For many students and graduates, student loans are a necessary and helpful tool for financing their education. But these people may face sad federal student loan news: the pandemic-relief program, which suspends federal student loan payments, has lasted almost three years and been extended eight times.
Repaying those loans can be significant, and falling behind on payments can have serious consequences. Suppose you’re struggling to keep up with your federal student loan payments. In that case, it’s essential to understand the potential problems that may arise.
The Supreme Court is slated to weigh in on President Joe Biden’s federal student loan forgiveness plan, federal payments are set to resume after more than three years, and several new initiatives aimed at improving borrowers’ repayment experiences are taking effect. (Photo via https://money.com/student-loan-changes-2023/)
Federal Student Loan News: Payments Remain Uncertain
CNBC said it remains unclear when the federal student loan payments will resume.
Experts suggest that the timeline will be determined by the Supreme Court hearings on February 28 regarding President Joe Biden’s student loan forgiveness plan.
Depending on the outcome, borrowers may have slightly over two or six more months before the payments resume.
The length of time it takes the Supreme Court justices to rule on the president’s plan will determine when student loan payments resume.
The United States of America Federal student loan payments will restart 60 days after the dispute over the Department of Education’s student debt forgiveness scheme is resolved, according to the Department of Education’s announcement of the most recent extension.
Payments will resume at the end of August if the administration’s intention to cancel student debt is still subject to legal challenges by the end of June or if it is not permitted to do so.
ALSO READ: New Revised Pay As You Earn: Uncertain Student Loan Forgiveness
The length of time it takes the Supreme Court justices to rule on the president’s plan will determine when student loan payments resume.
The United States of America Federal student loan payments will restart 60 days after the dispute over the Department of Education’s student debt forgiveness scheme is resolved, according to the Department of Education’s announcement of the most recent extension. Payments will resume at the end of August if the administration’s intention to cancel student debt is still subject to legal challenges by the end of June or if it is not permitted to do so.
Falling Behind on Payments May Lead to More Burden
According to new research by The Pew Charitable Trusts, falling behind on federal student loans is likely to trigger other major financial consequences for borrowers.
More than 80% of borrowers who experienced default stated that they’d faced at least one additional consequence. The most common impact was a drop in their credit score (62%) followed by being subject to collection fees (47%) and losing eligibility for future federal financial aid (37%).
The Pew poll mentioned that many borrowers are unaware of the exact repercussions of not making payments on their federal student loan debt. For instance, less than a third of respondents were aware that wage garnishment or collection costs may be used against them before they fell behind.
Thankfully, CNBC said the U.S. Federal student loan borrowers who have fallen behind on their payments are also being given a chance to catch up by the Department of Education.
The 7.5 million student loan borrowers who are in default are entitled to resume paying without a past-due debt as part of its “Fresh Start” campaign. Last April, the program was announced.
Borrowers will begin by selecting a repayment plan through MyEdDebt.Ed.Gov or by calling the Education Department’s Default Resolution Group at 800-621-3115 once it officially starts, according to Kantrowitz.
RELATED ARTICLE: When Must I Start Making My Student Loan Payment Again?
