After more than two years of forbearance, some Americans may have forgotten about their student loan debt.
Since Joe Biden has been in office, no one has had to make a student loan payment on federal student loans (January 2021). (The current forbearance began with the CARES Act on March 27, 2020, before Biden was elected, in the early months of the Covid pandemic.)
That is all about to change, as of August 29, 2023, or perhaps even earlier, depending on when the Supreme Court rules on Joe Biden’s plan to forgive up to $20,000 in student loans made to low-income families.
Biden’s new student loan forgiveness plan is stalled for now — but so are payments — until mid-2023.
The Biden administration took significant steps on canceling federal student debt in the fall, forgiving up to $20,000 in federal student loan debt for a couple (which, for many debtors, will wipe out their balance entirely), but the courts have stalled that process. And the courts may thwart him.
The supreme court has put the Biden administration’s loan forgiveness plan on hold.
The question before the court is whether the president has the constitutional authority to forgive that debt — whether the executive branch can do that without congressional approval.
The Biden administration decided to postpone the end of the forbearance until 60 days after the court decides the status of the loan forgiveness program (maybe August 29, 2023??) because the student loan forgiveness program was timed to coincide with the end of loan forbearance, which began with the current Covid pandemic, So it remains the case that no federal student loan payments have been required since before Biden took office in January of 2021.
Planning for the coming restart of student loan payments
Now is the time to start thinking about your options if student loan payments resume sometime in the middle of 2023.
Starting Points for Student Loan Research: Issues to Start Researching
Check out these articles to learn about getting ready for 2023.
- What Kind of Loan Do I Have?
- These forbearance and forgiveness programs only apply to federal student loans, not private student loans
- There are websites you can go to to find out what kind of loan you have
- If you have a federal loan,
- you should check out income-based repayment plans if you haven’t already
- if your student loan payments make it impossible to make ends meet, do you qualify for an “undue hardship” discharge in bankruptcy?
- If you have a Loan from a private lender that is not guaranteed by the government.
- The loan does not qualify for federal programs found on studentaid.gov
- There may be ways to show that it doesn’t allow for discharge
Co-signers and parents, are you ready for what’s coming?
Did you know that if you’ve co-signed for your child’s student loan, loan payments can be deducted from your monthly social security check if you don’t pay them?
- Read about it in this article we published about preparing for payments to resume in 2023.
- Also, keep in mind what the Federal Student Aid website has to say about preparing for payments to resume:
- From studentaid.gov/announcements-events/covid-19
Preparing for Repayment to Resume (from FederalStudentAid website)
Here are four steps to make sure you’re prepared for student loan payments to resume:
(*Loan Servicer – A company that collects payments, responds to customer service inquiries, and performs other administrative tasks associated with maintaining a federal student loan on behalf of a lender. If you’re unsure of who your federal student loan servicer is, you can look it up in “My Federal Student Aid.”)
If you haven’t taken advantage of the various income-based repayment options, now is the time to get familiar with them and figure out which ones may help you manage your student loan debt.
Other Student Loan Relief Programs, Attempted and Otherwise, Go Forward. (Thank You, Joe Biden!)
The treatment of various aspects of student loan debt under the Biden administration is, in many ways, an about-face from the treatment of student loans under the Trump administration — under the leadership of Betsy DeVos.
Under DeVos’s leadership, the Department of Education took a hard-line stance when it came to forgiving loans from failed private universities (Corinthian, ITT, Westwood, and Marinello, for example) that gave students worthless degrees after taking thousands from them in loan agreements, after promising a high likelihood of high-income jobs upon getting a degree from them when, in fact, such prospects were unlikely. The degree from the educational institution carried little or no weight in the job market.
The Biden administration has taken a much more generous approach towards forgiving loans to students of failed universities, where people ended up with worthless degrees.
The Biden administration released a series of rule changes that should make it easier for many student loan debtors to get relief, according to this NCLC article from September of 2022.
They mention the following:
- New Right # 1: $10,000 or $20,000 One-Time Debt Cancellation
- New Right #2: Payment Pause Extended Until January 1, 2023 (now extended until mid 2023)
- New Right #3: Fresh Start for Borrowers in Default
- New Right #4: Public Service Loan Forgiveness Waivers, with October 31 Deadline to Act
- New Right #5: Income-Driven Repayment Account Adjustment and Tracking Time Toward Forgiveness
- New Right #6: Relief for Pending and Certain Denied Borrower Defense Applications
- New Right #7: Automatic Loan Cancellation for All Students at Corinthian, ITT, Westwood, and Marinello
- New Right #8: School Findings Leading to Borrower Defense Loan Discharges
- New Right #9: Successful Borrower Defense Applications Currently Lead to Complete Discharges
- New Right #10: Disability Discharges Now Automatic for Borrowers on Social Security Disability
- New Right #11: Relief for Private Student Loans and Navient-Serviced Federal Loans
- New Right #12: Department Eliminates Private Debt Collectors; Contracts with New Services
Source: Twelve Dramatic Changes Offering Relief for Student Loan Borrowers. – September 06, 2022