Biden proposes new student loan relief: This is how payments should be prepared

First modification: 07/01/2023 – 04:31

The White House says it has a plan B after the conservative-leaning Supreme Court struck down 6-3 a proposal by President Joe Biden to forgive about $430 billion in federal student debt.

A few hours later, the Democratic president assured that his Administration would look for a different way to achieve its objective. “Today’s decision has closed a path. Now we are going to start another one, ”he told reporters.

The president will seek student loan relief through the Higher Education Act leading a regulatory process likely to take months.

As part of this general plan, Biden assured that granting a 12-month grace period without negative reports to risk centers is being analyzed for those who are not up to date with their payments.

“The monthly payments will be due, the bills will still be there, and interest will accrue. And during this period, if they can pay their monthly bills, they should. But if they can’t and fall behind on payments, this on-ramp temporarily removes the threat of default or damage to your credit history,” he added.

But, regardless of this Friday’s decision, students must begin preparing to resume their payments as of October, when three years have passed since a suspension of payments decreed during the pandemic.

What do the experts advise to resume payments?

An estimated 43 million borrowers who could have had their student loan balances reduced or erased will now have to resume their original payments, without discounts, beginning next fall.

Betsy Mayotte, president of the Institute of Student Loan Counselors, encourages people not to make any payments until the hiatus is officially over. In her place, she says, they should deposit it into a savings account.

“The habit of making the payment is maintained, but it is also earning a little bit of interest,” he said. “There’s no reason to send that money to student loans until the last minute of the 0% interest rate.”

Mayotte recommends borrowers use the loan simulation tool at StudentAid.gov or the one on the TISLA website to find the repayment plan that best suits their needs.

Evaluate payment restructuring or check if they are eligible for another of the various existing forgiveness plans are other options. For example, there is a program that offers forgiveness after ten years of regular pay for those who have worked for a government agency or non-profit organization.

With Reuters and AP