TOPSHOT – US President Joe Biden announces student loan relief on August 24, 2022 in the Roosevelt … [+]
With student loan borrowers waiting on the verdict from the Supreme Court, and the Covid-19 State of Emergency set to end in May 2023, many are wondering – will President Biden extend the student loan payment pause one last time while he still can?
It’s possible, especially given the uncertainty surrounding his signature student loan forgiveness program and the difficulty that will come with restarting student loan payments.
What’s interesting about the current pause on federal student loan payments (and the continuance of the 0% fixed interest rate) is the fact there’s no set date when it will end yet. At the end of the day, it all depends on the Supreme Court’s decision on Biden’s student loan forgiveness plan and when this decision is made.
The U.S. Department of Education implies that payments could begin on September 1st, 2023. That’s because the guidance says payments will restart 60 days after the litigation regarding student loan forgiveness has been resolved. If the legal issues are not resolved by June 30, 2023, however, the agency says payments will resume 60 days after that. That would get us to the end of August 2023 at the latest, which could mean payments resume in September.
Bottom line right now: whether student loan forgiveness does happen or doesn’t, student loan payments could be set to resume in the fall.
This brings us to another question that has been top of mind for many borrowers with federal student loans lately. With eight different extensions of the original pause already behind us, is it even possible the payment pause will be pushed back yet again?
While it seems unlikely at this point, there could be some scenarios where this could actually happen. However, you shouldn’t hold your breath, and you should definitely begin making plans to pick up your payments sometime later this year if you have federal student loans.
According to student loan consultant Blaine Blontz of Financial Aid Coach, one such scenario where the payment pause could be extended again could take place if the Supreme Court rules against the student debt relief program. In that case, the Biden administration could push for the loan payment pause to be extended to afford some relief to borrowers and allow them a bit longer to get a plan in place, he said.
Travis Hornsby of Student Loan Planner agrees that he could see this scenario become reality. In fact, Hornsby says he could see the Biden administration feeling political pressure and seeking debt cancellation via the Higher Education Act. They could make the same argument for extending the pause until the courts rule if they can do that, he said.
However, the expert also believes that, in that scenario, student loan debt cancellation would still get blocked due to the Major Questions Doctrine (a doctrine that limits the power of government agencies to make major changes regarding matters of political or economic significance).
From there, the repayment pause might again get extended and the House GOP might respond by defunding much of the Education Department and federal student aid programs unless the administration relents, said Hornsby.
According to student loan expert and Forbes contributor Mark Kantrowitz, there may be some legal roadblocks that limit Biden’s options when it comes to extending the repayment pause yet again. Specifically, Kantrowitz says the authority to implement the payment pause and interest waiver is based on the Heroes Act of 2003, but that the authority to extend the repayment pause ends when the national emergency ends.
In the meantime, President Biden has officially expressed an intention to end the Covid-19 emergency on May 11, 2023.
That said, the Biden administration has also signaled that its authority to implement the payment pause and interest waiver continues beyond the end of the national emergency because the economic effects continue, says Kantrowitz.
He also adds that the President’s plans to end the national emergency declaration could change before any of this happens.
Kantrowitz also believes that it’s possible the Biden administration will decide to extend the payment pause and interest waiver indefinitely as a “plan B” in case the U.S. Supreme Court blocks the President’s student loan forgiveness plan.
However, he says they may decide to leave the US Supreme Court’s opinion as the final say instead.
So, will Biden try to extend the federal student loan repayment pause and 0% interest rate period yet again? As you can tell from our experts’ opinions, nobody knows for sure — or if he even can. If this leaves you wondering what you should do to prepare either way, experts agree it’s best to get your finances ready for student loan payments now as if they will definitely resume sometime in fall of 2023.
What does this mean, exactly? According to Blaine, borrowers that might struggle to repay their loans should work with the Federal Student Aid program now, while still in the midst of the pause, to see if they would be eligible for deferment or forbearance if and when the general pause is lifted.
Another option is seeing which federal student loan repayment programs could leave you better off, keeping in mind that monthly payments on income-driven repayment plans can be as low as $0 if your discretionary income is low enough.
You can also look into the Fresh Start program for federal student loans in default. However, this program is geared to borrowers who were already in default on their loans before the payment pause began in March of 2020.
Whatever you do, don’t wait and see what happens if you’re already in a financial bind and you know you can’t afford your federal student loan payments as they stand right now. If you take the initiative to get back on track right away, your hard work could make all the difference.