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Supreme Court Ruling and Resuming Student Loan Payments: What Students Need to Know for September

Stay informed about the resumption of student loan payments and explore your options as a student. Understand the latest developments and discover valuable private student loans and refinancing resources. Don’t miss important information that can help you make informed financial decisions.

Questions Answered in this Article

  1. Q: When will student loan payments resume after the pandemic pause? A: Student loan payments are set to resume either 60 days after the Supreme Court ruling on President Biden’s forgiveness plan or 60 days after June 30, 2023.
  2. Q: Which student loans were included in the payment and interest pause? A: The pause on payments and interest applied to all federally held student loans, regardless of the loan servicer. This included Direct federal student loans, Federal Family Education Loan program loans held by the Department of Education (FFEL), Federal Perkins Loans held by the Department of Education, Defaulted FFEL loans not held by the Department of Education, and Defaulted Health Education Assistance loans (HEAL).
  3. Q: What is the income threshold for eligibility in President Biden’s debt forgiveness program? A: Individuals earning less than $125,000 per year or married couples making less than $250,000 combined are eligible for $10,000 in public student loan forgiveness. Additionally, borrowers paying off federal Pell Grants can be eligible for an additional $10,000 in relief.
  4. Q: How can I prepare for the resumption of student loan payments? A: To prepare for the resumption of payments, reconnect with your loan servicer, update your information if necessary, and consider reestablishing automatic payments. Additionally, explore income-driven repayment plans to manage monthly payments effectively. Stay informed about any changes in your monthly balance, especially if you are on a traditional repayment plan.
  5. Q: Will the Supreme Court ruling impact the likelihood of continuing the student loan forgiveness plan? A: Many analysts doubt that the Supreme Court will allow the forgiveness plan to continue. Even if it does, it is anticipated that at least half of the estimated 44 million borrowers will still have some outstanding balance when the forbearance period ends in October.

More: Navigating Student Loan Repayment: Challenges and Strategies for Borrowers as Payments Resume

Learn More: The Hidden Burden of Parent PLUS Loans: Exploring Pathways to Debt Relief

The Impending Supreme Court Decision on Student Loan Forgiveness

The eagerly awaited decision by the US Supreme Court regarding the legality of President Joe Biden’s proposal to forgive up to $20,000 in student loan debt per borrower is just days away. As law students gear up for the upcoming academic year in September, the outcome of this ruling holds significant implications for their financial future.

More: Public Service Loan Forgiveness (PSLF) Program – A Guide

Learn More: An Overview of Student Loan Forgiveness Programs: Benefits, Drawbacks, and Options for Struggling Borrowers

Resumption of Loan Payments after Pandemic Pause

Regardless of the court’s verdict, the halt on payments and interest for education loans, which commenced at the onset of the pandemic over three years ago, will finally end. Loan servicers, the contracted third-party companies responsible for managing borrowers’ accounts, will work tirelessly to reinstate billing procedures for tens of millions of customers.

More: Student Loan Forgiveness and Relief Options for 2022

Learn More: Coronavirus and Student Loans: What You Need to Know

Uncertainty Looms: When Do Student Loan Payments Resume?

Initially, President Biden announced that payments would recommence on January 1, 2023, when the White House unveiled its debt forgiveness program in August 2022. However, legal challenges prompted the moratorium to be extended to allow the Supreme Court ample time to decide.

To ensure fairness for borrowers eligible for relief, President Biden emphasized, “It isn’t fair to ask tens of millions of borrowers eligible for relief to resume their student debt payments while the courts consider the lawsuit.” Consequently, the administration stipulated that payments and interest would resume either 60 days after the Supreme Court’s ruling or 60 days after June 30, 2023.

More: Supreme Court Hears Arguments on Biden’s Student Debt Forgiveness Plan

Debt Ceiling Deal Deadline and Loan Servicers’ Role

While the court is yet to deliver its judgment, a provision embedded within the Congress-passed debt ceiling deal solidifies the June 30 deadline and bars any further pauses by the Department of Education. Consequently, interest on student loans will recommence on September 1, 2023, with payments due to begin in October. The exact date in October may vary depending on the loan servicer handling each borrower’s account.

More: Understanding Biden’s Efforts to Alleviate Student Loan Debt in the US

Affected Student Loans during the Pause

Throughout the moratorium, payments, and interest on all federally held student loans were frozen, regardless of the loan servicer. The eligible student loans subject to the pause include the following:

  • Direct federal student loans.
  • Federal Family Education Loan program loans held by the Department of Education (FFEL).
  • Federal Perkins Loans held by the Department of Education.
  • Defaulted FFEL loans not held by the Department of Education.
  • Defaulted Health Education Assistance loans (HEAL).

However, certain student loans were not eligible for the pause, including:

  • Nondefaulted FFEL loans not held by the Department of Education.
  • The Department of Education does not regulate Federal Perkins Loans.
  • Nondefaulted HEAL loans.
  • Private student loans.

