Update About Student Loans: Important Details Borrowers Need to Know

• Author: Jessica Williams
• Posted: 2024-02-08

On Monday, March 7, 2022, more than two hundred advocacy, local and state government, non-profit and union agencies and organizations, respectively, asked the U.S. Department of Education (DOE) and President Biden in writing to extend the student loan repayment pause beyond May.

They also demanded that President Biden keep his campaign promise to cancel at least $10,000 from every student loan account and overhaul the entire system so that future borrowers never have to experience the overwhelming financial and mental stresses associated with student loan debt.

These groups included the American Civil Liberties Union, American Federation of Teachers, American Psychological Association, Massachusetts Affordable Housing Alliance, NAACP, Youth & College, National Association of Consumer Advocates, National Association of Social Workers, National Consumer Law Center, Public Law Center, State of New Mexico and the Student Borrower Protection Center.

Why Is This Happening Now?

The plea was made because everyone around the country knows that millions of borrowers can't afford to restart their student loan payments.

The SARS-CoV-2 pandemic and other major life events related to it both nationally and globally, including disruptions to workforces and supply chains, decreases in business revenues and incomes, a housing crisis, a healthcare crisis, inflation and other economic woes, have made it difficult for many people to pay for necessities like rent, utilities and food let alone student or other loans.

Additionally, the recent conflict between Russia and Ukraine and resulting restrictions against using oil from Russia have increased oil and gas prices across the country, which means that people who were already struggling financially now face even greater financial challenges if they need to pay for oil to heat their homes or gasoline to work away from their homes. Even if they use public transportation, they can expect higher costs. In some states, gas prices have already increased to above $5 per gallon.

What Do Experts Expect?

The student loan crisis involves a national combined debt of more than $1 trillion. Several government officials have recently implied that President Biden is considering another student loan pause. White House Chief of Staff Ron Klain also stated last week during a podcast interview that President Biden is considering whether he needs to make an executive decision about student loan debt forgiveness. President Biden stated after he took office that he wasn't certain that he had the authority to make the decision and believed that Congress had to act to waive at least $10,000 per federal account. As a result, he focused on targeting certain groups for debt forgiveness, such as students who were defrauded by for-profit universities.

Klain inaccurately noted during the podcast that all borrowers with federal loans haven't made monthly or interest payments during the repayment pause. Many federal loan borrowers who previously chose debt consolidation and federal student loan holders with debt sold to private lenders didn't receive pause protection. They currently deal with high payments. Some accounts have fallen into default status.

Even if President Biden performs an executive action to forgive $10,000, many borrowers may have to take legal action to receive the help they need. Historically, borrowers have had to fight the government tooth and nail to receive help. Other student loan news from this week provides a clear example: A borrower living in Texas, a woman with aggressive, invasive cancer, is currently fighting the DOE to have her loans discharged entirely via disability forgiveness and bankruptcy processes. Instead of focusing on treatment and reducing stress, she has been forced to focus on the loans. The DOE continues to claim that she won't have any difficulty working once her cancer treatments end although her doctors believe otherwise.

What Can You Do Today?

If you currently have an active or paused student loan repayment account and you're struggling financially with payments or approaching default, you don't have to wait for President Biden's decision. StudentAid.gov outlines many different options for borrowers to reduce their payments or even stop their payments temporarily.

Currently, a borrower can apply for forbearance, deferment or income-based assistance unless they've used up their allotted amount of time for each type. If you work in one of several public service positions, you might also be able to have your loan forgiven based on several factors, including the length of your service.

The servicer of your loan can also provide you with helpful information about how to manage your debt and prevent further immediate and long-term financial harm. If you allow your account to go into a default status, you can damage your credit score, which can adversely impact attempts to purchase a car or home, and even put you at risk of DOE legal action.