If you are bewildered by the status of student loan forgiveness, you are not alone. Two court cases, one brought by six Republican-led states, and another brought in Texas by two individuals who would not benefit from the entire forgiveness amount, have stalled debt forgiveness for close to 26 million borrowers.
As of November 11, 2022, the U.S. Department of Education (ED) stopped taking applications for student debt relief because of the lawsuits. However, they will retain, and review applications already submitted. Some applicants may receive emails from the Education Department, saying their application for debt forgiveness is approved. However, be aware that the debt forgiveness will not happen unless the court rules in favor of the Biden Administration.
The good news is that the Biden Administration extended the pandemic-related federal student loan payment pause. Per studentaid.gov, the loan payment pause is extended “…until the U.S. Department of Education is permitted to implement the debt relief program or the litigation is resolved. Payments will restart 60 days later. If the debt relief program has not been implemented and the litigation has not been resolved by June 30, 2023 — payments will resume 60 days after that.”
Even though the student debt forgiveness program might not be an option right now, there are other changes to student loan repayment programs that may positively impact student loan borrowers:
- Borrowers with Direct and Education Department-managed Federal Family Education Loans (FFEL) may receive more credit in a one-time account adjustment. Borrowers who have other types of federal student loans must apply for consolidation into a Direct Loan by May 1, 2023.
- The Education Department has proposed improvements to Public Service Loan Forgiveness Program, which will streamline and clarify the process.
Finally, here are some things you can do now to get ready for when the student loan payment pause ends sometime in 2023:
- Confirm that your loan servicer has updated information.
- Enroll in auto-debit (you get a .25% interest rate reduction).
- Check out studentaid.gov’s loan repayment simulator to find a repayment plan that works for you.
- Open a savings account and start making a monthly transfer equal to your student loan once the debt forgiveness program resumes. Note: If you receive financial assistance from Supplemental Social Security Income (SSI) or services from one of the Pennsylvania Home and Community-Based Services waiver programs, make sure your savings fall within the program guidelines. For more information, download our book, Cents and Sensibility: A Guide to Money Management, and go to page 27.
You got this!