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.

Stay Up to Date: Student loan rules are constantly changing, and lawsuits often complicate matters. To help manage this issue, I’ve created a monthly newsletter to keep borrowers up to date on the latest changes and upcoming deadlines.

Click here to sign up. You’ll receive at most one email per month, and I’ll do my best to make sure you don’t overlook any critical developments.

The post Will Student Loan Forgiveness 2.0 Hold Up in Court? A Legal Perspective and Analysis appeared first on The Student Loan Sherpa.

Today’s article is about perspective and available options. I’ll explore what the rules say and discuss strategies for preventing conflicts.

Does the Student or Child Have a Legal Obligation to Pay for the Parent PLUS Loan?

I’ve received many emails from parents frustrated that their child hasn’t been making Parent PLUS loan payments.

Legally, the responsibility to make these monthly payments falls squarely on the parent. The student loan contract is between the government and the parent. The loan was taken out in the parent’s name and, so, it’s the parent who has the obligation to repay the entire loan balance. Although the child is the one who benefited from the loan, they are not required to repay the debt.

In theory, a parent and child could have a separately created contract requiring the child to repay the parent. However, such an agreement wouldn’t affect the parent’s legal obligation to the government. If repayment isn’t made, the Department of Education would look to collect the money from the parent. The parent’s only legal recourse would be to sue the child for breaking the contract between the parent and child.

In short, both the law and the loan terms are clear that the repayment of a Parent PLUS loan is the parent’s obligation.

Children May Have a Moral or Ethical Duty to Help

Although the legal responsibility for repaying Parent PLUS loans rests with the parents, a case can be made that the child has a moral obligation.

Parents don’t personally benefit from Parent PLUS loans. The sole purpose of taking on such a loan is to help the child further their education. Taking on a Parent PLUS loan is a selfless act. If you benefited from a Parent PLUS loan, you should do your best to ensure that the borrower doesn’t regret their decision.

Even if making payments is financially challenging for the child, there are various ways they can contribute and show appreciation for the support received.

Even if the child cannot afford to make payments, there are other ways in which they can contribute and show appreciation for the support they received.

Getting Parents and Children on the Same Page

The strange thing about Parent PLUS loan repayment is the ambiguity about repayment responsibility.

Under the law, it is the parent’s job. Morally and ethically speaking, the child should help whenever possible.

There are a variety of options for managing Parent PLUS loans, including:

• Income-Driven Repayment
• Student Loan Forgiveness
• Public Service Loan Forgiveness

Programs like these provide borrowers with ways to reduce their monthly payments and, in some cases, qualify for debt forgiveness. This article breaks down the many options available for Parent PLUS loan repayment. It is even possible for Parent PLUS loan borrowers to manage the debt living on limited income sources, such as social security.

Given the breadth of available repayment options, parents and their children can usually devise a reasonable plan for managing the debt together. The key is maintaining open and honest communication about everyone’s financial realities and focusing on finding solutions rather than finger-pointing and making accusations.

Transferring Parent PLUS Loans to the Student

I often hear from children who would like to transfer Parent PLUS loans into their name.

While commendable, this decision isn’t without its drawbacks.

Some student loan refinancing companies, like SoFi, offer services to pay off existing Parent PLUS loans and replace them with a new loan in the child’s name. While this move might seem like an ideal solution, it’s important to understand the implications and risks.

Refinancing in this manner changes the loan from a federal to a private one, which means it loses eligibility for federal benefits like income-driven repayment plans and student loan forgiveness programs. While refinancing to a private loan might offer lower interest rates, it also removes these federal protections. This decision should be made with caution, especially if there’s any uncertainty about the ability to repay the debt fully

This option converts federal student debt into a private loan. As a private loan, the debt loses its eligibility for federal benefits like income-driven repayment or student loan forgiveness. It’s true that borrowers may qualify for lower interest rates by choosing the private refinancing route. However, unless the borrower is certain they can afford to fully repay the debt, this decision should be made with caution.

When Your Child Isn’t Making Payments

Unfortunately, there isn’t an easy answer to this problem.

In most cases, the best path forward is recognizing that working together is the best way to manage the debt.

The post Help! My Child Isn’t Making Parent PLUS Loan Payments appeared first on The Student Loan Sherpa.