There was hope that the latest forgiveness attempt from the Biden administration, nicknamed Forgiveness 2.0, would have a better chance of surviving in court. Thus far, there hasn’t been much good news for borrowers, but there is reason for optimism that this attempt might end differently.
Like the page that tracks the SAVE litigation, this page will remain updated with the latest news, updates, and developments on Forgiveness 2.0.
Forgiveness 2.0 Basics
Unlike previous efforts that aimed to forgive some debt for nearly all federal borrowers, the Department of Education is now focusing on those most in need and arguably most deserving of federal assistance. This targeted approach includes four key groups:
- Borrowers with balances larger than their original loans.
- Borrowers who have been in repayment for decades.
- Borrowers who are eligible for forgiveness but haven’t applied.
- Borrowers enrolled in low-financial-value programs.
By concentrating on borrowers who are struggling and unlikely to repay their debt in full, the Department of Education strengthens its position should the forgiveness plan face legal challenges.
Timeline and Current Status
- August 1, 2024: The Department of Education emails borrowers, giving them until August 30th to opt out of any potential forgiveness.
- September 3, 2024: Seven states sue to block Forgiveness 2.0.
- September 5, 2024: The Southern District of Georgia grants the plaintiffs’ request to temporarily block Forgiveness 2.0 from being implemented while the case is pending.
- October 2, 2024: The case gets moved from Georgia to Missouri potentially opening a small window for the Department of Education to move forward with forgiveness.
- October 3, 2024: A Missouri judge blocks the Department of Education from moving forward with forgiveness.
The case has no entered into another likely long holding pattern for borrowers.
The dismissal of Gorgia as a plaintiff and the move to Missouri was a small win for the Biden adminstration, but there are much bigger battles to still be fought.
The full litigation process could take years, as a trial is expected, followed by appeals that could eventually reach the Supreme Court.
The Legal Theory Behind Forgiveness 2.0
Previously, the Department of Education attempted to forgive up to $20,000 per federal student loan borrower by relying on the HEROES Act. This act, passed shortly after 9/11, was designed to help the federal government respond to disasters. The Department argued that the COVID-19 crisis justified student loan relief, but the Supreme Court disagreed.
One significant advantage of using the HEROES Act was the ability to act swiftly, bypassing the lengthy rulemaking process that other approaches would have required.
This time, the Department took a more conventional approach under the Higher Education Act (HEA). The rulemaking process began in 2023 and was still not completed at the time the lawsuit was filed.
Last fall, the Department released an issue paper exploring the legislative authority for forgiveness under the HEA. This approach, while slower, was intended to provide a more robust legal foundation for the forgiveness effort.
The Influence of the Upcoming Election
Complicating the legal outlook is the upcoming presidential election, which could dramatically shift the trajectory of this case.
If former President Trump is re-elected, there is little doubt that the plan for Forgiveness 2.0 would be abandoned, effectively ending the litigation.
Conversely, if Kamala Harris takes office, her administration is expected to continue defending the plan in court, potentially extending the litigation process.
Borrower Planning and Strategy
If your loans are potentially eligible for forgiveness under Forgiveness 2.0, no additional steps are necessary at this time to qualify or get your loans discharged. However, it is crucial to monitor the situation closely in case any changes require quick action.
Odds of Forgiveness 2.0 Happening
Estimating the chances of Forgiveness 2.0 becoming a reality is difficult. The legal footing for this plan is likely stronger than the initial attempt to forgive up to $20,000 per borrower, but the recent setbacks in the SAVE litigation and the initial ruling in this case indicate that winning in court will be challenging.
When combined with the uncertainty surrounding the upcoming election, the most likely outcome at this point is that Forgiveness 2.0 may not come to fruition.
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After the final rule has been published, how long until the Department of Education can start implementing it and forgive loans? I have read elsewhere that the new regulations cannot go into effect for 30 days. Is this correct? If so, is that typically enough time for potential legal challenges to successfully secure an injunction, thus preventing the forgiveness for loans that qualify?
