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Federal Student Loan Borrowers Should Prepare to Resume Payments

Federal Student Loan Borrowers Should Prepare to Resume Payments

Biden administration officials are preparing for the Supreme Court potentially killing a student loan forgiveness plan that sought to wipe out an estimated $430 billion in loans, The Wall Street Journal reported. If overturned this month, payments will resume on borrowers’ federal loan balances, and interest will begin accruing again.

  • If forgiveness is upheld, borrowers with Pell grants will have up to $20,000 canceled, and others will have up to $10,000 of federal loans forgiven. Average monthly loan payments range from $270 to $400, said Mark Kantrowitz, author of How to Appeal for More College Financial Aid.
  • Apart from the Supreme Court ruling, payments paused during the Covid-19 pandemic are also set to resume this fall. Student loan recipients should begin preparing now, experts say. Congress’ deal to raise the debt ceiling doesn’t allow further extensions of the payment suspensions after Aug. 30.
  • Borrowers will receive billing statements or other notice at least 21 days before payments are due, the Education Department said. That means the first payments will be due around late September or early October.
  • The Biden administration has approved $14.5 billion in borrower defense claims for 1.1 million people, in addition to approving $42 billion in Public Service Loan Forgiveness claims for more than 615,000 borrowers since October 2021, the Journal reported.

What’s Next: The Biden administration has proposed expanding the Revised Pay As You Earn (REPAYE) program, including amending terms to offer $0 monthly payments for borrowers making less than roughly $30,600 annually and borrowers in a family of four making less than about $62,400.

Elizabeth O’Brien and Janet H. Cho