On Friday, June 30, 2023, the U.S. Supreme Court rendered a highly divided decision that blocked President Biden’s federal student loan cancellation plan, with six of the justices striking down against cancellation. This decision had a significant impact on nearly 40 million Americans who were anticipating relief from overwhelming student loan debt. While we are disappointed by this outcome, we are here to address the next pressing question: “What happens now?”
President Biden acted swiftly and announced his plan for an alternative approach just hours after the Supreme Court decision. He stated that he now intends to utilize the Higher Education Act of 1965 to make another attempt at providing borrowers with much-needed relief. However, implementing this plan may take a year or even longer, meaning that we may not witness substantial progress in federal student loan forgiveness until 2024. This approach may also be subject to legal challenges. Though this delay may be frustrating, there are immediate steps you need to take as federal student loan payments are set to restart in October.
The Department of Education plans to implement more affordable repayment plans for student loan borrowers. The recently introduced SAVE plan offers an income-driven payment structure that can potentially cut borrowers’ monthly payments in half, leaving many with a $0 monthly bill. This new plan will replace one of the existing income-driven repayment plans, but the full benefits won’t be realized until next summer when the SAVE plan is fully implemented. Despite the delay, it is a positive development for borrowers who seek more manageable payment options.
In the meantime, here are some immediate actions to consider when payments become due in October:
- Review your repayment options: Take the time to understand the various repayment plans available to you, these might include forbearance; allowing you stop temporary making payments or make smaller payments or you can check out the current income-based repayment plans. Explore each of the features, benefits, and eligibility criteria of each plan to determine which one aligns best with your financial situation.
- Evaluate your budget: With loan payments resuming, reassess your budget to ensure that you can comfortably meet your repayment obligations. Consider adjusting your expenses or seeking additional sources of income to accommodate your student loan payments.
- Communicate with your loan servicer: Stay in touch with your loan servicer to address any questions or concerns you may have regarding your repayment plan.
- Seek professional advice: If you are unsure about the best course of action or need personalized guidance, consider consulting with a financial advisor or a student loan counselor. They can provide expert insights and help you make informed decisions.
- Stay updated on developments: Continuously monitor updates from reliable sources regarding student loan forgiveness and related policies. Changes in legislation or government programs may impact your repayment options in the future.
While the Supreme Court’s decision was disheartening for the millions desperately needing student loan relief, it is essential for these borrowers to remain proactive and informed. Despite the setbacks, the introduction of the SAVE plan offers a glimmer of hope for borrowers seeking more manageable repayment terms. By taking the necessary steps and staying engaged with the evolving landscape of student loans, you can navigate this challenging situation with confidence.