Student debt relief isn’t expected soon. What you should do to prepare


  • The Biden administration’s student debt cancellation plan is mired in litigation.
  • That means Americans shouldn’t expect help anytime soon.
  • They should be ready to start repayments again on January 1st. Here’s how.

Now that millions of Americans are unlikely to receive student loan forgiveness by the end of the year, they should prepare (and quickly) to start making payments again, experts say.

A federal appeals court voted unanimously on Monday to issue a nationwide injunction blocking the Biden administration’s student loan debt relief program until the matter is resolved in court. The Biden administration may ask the Supreme Court to overturn the ban. Either way, a resolution could take months and certainly won’t come until the end of the year, when the student loan moratorium ends.

That means anyone with student debt will likely have to start making payments on Jan. 1 unless the administration can come up with a new plan that can avoid court battles, experts say.

Even if the administration comes up with a new plan, it’s likely to be narrower than the one stuck in the courts, which is why “I’m telling people to expect to pay again,” said Brian Marks, CEO. Entrepreneurship and Innovation Program at the University of Connecticut New Haven.

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How many Americans with student debt are affected?

A simple debt forgiveness application was launched in mid-October. About 26 million Americans had already applied for forgiveness and 16 million people had already been approved for debt relief when the Department of Education stopped accepting applications on Nov. 11, the day a federal judge in Texas declared the debt forgiveness program illegal in a separate lawsuit.

The White House estimated over the summer that up to 43 million borrowers, including roughly 20 million borrowers whose outstanding balances would be written off, would be eligible for relief.

What is the income limit for student loan debt forgiveness?

The administration’s plan, announced last summer, would have canceled $10,000 in federal student loans, including Parent Plus loans, for those earning less than $125,000 or households with incomes less than $250,000. Pell Grant recipients who typically have greater financial need will receive an additional $10,000 in debt forgiveness.

What should people do to prepare to start paying off again?

There isn’t much time before the student loan repayment moratorium ends on Dec. 31, but people need to “get their financial house in order,” Marks said.

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Here are some steps to take before the end of the year:

  • Start cutting costs and increasing savingsMarx said, acknowledging that it had been a rough year with the highest inflation in a generation. The times “call for prudence and creativity,” he said, recalling that when he and his wife were first married and had little money, they would take long walks or spend date nights grocery shopping instead of going to the movies;
  • Find out what your payments will look like and will you be able to afford them? If not, and if you don’t qualify for forgiveness, it may be possible to refinance at a lower rate until payments resume, said Randy Lupi, financial specialist at Equitable Advisors. Just note, however, that once the loans are refinanced at a private company, they will no longer be eligible for federal forgiveness programs, he said.
  • Check your eligibility for other state loan forgiveness programs. “For example, individuals in the nonprofit sector likely qualify for Public Service Loan Forgiveness, which has no limit on the amount of forgiveness, and should take this time to make sure they are properly enrolled,” Lupi said.
  • Consider paying off your loan by January 1st. Because a student loan moratorium includes 0% interest, 100% of payments made during the moratorium go toward your principal, says Eric Schuppenhauer, head of national banking and lending at Citizens Bank. If you reduce your loan amount, you may be able to reduce the length of the loan and save money in the long run.
  • Check your eligibility for income-based repayment plans. Federal student loans offer income-based repayment plans that can lower your monthly payments.
  • Check with your employer. A survey by the Employee Benefit Research Institute last year found that 17% of employers offer student loan debt assistance, and another 31% plan to. For example, Aetna matches employee U.S.-based student loan payments of up to $2,000 per year up to a maximum of $10,000 for lifetime qualifying loans; PwC offers partners and senior partners up to $1,200 per year in student debt; and Google matches up to $2,500 per year.
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Medora Lee is a money, markets and personal finance reporter for USA TODAY. You can reach him at mjlee[email protected] and subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday morning.


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