The three-year federal student loan payment halt during the COVID-19 pandemic was never meant to last. With or without a Biden administration, student loan forgiveness cancelled to $20,000 per borrower, and now borrowers had to resume payments.
Borrowers may have to start full payments this summer if the U.S. Supreme Court strikes down that plan.
After Tuesday’s Supreme Court oral arguments, legal experts told Time that debt forgiveness is “increasingly likely” to be overturned. The current payment pause will end 60 days after June 30 or when the Supreme Court rules on the debt forgiveness plan.
President Joe Biden may extend the delay if the court rejects the forgiveness plan. Even with that chance, it’s still a good idea to prepare mentally and financially to resume loan payments—especially during a time of economic stress due to high inflation and rising interest rates.
Time revealed that over 26 million Americans applied for student loan relief in October 2022. 16 million debts were forgiven, but legal challenges have stalled the scheme.
Student Loan Forgiveness Cancelled: Borrowers Should Adjust Finances
The Biden administration has warned months of dire implications if those legal challenges kill the forgiveness plan. In a November 2022 court filing, U.S. Department of Education Undersecretary James Kvaal wrote that “we expect there could be a historically large increase in the amount of federal student loan delinquency and defaults as a result of the COVID-19 pandemic” without debt relief.
Many borrowers will have to adjust their finances to start payments they haven’t made since March 2020.
“I will probably go back to waitressing part-time to pay off my debts just so my interests don’t multiply,” Olympia, Washington hospital worker Martha Hernandez told Time.
There are things you should do to get ready for when payments start up again in a few months. The following is what the Consumer Financial Protection Bureau suggests:
- Check your contact data. A billing statement or other notice will arrive at least three weeks before your payment due date after the delay. Update your StudentAid.gov and student loan servicer contact details. Monthly student loan payments go to your servicer.
- If you can’t pay, investigate options. Income-driven repayment plans for federal loans can offer $0 payments based on income and family size. If you have an income-driven repayment plan and your salary or family size changes, ask your servicer to recalculate your monthly payment. Consider a deferment or forbearance if you can’t pay but only need a short break.
- Look out for scams: Student loan borrowers have been attacked by pandemic scammers. Scammers ask for personal information or money to stop or cancel student loans. Never share personal, financial, or student aid details with strangers.