U.S. Supreme Court due to a lack of standing, it’s unclear how SCOTUS might rule in these cases.

“We are disappointed in the decision of the Texas court to block loan relief moving forward,” Secretary of Education Miguel Cardona stated in a press release. “Amidst efforts to block our debt relief program, we are not standing down. The Department of Justice has appealed today’s decision on our behalf, and we will continue to keep borrowers informed about our efforts to deliver targeted relief.”

The Texas judge found the plan unconstitutional because federal procedures for public comment weren’t followed. The circuit court heard a suit brought by six states — claiming the president exceeded his authority and their tax revenues would be affected — and granted an injunction.

While the effort to forgive student debt plays out in courts, borrowers are left in a lurch. The final payment pause on federal student loans expires soon and payments are set to resume in January.

What Should Student Loan Borrowers Do Now?

As maddening as it is to sit and wait, that’s exactly what the Biden administration is advising students and parents to do. If you’ve already applied for student loan forgiveness, the Department of Education plans to keep applications on file and take action on forgiveness as soon as legal challenges can be resolved.

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If you’re eligible but haven’t applied for student loan forgiveness yet, you’ll have to wait until the application opens again. In the meantime, it’s worthwhile to explore other options for federal student loan forgiveness including public service loan forgiveness and Perkins loan cancellation.

Will the Student Loan Payment Pause Be Extended?

In August, the pause on federal student loan payments — which began in March 2020 — was extended through Dec. 31 to facilitate the cancellation of debt. While another extension is possible, it’s unlikely.

At this point, it’s best for borrowers to prepare to resume payments on student loans in 2023. It’s unclear how long it will take courts to untangle legal challenges and determine if student debt cancellation can proceed.

Be patient as legal challenges play out and be aware that forgiveness may not occur until well into 2023 (if at all). In the meantime, keep up with federal student loan payments when they resume to avoid defaulting.

How to Prepare for Student Loan Payments to Resume

After nearly three years, most borrowers have gotten comfortable with not accounting for student loan payments in their monthly budgeting. As 2023 approaches, here are some steps you can take to add payments back into your financial plan.

1. Rework Your Budget

If you don’t have one, now is the time to take stock of your finances and make a monthly budget that will allow you to pay down your student loans. Check in with your borrower to verify what your payments will be.

If you’re not sure which budgeting method to use, try one of the most common budgeting methods or start a sinking fund to pay off a large amount of debt at once.

Overwhelmed by your budgeting options? Take our quiz and get customized recommendations based on your style and financial situation.

2. Cut Your Costs

Finding the financial bandwidth to resume payments is really about trimming expenses and finding ways to save in other areas of your life. Try our money saving tips to cut expenses in dozens of small ways that can really add up.

3. Make More Money

The other option to creating more financial bandwidth is to generate additional income from a gig or side hustle. Try one of our 25 best side hustles such as food delivery, tutoring or freelancing.

And last but not least, if you can’t make your student loan payments, the federal government offers several types of forbearance or deferments for borrowers in financial difficulty. Check to see if you qualify or if an income-driven repayment plan would lower your monthly payments and make them more manageable.


Kaz Weida is a senior writer for The Penny Hoarder.