Upcoming Changes to Student Loan Repayment and the Future of Student Loan Forgiveness
With the debt ceiling deal being passed there is more that comes along with it than just suspending the US debt limit till 2025. The terms of this deal end the pause on student debt repayment requirements. The student dept repayment suspension gave borrowers an interest free pause on their student debt payments that began during the pandemic as a means to relieve Americans during times of economic hardship. This pause was then extended into 2023 due to President Bidens student loan forgiveness programs ongoing legal disputes. Come August 29th, the freeze will end and payments with restart. Around 45 million borrowers were able to take advantage of the moratorium, and now they will resume an added expense depending on their loan amounts and graduation year. On this date most borrowers must start making payments and interest will also accumulate again as well. Now that borrowers have a date of when they must start repaying it is time to prepare for these payments.
Within the next few months, it will be important for people affected to check in on their budgets and rebalance where necessary. Making sure you are clear on what your monthly payment amount is and where this payment will come from will help make sure you can make those minimum monthly payments and aren’t stretching things too thin. Your loan servicer can charge you up to 6% of your missed payment as a late fee, and you don’t want to be caught paying fees instead of paying off debt. Contact your lender to ensure you are on the same page with student loan repayment amounts, dates, and fees. Having a tight plan to repay student loans is the best way to avoid unnecessary stress and uncertainty.
What Student Loan Borrowers should expect to pay in late August
With the amount of people affected by this change you can expect that student loan servicers will be swamped with customer service requests come August 29th, so it is best to take a look at this as soon as possible so you’re not on hold for hours on the day your payment is due. Make sure your student loan servicers have your updated information now so you receive information and statements promptly.
Read more: Tools to set your children up for financial success.
If you’re struggling to make room in your budget for these student loan repayments, it can help to take a look at your past few months of expenses and make notes on where you can cut down to make room if needed.
The Future of Student Loan Forgiveness
President Biden’s student loan forgiveness plan is still facing legal contest and it is not known if qualifying borrowers will be forgiven up to $20,000 of their student debt till the supreme court decision is released. The Supreme Court decision is expected to be handed down between late June and early July when the court goes into summer recess. If the Justices uphold the student loan forgiveness plan, the department of education will promptly begin operations to relieve borrowers who have already applied and been approved.