I can see that by having the opt out happen before the final rule is published it shortened the time before it can be implemented, but still, the new rule is not immediately actionable by the Department of Ed.
This is a fantastic question!
Acoording to the Office of the Federal Register, a Final Rule must be published at least 30 days before it can go into effect. However, if the agency wants to make it effective sooner and can show “good cause” as to why it is in the public interest, they can do so sooner.
Thirty days is definitely enough time to file a lawsuit, but the shorter the window, the more difficult it becomes. Additionally, it is worth noting that we already have a really good idea of what the final rules will look like, so AGs in opposition to the forgiveness could already be preparing their lawsuits in anticipation of the new rule.
Thank you for these insights! I have a question about the opt-out.
“Note that if you opt out, you will also be opted out of forgiveness under income-driven repayment (IDR) for the next several months and won’t have the option to opt back in.”
Does PSLF qualify as IDR forgiveness in this context?
I’m not sure I follow your question. This question only makes sense if you are opting out for some specific reason, but I think I’d need to have some idea of what your strategy is before I can offer any thoughts.
Because PSLF takes 10 years, and IDR forgiveness takes at least 20 (for now), the odds of an overlap are really low. What is the situation you are in and what would you be hoping to accomplish by opting out?
I’ll try to clarify. I only have two PSLF payments left, or would if not for the mandatory SAVE forbearance. I’m hoping to do “buyback” in October. I am thinking of opting out of this forgiveness because I don’t think I need it, even though I am fairly certain I will qualify because my loan balance is a lot more than my original loan amounts. I’m concerned there may be some delay/reversal of this targeted loan forgiveness, or some unforeseen tax implications down the road (I’m in Utah). However, I don’t want to delay my PSLF forgiveness by opting out, and it says I will be opted out of all IDR forgiveness for several months. I don’t understand if PSLF forgiveness is included in the several months delay they are describing.
Obviously there isn’t a playbook for handling this exact situation, but I can share a couple of thoughts.
First, if you qualify for forgiveness due to your balance, it wouldn’t forgive all of the debt, it would just take you back to your original balance. Second, it is my understanding that Utah is not a state that taxes student loan forgiveness, so I’m not sure why you would be worried or care about what specific program the debt got forgotten under. (A quick call to your tax preparer to confirm would be a good idea.)
You may wish to call your servicer to ask this question, but I don’t know if they will be able to give you a definitive answer. Even if they could, and they told you that it wouldn’t interfere, it is still possible that it causes an issue due to a mistake on their end.
My instinct says to leave the door open to all forms of forgiveness, but I think this is a personal choice/doing what you are most comfortable with situation.
Great article as usual! Can you consider writing an article discussing how the Chevron ruling from SCOTUS can affect all of this? Specifically the issue that now regulatory agencies can’t necessarily do things stemming from their own good judgement, but that their actions need to be explicitly allowed by law.
This could be a disaster for the IDR recount because that is based on the Dept of Ed’s judgement of financial impact of forbearance steering, more specifically the Dept of Ed’s changing forbearance and deferment months into repayment months isn’t explicitly granted in the HEA.
Whether this would affect SAVE is another issue, I’m not sure if the negotiated rule making progress would be sufficient to withstand a Chevron challenge. But I’m far from an attorney and would love to see someone like yourself tackle this!
Thanks for the kind words and the thoughtful suggestion!
The tricky part about this topic is that there is so much that we don’t know. Frankly, I’m not even sure if the majority that overturned Chevron fully understood the consequences of their decision.
Additionally, the Chevron analysis is probably best left to someone with a background in administrative and constitutional law. That said, what I may be able to do is find some scholarly articles from true experts in the field and then explain how that would impact student loan borrowers.
Your idea is a really good one, and I’ll keep you posted if I come up with anything useful.
Thank you for this! Let’s hope this one works.