If you have student loan debt, you may be wondering how the Supreme Court ruling affects you.
The Court ruled the Biden administration overstepped its authority in trying to cancel or reduce student loan debt. It effectively killed the $400 billion plan that would have canceled up to $20,000 in federal student loans for 43 million people. Of those 20 million would have had their debt erased completely.
So, barring an act of Congress, millions of Americans are on the hook for payments starting in October. And that has people worried about their budgets. Still, there are options.
“The good news is the Biden administration is determined to get some things done here that I think the Supreme Court decision was a setback, so the administration is going to come at this from a different angle,” said Joe Krier, a financial analyst with Tidal Fund Trading. “So, if you are holding student debt, be patient here and watch the news and the mail. I think there may be another delay in payments coming here.”
Payments aren’t set to resume until the pause ends in October. With a tight economy, people are struggling to pay their bills and now they have the added worry of resuming student loan payments. Those who can’t repay are worried about the impact on their credit.
Krier said there are ways to avoid negative credit impacts and set up a repayment plan that accommodates your budget.
It involves structuring your payments around your financial needs. It is called the income-driven repayment plan. Krier said it works fairly simply.
“It’s essentially the more money you make, the more you have to pay back,” added Krier. “It’s pro-rated, almost like the tax system depending on how much money you make determines how much you pay.”
There may be another chance for student loan forgiveness. The Biden administration plans to pursue student loan cancellation employing a different legal justification than the one struck down by the Supreme Court. The White House hopes to use the Higher Education Act. It’s a broad federal law that governs the student loan program.
Still, the process to decide who would be eligible and how much would be canceled will be decided by a federal rule-making process. And that can take months or even longer. So, this attempt at cancellation won’t come quickly, according to White House officials.