Young Americans are currently facing a debt crisis. Fortunately, the student loan repayment pause has provided much-needed debt relief. Before the student loan pause, student loan borrowers struggling with repayment had to switch repayment plans or consolidate with an installment loan, such as a No Credit Check Loan.
The student loan payment pause temporarily suspends loan payments on federal student loans. The payment pause, also known as administrative forbearance, began on March 13, 2020. The goal was to provide immediate student debt relief to eligible individuals during unprecedented times created by the COVID-19 pandemic.
When Will Student Loan Payments Resume?
The debt relief program has been in effect since 2020. It is currently unknown when student loan borrowers must resume making monthly payments. The Federal Student Aid website says the loan repayment pause extends until June 2023.
If you have student loan debt, you may wonder what happens once June 2023 arrives. The extension of the student loan payment pause will end once the U.S. Department of Education implements the debt relief program or resolves the current litigation.
Federal student loan payments will restart 60 days after one of these two possible scenarios occurs by June 30, 2023. The U.S. Department of Education will notify student loan borrowers
How Much Will Be Forgiven Through the Student Debt Relief Plan?
On August 24, 2022, President Biden, Vice President Harris, and the U.S. Department of Education announced a student debt relief plan. The student debt relief plan aims to provide between $10,000 and $20,000 of student Loan forgiveness to eligible borrowers.
In order to be eligible for student debt relief, your annual income must have fallen below $125,000 (for individuals) or $250,000 (for married couples or heads of households). You are eligible for the student loan forgiveness program if you meet the income threshold. Your debt relief amount depends on the type of student loans you have.
- Non-Pell Grant borrowers are eligible for up to $10,000.
- Pell Grant borrowers are eligible for up to $20,000.
Why Is the Student Debt Relief Plan Headed to the Supreme Court?
Unfortunately, the student loan forgiveness program is on hold due to lawsuits that aim to block student debt relief. On September 29, 2022, six republican states filed a lawsuit against the student loan forgiveness program. This state-led lawsuit is known as the Biden v. Nebraska case.
These six states include:
- South Carolina.
The six GOP-led states filed a lawsuit against this historic debt forgiveness policy because they believe the president is overstepping his authority without authorization from Congress. However, the Biden administration states that the Heroes Act of 2003 grants the U.S. Secretary of Education authority to alter the federal student loan system during national emergencies.
President George W. Bush signed the Higher Education Relief Opportunities for Students (HEROES) Act of 2003 into law in response to the 9/11 terrorist attacks of 2003. This Act previously allowed the U.S. Secretary of Education to provide loan relief to terrorist attack victims. Student loan borrowers either paid a reduced monthly payment amount or made no payments at all. In addition, collection activities on defaulted loans were also put on hold.
Since the Biden administration announced the student loan relief plan, there have been at least six lawsuits. The Supreme Court, which consists of nine justices, will hear two of the six lawsuit cases. The ruling will determine the fate of over 30 million Americans with outstanding federal student debt. The final decision will occur by the end of June 2023.
What Is the Department of Education v. Brown Case?
Two cases are headed to the Supreme Court to tackle the issue of federal student loan forgiveness. These two cases are Biden v. Nebraska and Department of Education v. Brown.
Alexander Taylor and Myra Brown filed the Department of Education v. Brown case. Both parties state that the Biden administration did not go through the Administrative Procedure Act’s notice-and-comment procedure. The notice-and-comment process allows anyone to submit comments on proposed rulings. According to the current eligibility requirements for the student debt relief plan, Brown is ineligible, and Taylor is only eligible for $10,000 of student loan forgiveness.
Is It Too Late to Apply for the Student Loan Forgiveness Program?
The Education Department is no longer accepting applications for student debt cancellation due to court orders. In October 2022, a federal judge in North Texas ruled that the student debt relief program was “unlawful.” The judge stated that the president did not follow proper federal procedures, which allowed public comment.
If you have already submitted an application, the Education Department will hold your application. But if you missed the deadline, you must wait for the Supreme Court to rule on the Biden administration’s student loan forgiveness plan.
Alternative Loan Forgiveness Options for Federal Student Loan Borrowers
Suppose the Supreme Court prevents the Education Department from implementing the student loan forgiveness program. In that case, student loan borrowers must resume making payments 60 days from June 30, 2023.
However, even if the Supreme Court blocks the Biden administration’s student loan forgiveness plan, there is an alternative option! The U.S. Department of Education offers a Public Service Loan Forgiveness Program.
