In the start of this series last week, we looked at the growing crisis around student loan debt. We also reviewed the process for Biden’s proposed loan forgiveness plan, as well as eligibility requirements.
But now… the loan forgiveness program is officially on ice. On Monday, the 8th Circuit Court of Appeals ruled against Biden’s student loan forgiveness plan in response to a Texas lawsuit filed. The Biden administration has stopped accepting applications, and the Department of Education’s Studentaid.gov site has noted, “Courts have issued orders blocking our student debt relief program. As a result, at this time, we are not accepting applications. We are seeking to overturn those orders.”
The Texas court ruling is currently being appealed by the Department of Education. In the meantime, all applicants are on hold and further applications are suspended.
So, what should borrowers do in the meantime?
Don’t wait on the government to get a handle on your student loan debt. The pandemic and recessionary pressures have caused many borrowers to put their loans on hold through forbearances. However, this causes debt balances to balloon with additional interest. Student loan payments and interest are set to resume in the new year. While there is a chance the Biden administration may extend the payment pause for the eighth time, borrowers shouldn’t count on it.
Be sure to review your student loan balance and payment plan. You can use loan simulators from the Department of Education’s site to help choose the repayment option that’s best for you. Inflationary pressures are already weighing on your monthly budget, so make necessary adjustments to your spending now to be able to resume payments in January. Until then, if your budget allows, start saving in a high-yield savings account to earn interest. I’ve provided additional insight into your emergency fund and savings accounts here.
Lastly, if you haven’t already, sign up for autopay. Some lenders even provide an interest rate reduction for autopayments. Remember, student loans can greatly influence your credit score. Late payments or delinquency can have a significant impact on your financial health. For ways to boost your credit score, check out this other post.
Next time we will look at alternative plans for student loan debt, as well as other ways borrowers' funds could be used. Stay tuned and as always, comment below with any thoughts or questions!