Supreme Court Decision Looms as Federal Student Loan Payments Prepare to Resume

Student loan borrowers across the nation are eagerly awaiting the Supreme Court’s ruling on President Biden’s student loan forgiveness plan, which could come as early as Thursday. The court is currently deliberating on whether the Biden administration can proceed with its proposal to forgive up to $10,000 in federal student loan debt for borrowers and up to $20,000 for those who received Pell Grants. However, regardless of the court’s decision, the temporary suspension of federal student loan payments, implemented during the COVID-19 pandemic, is nearing its end.

While some borrowers may eventually see their payments reduced or even eliminated if the Supreme Court deems Biden’s $400 billion plan to be legal, there is currently no set timeline for when such measures would take effect. More than three years after payments were paused and interest rates were reduced to 0% in March 2020 under the Trump administration (and subsequently extended multiple times under Biden), student loan interest will begin accruing again on September 1, with payments due in October.

The Department of Education has assured the more than 40 million student loan borrowers that they will receive advance notification “well before payments restart.”

Resuming student loan payments undoubtedly poses a significant financial burden for many borrowers. As the country emerges from the pandemic, Americans’ budgets have been squeezed due to skyrocketing inflation fueled by increased demand, the Ukraine conflict, and substantial government spending. Simultaneously, wage increases have failed to keep pace with rising prices, and U.S. household debt has reached a staggering $17 trillion, with a growing number of individuals struggling to make payments on various types of loans.

Failure to make student loan payments can lead to delinquency and eventual default, which carry severe penalties. In addition to damaging credit scores, borrowers in default may be ineligible for further financial aid and government benefits.

Financial experts recommend that borrowers concerned about their ability to make student loan payments explore income-based repayment plans, which consider a borrower’s expenses when determining payment amounts. Eligibility for such plans can be determined on the Federal Student Aid website. Current and former government or nonprofit employees may also qualify for the Public Service Loan Forgiveness Plan, which forgives student debt after ten years of service.

For borrowers facing immediate financial challenges, options such as deferment or forbearance may provide temporary relief, although it is important to note that the loans do not disappear, and interest continues to accrue during these periods.

As the Supreme Court’s decision on student loan forgiveness hangs in the balance, borrowers are urged to explore the available repayment options, seek guidance from financial professionals, and stay informed about any updates from the Department of Education regarding the resumption of federal student loan payments.