What Happened
At the end of June, the Supreme Court struck down President Biden’s plan to eliminate $400 billion in student loan debt for 45 million borrowers. The ruling stated that the president lacked the authority to broadly eliminate debt without explicit congressional approval.
Loan payments were originally paused in March 2020 by then-President Donald Trump as part of Covid-19 relief, and extended multiple times by President Joe Biden. In August 2022, President Biden announced a plan to forgive student loan debt for many borrowers, but the measure was immediately challenged in court. Borrowers have been awaiting news on if and when repayments would resume—and now they have it.
What You Need to Know
Unpaid student loans resume accruing interest in September, with payments due in October. Take these steps now so you’re prepared when repayment starts.
- Sign into your loan account. The Department of Education plans to communicate directly with borrowers and student loan servicers before repayment begins, but it’s a good idea to log into your StudentAid.gov account soon to check everything out. It’s possible your loan servicer changed during the pandemic.
- Update your account info. While you’re logged in, make sure your account information is correct, including your phone number, email address, and mailing address.
- Reach out to your loan servicer. If you’ve got questions, reach out to your loan servicer now—before escalating wait times for customer service. Ask for an estimate of your monthly bill and confirm other details.
- Adjust your monthly budget. Make changes to your budget to slowly ease into repayment mode. It may take a few months of adjustments to come up with a workable budget, and it’s less stressful if you figure that out before your loans are actually due.
Repayment Options
If your impending payment seems overwhelming, it may be worth changing repayment plans. You can change repayment plans at any time, for free. Not all borrowers qualify for all repayment plans, but there are plenty of options.
- Standard Repayment Plan. Payments are a fixed amount based on a 10-year repayment period.
- Graduated Repayment Plan. Payments start lower and increase over time based on a 10-year repayment period.
- Extended Repayment Plan. Payments can be fixed or graduated based on a 25-year repayment period.
- REPAYE Plan (Revised Pay As You Earn Repayment Plan). Payments are 10% of your discretionary income and recalculated each year based on income and family size. Outstanding loan balances are forgiven after 20-25 years.
- SAVE Plan (Replacing REPAYE Plan). Payments are calculated based on your income and family size and are the lowest monthly payment of any income-driven repayment plan.
- Income-Based Repayment Plan. Payments are 10 or 15% of discretionary income, and high debt relative to income is required. Outstanding loan balances are forgiven after 20 or 25 years.
- Income Contingent Repayment Plan. Payments are the lesser of 20% of discretionary income or an adjusted amount based on your income and a fixed payment over 12 years. Outstanding balances are forgiven after 25 years.
- Income Sensitive Repayment Plans. Payments are based on annual income and loan will be paid in full within 15 years.
Some Loan Forgiveness Coming
Even though President Biden’s plan was struck down, some long-time borrowers will still see their loans forgiven as part of an adjustment to mismanagement of loan repayment programs, as announced July 14 by the Department of Education.
According to the DOE, some 804,000 borrowers should have qualified for loan forgiveness under the government’s income-driven repayment plans. A press release stated that because of “historical failures in the administration of the Federal student loan program,” qualifying payments that should have moved borrowers closer to loan forgiveness were not accounted for.
“For far too long, borrowers fell through the cracks of a broken system that failed to keep accurate track of their progress towards forgiveness,” said U.S. Secretary of Education Miguel Cardona.
Qualifying borrowers are enrolled in income-driven repayment (IDR) programs and have made between 240 or 300 required monthly payments—that’s between 20 and 25 years of repayment. Their debts will be eliminated in the coming weeks. Court challenges are not expected because the mandate falls within the education secretary’s power to administer loan repayment programs.