Will Student Loans Be Forgiven? Here's How It's Looking For Borrowers

Hi everybody, I'm Brett E. Lewis, a breaking news reporter here at Forbes. Joining me now is Forbes senior contributor Robert Farrington. Robert, I appreciate you coming on today. Hey, thanks so much for having me. I'm excited to be here. As you know, there has been a ton of confusion the past year surrounding student loans, all the announcements, all the updates, everything in between.

Can you give us the highlight of the annual annual? Absolutely. I mean, everyone is kind of waiting, you know, what their breath held to see if student loan forgiveness, the 10,000 or 20,000 is going to happen. The problem is, is we're waiting on the Supreme Court and they're going to hear the arguments later in February. But that doesn't mean that borrowers should expect to hear an answer in February. Usually the Supreme Court is going to take several months to create their opinion. And that's going to push us close to summer before we know whether the 10 or $10,000 in loan forgiveness would happen. And at the same token, student loan payments may be restarting this year.

I say maybe because we've heard the word final several times at this point in time, but allegedly this will be the final payment pause, which means borrowers might get bad news and might have to restart student loan payments later this year. You said the biggest headlines have been debt cancellation and these pauses. So I do want to break down debt cancellation a little further. How is this legal battle looking for the Biden administration? Because you said we won't hear answers potentially till summer. That's a while. It is a while. And you know, I think a lot of borrowers are worried about what's going to happen.

And honestly, it doesn't look great for the Biden administration when it comes to student loan forgiveness. They are using the heroes act, which depends on the COVID-19 state of emergency as their legal basis for student loan debt cancellation. And they're facing a conservative, you know, majority Supreme Court as a result, this, you know, could be seen as a stretch of their powers and something that they're not allowed to do on the flip side. Many student loan advocates and borrower groups say that this is legal and they could do it. So there is definitely still hope for student loan borrowers, but borrowers shouldn't be counting on that cancellation, you know, in their personal financial plans. Let's talk some hypotheticals here. What happens if the Supreme Court strikes down this program? You know, it's very likely that they do strike down this program, which means borrowers are in the status quo.

I mean, their loan situation is the same that it's been. However, borrowers haven't had to make student loan payments since March of 2020, which is a huge relief. And you know, considering the average student loan payment is about $300 a month, most borrowers have seen well over $10,000 and not having to make payments at this point in time. Furthermore, the student loan payment pause has given borrowers credits to other student loan forgiveness programs like public service loan forgiveness. Public service loan forgiveness, if you know, requires 10 years or a 120 payment count to get loan forgiveness. Well, at this point time, borrowers have already made it a third of the way towards their goal of student loan forgiveness. So while some hope may be dwindling on the blanket $10,000 or $20,000 cancellation, there are a lot of other great benefits that borrowers have currently received and may receive in the future.

And let's say the court does find this perfectly legal. Will borrowers be instantly impacted? Yeah, borrowers should see relief very quickly. Remember, the Biden administration took all those applications before, you know, everything got held up in the court. So there are millions of borrowers who have already submitted their applications. And if it does go through, my guess would be that borrowers would see that cancellation wiped off their loans, probably within two months or so. Remember, we're still talking about the government. So things do take time.

Now, let's talk about that payment pause. It has been paused since March of 2020, when then President Trump enacted that pause. Since then, both Trump and Biden have extended that pause. Should borrowers expect that pause to be lifted this year? You know, I'm very, you know, it's a maybe we can say that right now, it's a maybe I am leaning towards yes, we will probably see student loan payments resume this year. However, there is a slim chance that the payment pause could be extended again. The problem is, is that they're using the state of emergency as their justification for the payment pause and the Biden administration announced that the state of emergency will be ending in May of this year. That means that they will no longer have the powers to extend the payment pause.

That doesn't mean though, between, you know, April and May, they don't push it out one last time and say maybe we're going to go a year or something longer. However, I think most borrowers should be planning on the student loan payments resuming at some point this year.