In March 2020, the federal government suspended student loan payments due to the economic fallout caused by the COVID-19 pandemic. However, as the pandemic situation improves and inflation and interest rates rise, borrowers must prepare for payments to resume this summer. Experts predict that the Biden administration’s loan forgiveness plan of up to $20,000 per borrower may not pass the U.S. Supreme Court, leaving borrowers to resume payments on their full balances.
The current payment pause is set to expire 60 days after either June 30 or whenever the Supreme Court decides on the loan forgiveness plan. However, there is a possibility that President Joe Biden may extend the payment pause yet again. Nonetheless, borrowers must prepare mentally and financially to resume payments, especially during a period of economic stress.
The Consumer Finance Protection Bureau recommends that borrowers make sure their contact information is accurate with their student loan servicer and update their StudentAid.gov profile. Borrowers should research their options if they cannot afford payments, such as income-driven repayment plans, forbearance, or deferment. They should also watch out for scams that target student loan borrowers to take advantage of pandemic circumstances and government relief packages.
If the loan forgiveness plan gets thrown out by the Supreme Court, borrowers must adjust their finances to resume payments they haven’t had to make since March 2020. The Biden administration has spent months warning of dire consequences, including an increase in the amount of federal student loan delinquency and defaults, should those legal challenges kill the forgiveness plan.
More than 26 million Americans applied for student loan relief, and about 16 million were approved for forgiveness, though no debt has been canceled because legal challenges have put the program in a state of flux. As the government may not be able to provide debt relief, borrowers must prepare to pay off their loans again.
How to prepare for your student loan Repayment
Here are some detailed suggestions on how to prepare for resuming loan payments this summer in the context of the Supreme Court case and the current state of student loan forgiveness:
- Check your loan balance: Take stock of your current loan balance and ensure that you know exactly how much you owe. Knowing your loan balance will help you budget for the upcoming payments and avoid any surprises.
- Review your payment plan: Review your current payment plan and see if it is still the best option for you. If your income or job situation has changed, you may qualify for a different payment plan. You can use the Federal Student Aid website to explore payment plan options.
- Consider refinancing: If you have private loans, consider refinancing them to take advantage of lower interest rates. However, keep in mind that refinancing federal loans can disqualify you from certain federal loan forgiveness programs.
- Budget for payments: Make a budget that takes into account your loan payments. Consider cutting back on expenses in other areas to make room for your payments.
- Save for an emergency fund: If you don’t already have an emergency fund, start saving for one. Having money set aside for unexpected expenses can help you avoid missing a loan payment.
- Stay informed: Stay up to date on any changes to student loan forgiveness programs and payment plans. Follow news sources and government websites that cover student loan issues.
- Seek assistance if needed: If you’re struggling to make your loan payments, don’t hesitate to seek assistance. Contact your loan servicer to discuss your options, such as forbearance or deferment. You may also be eligible for income-driven repayment plans that can help lower your monthly payments.
In conclusion, it’s important to be prepared for resuming student loan payments this summer, given the current state of student loan forgiveness and the Supreme Court case. By taking these steps, you can make the transition back to student loan payments smoother and avoid any negative consequences.
Further, with the expiration of the student loan payment pause approaching, borrowers must prepare to pay off their student loans again. It is essential to update their contact information, research their payment options, and watch out for scams. Though the loan forgiveness plan may not pass the Supreme Court, borrowers must prepare mentally and financially to resume payments.