Student loan repayments to start in late August
Check how you can prepare for the upcoming months regardless of the Supreme Court ruling.
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Since 2020 due to the economic consequences of the COVID-19 pandemic, federal student debt holders have had their payments paused. Initiated by former President Donald Trump, the measure was extended by current President Joe Biden.
However, this measure is soon to finally end for good.
USA Today alerts for an imminent debt ceiling deal hammered out between President Joe Biden and House Speaker Kevin McCarthy, from which soon millions of former students will see their student loan payments and accrual of interest on those loans resume as early as late August.
The Biden administration has agreed to not renew the payment pause like it did last year — in exchange for a raised debt ceiling. Last August, the administration said the fourth and “final extension” would expire on Dec. 31, 2022, but by November, it extended that deadline to either 60 days after the Supreme Court issues a decision on the relief program, or 60 days after June 30 – whichever came first.
Without a Supreme Court ruling before June 30, the end of summer is when payments restart, and interest begins adding up again on August 29.
Scott Buchanan, executive director at the Student Loan Servicing Alliance trade organization, advises people to start contacting their services as soon as possible as the clock has started ticking and interest accruing.
A separate issue regarding student loans is the possible cancellation of up to $20,000 in debt by a Supreme Court ruling. Of the 45 million people who hold student loans, about 20 million would have their debt completely erased, Biden says.
If the high court decides to strike down Biden’s forgiveness proposal, it would only be effective earlier in August. If the opposite happens, an estimated $400 billion in student loan debt would be canceled, but still about 25 million people would have to restart making payments.
HOW TO PROCEED
According to Federal Student Aid, an office of the U.S. Department of Education, borrowers should immediately create a StudentAid.gov profile or make sure their contact information is current to avoid missing updates. A profile also lets borrowers apply for repayment plans and complete loan counseling.
USA Today also recommends contacting your loan servicer now in order to avoid long hold times. Once connected, servicers can remind individuals what their payments and responsibilities are, help them enroll in affordable repayment programs and manage other logistics.
On top of that, if a borrower had autopay before March 13, 2020, they must re-enroll in autopay as payments won’t automatically restart. Once the payment pause ends, individuals will receive a billing statement or other notice at least 21 days before the payment is due — including amount, payment deadline and any upcoming interest. Borrowers can get an estimate of it through their loan servicer online or by phone.
If you want to learn more about alternative methods in case you can’t pay for them or learn more about the whole process, click here.