The Public Service Loan Forgiveness (PSLF) plan is a program that allows specific employed individuals to qualify for loan forgiveness. After a student loan borrower has made 120 qualifying monthly payments, the Department of Education could forgive the remaining debt balance.
Qualification Requirements for PSLF
The qualification requirements are strict for PSLF. In order to be eligible, you must:
- Work in public service in federal, state, tribal, or local government or for a non-profit organization. According to the Department of Education, military service and AmeriCorps or Peace Corps volunteering counts as federal service.
- Work full-time for one of the agencies or organizations listed above.
- Have a Direct Loan or consolidate multiple federal student loans through the William D. Ford Federal Direct Loan (Direct Loan) Program.
- Repay your federal student loans under a qualifying income-driven repayment plan.
- Make 120 qualifying monthly payments.
How to Apply for PSLF
If you meet the qualification requirements for PSLF, you can start applying for student loan forgiveness. Keep in mind that it takes approximately ten years for student loan borrowers to make 120 qualifying monthly payments and qualify for PSLF. In addition, you must work for a qualifying employer when you submit an application and receive loan forgiveness.
The PSLF Help Tool can help interested borrowers search for a qualifying employer and learn what steps to follow to be eligible. If your employer qualifies and you meet all the requirements, you can complete the PSLF form and submit it to a PSLF servicer.
The PSLF Form helps borrowers keep track of their progress. The U.S. Department of Education recommends that borrowers submit a PSLF form annually or when there is a change of employer. After submission, an email will be sent to you with information on whether your employment qualifies and if you are close to meeting your 120 required monthly payments.
PSLF forms can be faxed (866-222-7060) or mailed to the following address:
U.S. Department of Education
633 Spirit Drive
Chesterfield, MO 63005-1243
If your federal loan servicer is MOHELA, you can upload your PSLF form to the MOHELA website.
What Is an Income-Driven Repayment Plan?
An income-driven repayment plan is a federal student loan plan that potentially allows you to get a lower monthly payment amount. Payments depend on your income and family size. There are currently four income-driven repayment plans to choose from.
- Revised pay As You Earn (REPAYE): This payment plan allows eligible applicants to generally pay only 10% of their discretionary income.
- Pay As You Earn (PAYE): Eligible borrowers can generally pay 10% of their discretionary income but no more than the 10-year Standard Repayment Plan amount.
- Income-Based Repayment (IBR): Allows new borrowers (on or after July 1, 2014) to generally pay 10% of discretionary income. Individuals that became borrowers on or after July 1, 2014, could pay as little as 15% of their discretionary income monthly.
- Income-Contingent Repayment (ICR): Eligible applicants can generally pay 20% of their discretionary income or an amount they would pay on a fixed repayment plan over the course of 12 years (whichever is less).
Methods To Pay off Student Loans Quickly
While there is a possibility that federal student loan borrowers can get their loans forgiven, it’s a good idea to be prepared for the possibility of payment continuation. Luckily, plenty of debt repayment methods can help you speed up the repayment schedule.
Make Extra Payments
If you have money left over at the end of the month, consider using it on your student loans. Making extra student loan payments will speed up your final repayment date. You can make a more considerable lump sum or additional payments after paying your monthly amount.
Change Your Payment Plan
A benefit of having federal student loans instead of private ones is that you can change your payment plan anytime if you meet the qualification requirements. Suppose your monthly payment is too high, and you struggle to afford other bills. In that case, you can apply for an income-driven repayment plan. The eligibility requirements vary depending on the plan you want. Use the online loan simulator on the Federal Student Aid website to determine which repayment plan is best for your current financial situation.
Enroll in Autopay
Federal student loan servicers provide a quarter-point interest rate discount to eligible borrowers that sign up for automatic payments! Automatic payments automatically deduct your monthly payment amount from your bank account. Autopay is beneficial because you can potentially save money and avoid late payments!
Use the Debt Snowball or Avalanche Method
Do you have multiple student loans to repay? Try using the debt avalanche or snowball method if you have too much debt to deal with and need to reduce the amount quickly.
- Snowball Method: The snowball method focuses on the smallest debt amount first. Pay as much as possible toward the smallest loan balance and pay the minimum on every other debt. This debt repayment method keeps you motivated for fast repayment!
- Avalanche Method: The avalanche method focuses on paying down the loan with the highest interest rate first. Pay as much as you can toward that debt and pay the minimum on all other debts. This repayment method could save you the most money on interest charges.
COVID-19 Emergency Relief and Federal Student Aid│Federal Student Aid
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