The Biden administration is also working to make a clearer path for borrowers considering bankruptcy. Depending on the conditions of your deferment or forbearance, it may make sense to continue paying the interest during the payment suspension.įollowing the year-long on-ramp offered by the Biden administration, if you don’t make student loan payments, you’ll risk delinquency and default, which will harm your credit score and potentially lock you out of other aid and benefits down the line. Both can also affect future loan forgiveness options. One thing to note: Interest still accrues during deferment or forbearance. To determine whether deferment or forbearance are good options for you, contact your loan servicer. Instead, any savings that would have gone to payments can earn interest in those remaining few months.įinally, after the year-long grace period, if you’re in a short-term financial bind, you may qualify for deferment or forbearance - allowing you to temporarily suspend payment. Biden reiterated that it is not the same as the student loan pause, adding that “if you can pay your monthly bills, you should.”Įxperts at the Student Borrower Protection Center and Institute of Student Loan Advisors encourage borrowers not to begin to make payments again until the fall, when interest starts up again and the pause lifts, since there is no penalty for not doing so during the freeze. Interest will resume in September, however, and it will accrue whether borrowers make payments or not. Biden said borrowers can and should make payments during the first 12 months after payments resume, but, if they don’t, they won’t be at risk of default and it won’t hurt their credit scores. Hours after the Supreme Court decision, President Joe Biden announced a 12-month grace period to help borrowers who struggle after payments restart.
Should borrowers still make loan payments?
To figure it out, the Education Department will go through a process known as negotiated rulemaking. So far, it remains unclear which loan holders will qualify and how much of their debt will be forgiven. Who will be eligible and how much debt will be canceled? The court's 6-3 decision, with conservative justices in the majority, said the administration needed Congress’ endorsement before undertaking so costly a program. In its previous attempt to forgive student loans, Biden's White House appealed to a bipartisan 2003 law dealing with national emergencies, known as the HEROES Act, for the authority to cancel the debt. The law includes a provision giving the education secretary authority to “compromise, waive or release” student loans. Under the proposed approach, the White House is now planning to use the Higher Education Act of 1965 - a sweeping federal law that governs the student loan program - to bring about relief for student borrowers.īiden said the authority of the act will provide “the best path that remains to provide as many borrowers as possible with debt relief.” What is the new plan and how is it different? Here's what to know about where the new Biden plan stands. With repayments set to begin in October, many borrowers are wondering if they still have to pay.
Of those, 20 million would have had their remaining student debt erased completely. Following the Supreme Court's decision to effectively kill Biden’s earlier student debt forgiveness proposal, the White House is trying again to ease the burden on those carrying student loans using a different legal approach.īiden's original plan would have canceled up to $20,000 in federal student loans for 43 million people.
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