The future in student loan debt relief appears to have two major programs coming to a close that may affect millions of borrowers. Understanding these changes is crucial for individuals seeking financial relief from their student loans. This article will detail what the ending programs are, what it means, and how you can determine whether you are affected.
Overview of the programs
The following are the two major debt-relieving programs for student loans that are ending:
- The Federal Student Loan Debt Relief Plan: This was announced by the Biden administration and in scope had the offering of targeted debt relief to borrowers affected by the COVID-19 pandemic; it came with provisions for income and Pell Grant status, one-time debt cancellation.
- Payment pause extension: This was a pause first put in place during the pandemic that allowed borrowers to temporarily stop their federal student loan payments without interest accruing. This moratorium will be lifted, with the resumption of payments by borrowers.
Both programs have been key in providing financial relief to borrowers, particularly low- and middle-income borrowers.
Key changes and end dates for the Federal Student Loan Debt Relief Plan
The Federal Student Loan Debt Relief Plan was designed to offer up to $20,000 in debt cancellation for recipients of Pell Grants and up to $10,000 for non-Pell Grant recipients. The plan was litigated with a current block by federal courts. As such, these borrowers need to seek other kinds of solutions for relief.
- Effective date: The application process of this scheme has, for all intents and purposes, become closed because of the legal impedance. The borrowers who couldn’t apply before the court decision lost their expected reprieve .
Payment resumption date
The federal student loans pause, which began in March 2020, is finally over. Payments are expected to begin in October 2023 after a protracted hiatus.
- Effective date: Payments are expected to restart in October 2023, two and a half years since they have gone into abeyance.
Who Is affected and eligibility criteria
For those who might want to know whether they have been affected by the change in trend, here are some of the eligibility criteria that were part of the Federal Student Loan Debt Relief Plan:
- Income limits: Those earning less than $125,000 or married couples earning less than $250,000 were eligible for debt cancellation under the plan.
- Type of loan: Only federal student loans issued before June 30, 2022, were eligible for relief.
- Pell Grant status: Borrowers of Pell Grants were eligible for more debt cancellation than non-Pell Grant borrowers.
Applicants who qualified under both but failed to apply prior to the end of the program will not get any debt cancellation.
Restarting payments
After the resumption of payments:
- All federal student loan borrowers will need to prepare for the restart of monthly payments.
- If you have been taking advantage of the pause without budgeting for these eventual payments, now is a crucial time to re-evaluate your financial situation.
Prepare for repayment
As borrowers head into repayment mode once more, some steps to consider:
- Know your loan servicer: Know who your loan servicer is and make sure your contact information with your servicer is current.Â
- Review your loans: You can log in to your Federal Student Aid account to view your loan balances and repayment terms.Â
- Explore repayment plans: You may want to consider an income-driven repayment plan, which will lower your monthly payment amount based on your income if you are having difficulty in making your payment.
- Watch out for scams: Scammers may try to take advantage of borrowers during a transition period. Verify any offers for loan forgiveness or repayment assistance through official channels.
The end of these two major student loan debt relief programs marks a turning point for numerous borrowers throughout the United States. With the blocked Federal Student Loan Debt Relief Plan and with payments reopening in October 2023, it is vital that affected individuals understand which avenues they still have moving forward.
