There are two things going on with Student Loans:
- Resumption of Student Loan Payment After The Covid Pause – in effect since Donald Trump was president and extended by President Biden several times. That pause was just ended by the bipartisan debt-ceiling compromise in May of 2023. Paused student loan payments are set to resume in October 2023. Borrowers should prepare for that.
- Student Loan Forgiveness Will Not Go Forward – Student Loan Forgiveness is the product of Predient Biden’s executive order in August of 2022, asserting his powers under the pandedemic. It would have forgiven up to $20,000 for qualifying low income borrowers.
- Supreme Court to Decide — Whether a president as head of the Executive Branch has the power to do this via an executive order is being challenged in court and is currently at the Supreme Court, with a decision expected in a few weeks. Meanwhile, Biden just vetoed a Legislative Branch attempt by the Senate to repeal his executive order.
What Resumption of Student Loan Payments Means For You?
The resumption of student loan payments in October will not only end inflation but may cause many Americans to think seriously about bankruptcy to get of other debts they may not be able to pay any longer now that student loan payments are resuming.
Now that Biden’s forgiveness plan is nixed, people will have a year to plan, and a bankruptcy might be a way to get the maximum benefit — the sooner the better, before you make more payments on a debt you’re going to need to discharge anyway,
if it’s clear that you’re not going to be able to make payments on your existing debts once student loans come due, and all of your assets are protected by state or federal exemptions, you might give Chapter 7 bankruptcy serious consideration as a way of legally discharging some debts to reduce monthly expenditures.
On the other hand before you do that, you might want to check out the new repayment plans, which only require 5% of your income, disposable income, if you are under a certain threshold income amount. You may be able to get your payments reduced to zero under some of these plans if your income is low enough. But if you are a higher income debtor and have higher loan balances bankruptcy, and the undue hardship discharge may be a better bet depending on your situation.