On June 30, 2023, the Supreme Court ruled that the Department of Education does not possess the authority to forgive student debt under existing federal law. The Court said that any such program requires support from Congress due to its substantial cost.
As you may know, President Biden introduced a plan in August 2022 to forgive up to $10,000 in student loan debt for borrowers earning less than $150,000 per year. Additionally, Pell Grant recipients, who often face greater financial need, would have been eligible for an extra $10,000 in debt forgiveness.
This recent decision means that approximately 43 million Americans will no longer see a reduction or elimination of their debts. With the student loan payment pause set to end on August 30, student loan interest will begin accruing in September, and loan payments will resume in October 2023.
In the short term, to ease the burden on borrowers this fall, President Biden announced that the Department of Education will be instituting a 12-month “on-ramp” to repayment, effective from October 1, 2023, to September 30, 2024. During that time, borrowers who miss monthly payments won’t be considered delinquent, reported to credit bureaus, placed in default, or referred to debt collection agencies. It’s important to note that interest on debt will still be accruing during the “on-ramp.”
Some alternative options for financial relief that may be available to those with student loans include Public Service Loan Forgiveness, Teacher Loan Forgiveness, and Income-Driven Repayment Plans. Student loan deferment and forbearance may also be options worth considering.
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Sincerely,
The Trademark Capital® Team
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