Student Loan Payments

Jan 03, 2023 By Susan Kelly

As the White House fights challenges that threaten to undermine its comprehensive student debt forgiveness plan, the delay in federal student loan payments has been again extended by the White House.

When do the student loan payments resume? According to information provided by the Department of Education in November, students could only be responsible for making payments as late as the summer of 2023. However, if the Supreme Court rules that Vice President Biden's proposal to forgive up to $20,000 in student loans for each borrower is constitutional, the forbearance program might be terminated sooner. The oral arguments are now slated to take place on February 28. Even if the court has guaranteed a speedy judgment, even a speedy resolution may be reached many months after all arguments have been presented.

When Exactly Will Payments Resume?

There has yet to be a date we know when payments will resume. The decision made by the Education Department leaves the expiry date of forbearance up in the air, and it depends on when the Supreme Court decides to weigh in on the legal challenges that have been orbiting around Biden's student debt relief proposal.

If the Supreme Court issues its decision on the case before June 30, 2023: Borrowers who still have outstanding sums on their loans will be required to begin making payments sixty days after the Supreme Court issues its ruling on Vice President Biden's proposal if the decision is handed down before June 30.

If the Supreme Court issues a ruling by June 30, 2023, Forbearance will end on June 30 if the Supreme Court has not rendered a verdict on Biden's attempt to discharge his debts by that date. Sixty days after June 30, borrowers will be required to begin repaying debts.

What Does The Payment Pause Do?

Borrowers of federal student loans are permitted to skip payments while they are in forbearance, which the president first authorized at the time, Donald Trump, in March 2020 as the COVID-19 epidemic took hold. The interest rate on their loans has been lowered to 0%, and the collection actions that were being carried out on defaulted debts have been put on hold.

Borrowers participating in normal repayment programs should expect to have their former loan sums available for them when they resume making payments, less any debt cancellation that is upheld after being challenged in court. Those who participate in income-driven repayment plans, which forgive any remaining debt after a predetermined number of payments have been made, are in a somewhat better financial position, although the fact that each month that goes by while they are not making payments still counts toward their overall balances. The extension of the interest-free forbearance period was announced in November, marking the ninth time the government has done so.

Approximately 40 million borrowers who were expected to resume making payments on their loans in January 2023 will now have some more time without having to do so. After not receiving student loan payments for over three years and facing an unclear future regarding the cancellation, however, the payment vacation should only be extended for some.

Should You Continue To Make Payments While The Extension Is In Effect?

Your current debt and your capacity to make payments factor into the decision on whether or not to begin repayment during the forbearance period. You shouldn't make payments during this extension if your cancellation amount under the blocked Biden proposal wiped out your student loans because of the amount you owe. Instead, if you can do so, set some of the money away from your student loan payment. This money must be stored in a separate account so that it does not get mixed up with your regular spending and so that you have it accessible to make a one-time payment if cancellation is never really carried out.

Regardless of whether the borrower makes a payment during the month, the payment count will continue to climb for them if they are engaged in a forgiveness program such as the Public Service Loan Forgiveness program. These debtors shouldn't make any payments at this time.

If the loan knows that they will still owe money on their student loans even after the cancellation is implemented, they should try to make payments during the extended pause extension. If you use this time to make payments, you will move closer to the finish line faster and at a lower cost overall.

Dave Christensen, a borrower from Wisconsin who repaid around $30,000 worth of student loans during the epidemic hiatus, argues that it all boils down to basic mathematics. "They are not charging you interest, so take advantage of it and your debt goes down a lot faster that way," he adds. "Take use of the fact that they are not charging you interest."

You will still be responsible for repaying debts even if Vice President Biden's comprehensive proposal to eliminate debt is scrapped. Your loan principal will be reduced by the amount of each payment you make toward your loans up to the conclusion of the forbearance period in 2023. Even partial payments help.

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