More: Understanding the Role of ECSI in Managing Perkins Student Loans

Learn More: Understanding the Student Loan Pause: Eligibility, Pros and Cons, and How to Apply

Read: College Students Facing Higher Federal Student Loan Interest Rates in 2023-24

Popular Private Student Loan Options

Preparing for Resumed Payments: What Law Students Should Do

As law students prepare for the resumption of student loan payments, taking specific steps to ensure a smooth transition is essential. Consider the following actions:

  1. Reconnect with Your Loan Servicer

Updating your information with the loan servicer is crucial if you have changed addresses or financial institutions. Even if there have been no changes, reestablishing automatic payments may still be necessary. It’s worth noting that during the pandemic, some companies exited the student loan business, leading to potential changes in loan servicers. To locate your loan servicer, visit the Department of Education’s Student Aid website.

More: Is It Time to Refinance to a Variable-Rate Student Loan?

Read More: Financing Law School: Everything You Need to Know

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  1. Explore Income-Driven Repayment Plans

Given the likelihood that many law students have not budgeted for student loan payments over the past three years, it is essential to assess your financial circumstances. Factors such as new expenses, lower-paying jobs, or other variables may have impacted your ability to manage loan payments. Exploring income-driven repayment (IDR) plans can provide a viable solution. While extending the repayment period, these plans offer more manageable monthly payments, preventing missed payments or defaults. Some popular IDR plans to consider include the following:

  • REPAYE (revised pay as you earn) plan
  • PAYE (pay as you earn) plan
  • IBR (income-based repayment) plan
  • ICR (income-contingent repayment) plan

By evaluating your financial situation and opting for an appropriate IDR plan, you can ensure that your monthly loan payments align with your current circumstances.

More: Department of Education Announces Changes to Income-Driven Repayment Forgiveness Criteria

  1. Stay Informed about Changes in Monthly Balance

Loan servicers may recalculate monthly payments for borrowers on traditional repayment plans based on the current loan balance and remaining repayment schedule. It is advisable to check the Student Aid website regularly for updates on the resumption of payments. On the other hand, if you are enrolled in an IDR plan, your prices will generally revert to their pre-pause amounts unless you have switched plans or recertified your eligibility.

Like many others, law students eagerly await the Supreme Court’s ruling on the student loan forgiveness plan proposed by President Biden. Whether or not the project is approved, it is crucial to be prepared for the resumption of loan payments in September. Law students can effectively navigate this significant financial milestone in their educational journey by staying informed, reconnecting with loan servicers, exploring IDR options, and understanding changes in monthly balances.

Remember, this article is intended for informational purposes only and does not constitute legal or financial advice. It is recommended to consult with professionals or relevant authorities for personalized guidance regarding your specific circumstances.

Learn More: Revised Income-Driven Repayment Plan for Undergraduates: The Most Generous Plan Yet

More: How Income-Driven Repayment Plans Can Help You Manage Your Student Loan Payments

Summary

  • The US Supreme Court is expected to rule on the legality of President Biden’s plan to forgive up to $20,000 in student loan debt per borrower.
  • Payments and interest on education loans will resume after a pause that began at the beginning of the pandemic over three years ago.
  • Loan servicers will be working to restart billing procedures for tens of millions of customers, regardless of the court’s decision on the forgiveness plan.
  • Student loan payments are expected to resume either 60 days after the Supreme Court ruling or 60 days after June 30, 2023.
  • A provision in the debt ceiling deal passed by Congress sets a June 30 deadline and prevents further pauses by the Department of Education.
  • Interest on student loans will resume on September 1, 2023, with payments due starting in October, depending on the loan servicer.
  • The moratorium on payments and interest included all federally held student loans, while certain loans, such as private student loans, were not eligible for the pause.
  • Law students should reconnect with their loan servicer, consider income-driven repayment plans, and stay informed about changes in their monthly balance.
  • The Biden program aims to forgive $10,000 in public student loans for eligible individuals earning less than $125,000 per year, with additional relief for borrowers with federal Pell Grants.
  • Analysts have expressed doubt about the likelihood of the Supreme Court allowing the forgiveness plan to continue, and many borrowers may still have an outstanding balance when the forbearance period ends in October.

Definition of Terms

  1. Student Loan Forgiveness: A program or policy that aims to eliminate or reduce the amount of student loan debt owed by borrowers, often based on specific eligibility criteria.
  2. Loan Servicer: A third-party company contracted by the government or private lenders to handle the administrative tasks of managing loans, such as billing, payment processing, and customer service.
  3. Moratorium: A temporary suspension or delay of activity or obligation. In this context, it refers to the pause on student loan payments and interest during the pandemic.
  4. Debt Ceiling: The maximum amount of money a government can borrow to finance its operations. It is typically set by legislation and requires approval to be increased.
  5. Income-Driven Repayment (IDR) Plans: Repayment plans for federal student loans that base the monthly payment amount on the borrower’s income and family size, making the payments more affordable.
  6. Pell Grants: Federal grants provided to students with financial need to help fund their education, typically awarded to undergraduate students pursuing their first bachelor’s degree.
  7. Defaulted Loans: Loans on which the borrower has failed to make payments for an extended period, leading to a default status, which can have negative consequences such as damage to credit scores.
  8. Federal Perkins Loans: The US Department of Education provides low-interest loans to eligible students with exceptional financial need, often disbursed through participating colleges and universities.
  9. Federal Family Education Loan (FFEL) Program: A program that provided federally guaranteed loans through private lenders, discontinued in 2010, with all new loans issued directly by the Department of Education since then.
  10. Private Student Loans: Loans issued by private financial institutions, such as banks or credit unions, to fund educational expenses. They differ from federal student loans as the government does not back them and typically have different terms and conditions.
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