Student-Loan Repayment Freeze Is Ending. Are Your Finances Ready?
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What is the main topic discussed in this episode?
Here's your money briefing for Monday, June 5th. I'm J.R. Whelan for The Wall Street Journal.
When will federal student-loan payments and interest resume after the pause?
The three-year pause on federal student loan repayments is ending, and that means many borrowers will have to make some changes in their personal finances.
Look at your budget now. Look at what your monthly payment would need to be for your student loan. And ahead of August 30th, start making some of those hard decisions. You know, where can I make sacrifices? Where can I cut back? Where am I saving money? Where am I spending too much money? Where can you make room so that your budget can reabsorb that payment?
WSJ reporter Julia Carpenter will join us after the break.
Could the student-loan repayment pause be extended again under the debt-ceiling deal?
Late August is going to get here faster than you think. That's when federal student loan borrowers are likely to have to dig deeper into their finances to resume making payments. WSJ personal finance reporter Julia Carpenter joins us today. So Julia, the pause on student loan repayments has been extended several times since 2020. What are the chances it could be extended again?
It's very understandable that people have that confusion, especially since we have had the pause extended so many times since it was first instituted in March 2020. But as a provision in the debt ceiling deal, we know that student loan payments and interest accrual will restart in August. So there's pretty much virtually no chance it'll be extended again.
Now, how is that different from President Biden's debt forgiveness plan that's being considered by the Supreme Court?
How does the Supreme Court decision on Biden's forgiveness plan affect borrowers?
And what's the latest on that?
So people probably saw the headlines when the plan was first announced, and we know that it provides up to $10,000 for qualified borrowers who make $125,000 a year and up to $20,000 for people in that same bucket who qualified for a public grant. So it's a lot of money on the table. People were very supportive of this. This was something the president had promised. But the court is weighing on the constitutionality of this, and we're expected to hear their decision later this month. So whatever the court decides, yes, the plan can go forward or no, it won't. We then have a two-month delay. So if the plan goes forward, people won't just immediately log into their accounts and see their debt wiped out overnight.
If the plan doesn't go forward, I mean, we then have a different scenario. Either way, though, whatever remaining debt you have, whether forgiveness moves on or not, that August 30th deadline is pretty firm now. That's when the payments start again.
I would imagine many federal student loan borrowers are holding out hope the court rules in favor of the forgiveness plan.
Understandably, financial advisors are saying no, though. If you are holding out for that hope, you are not preparing for the other outcome. And then you're in for a shock once this decision comes. I was speaking with financial advisors who were saying you should plan for the scenario in which payments do resume and forgiveness does not happen. In that case, you're prepared. It's not going to be this huge blow to your budget.
For some people, turning these payments back on after three years could be a shock to their personal finances.
What should borrowers do now to prepare for payments restarting on August 30th?
So let's talk about ways to prepare. For some people, it's probably been a while since they went over the terms of their loan.
I was speaking with Scott Buchanan. He's the executive director of the Student Loan Servicing Alliance. So he has talked to a lot of people about what this is going to mean for the system, specifically what this is going to mean for borrowers trying to contact their servicers. So his recommendation was call your loan servicer now. Call them, go over the terms of your loan, go over your monthly payment, go over, you know, am I in the right payment plan? Are there changes I can be embracing? All these different things, because come August, as soon as we're creeping up on that August 30th deadline for payment resumption, millions of other borrowers are going to be calling and we're going to be clogging the phone lines.
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Chapters
7 chapters
1
What is the main topic discussed in this episode?
0:02–0:10
2
When will federal student-loan payments and interest resume after the pause?
0:10–0:50
3
Could the student-loan repayment pause be extended again under the debt-ceiling deal?
0:50–1:34
4
How does the Supreme Court decision on Biden's forgiveness plan affect borrowers?
1:34–3:03
5
What should borrowers do now to prepare for payments restarting on August 30th?
3:03–4:13
6
Why is calling your loan servicer sooner rather than later important?
4:13–4:55
7
How can households adjust budgets to absorb resumed student-loan payments amid inflation?
4:55–6:06
Speakers
2 identifiedMore from WSJ Your Money Briefing
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