Federal Student Loan Repayment and Forgiveness: The Saga Continues

Melissa Maichle .

Federal student loans will be forgiven…no they won’t. Repayment will start this month…but it didn’t. If your head is spinning from the back-and-forth of the last few months, you’re not alone. Here is a recap of recent happenings, what we expect to happen moving forward and what you can do to help your students and recent alumni be successful no matter the saga ends.

In September, the Biden Administration approved a sweeping debt relief program that would benefit a large number of current student loan holders — even those who had not yet entered repayment. In our October blog, Federal Debt Relief Program: Questions and Answers, we filled in some of the details not included in the original announcement. As scheduled, the application for those who needed to apply (many borrowers would be qualified by documentation already on file) was made available in October and processing began. But so did the law suits — in some cases the claim was that the program would injure state agencies partnered with the Department of Education (ED) in the student loan program and in others the claim is ED is not empowered to forgive students loans in this manner. Regardless, a lower court issued an injunction to block the program and another maintained the injunction on appeal, so what’s next?

Although they initially said they would not take up federal debt relief, the Supreme Court has capitulated and expects to hold oral arguments in February. In response to the continued delay, ED has extended the student loan pause until 60 days after the Supreme Court decision or June 30, 2023 — whichever comes first. While we don’t know exactly how this will play out, there are a few things that are certain:

  • Federal Debt Relief and the student loan pause do not apply to all types of student loans. Your alumni already in repayment when COVID-19 hit know this, but what about your more recent graduates and students still enrolled?
  • Even if Federal Debt Relief is approved and the borrower qualifies, there may still be a balance to repay. If borrowers don’t know or don’t remember what they borrowed, they may think this program will wipe out all of their debt and ignore the correspondence intended to prepare them for entering repayment.
  • It’s been nearly three years since borrowers have had to make payments on Federal Direct Student Loans — and a lot of turn over among the servicing partners during that time. Borrowers may need to update addresses, provide banking information for automatic debit or change the repayment plan they had before. In order to do any of this, they need to know which company to contact.
  • Borrowers that should have entered repayment between March 2020 and today will probably suffer some ‘sticker shock’ when they have to start making payments. Many have been working and haven’t needed to budget for a payment that could be several hundred dollars each month.

You can help your borrowers (both in-school and out) by communicating early and often about these certainties. Take advantage of existing tools, like this Federal Student Aid resource, 6 Ways to Prepare for Student Loan Repayment to Begin Again and incorporate additional information into your Exit Counseling program for your 2023 graduates.

Follow the Higher Education Assistance Group blog for updates on this continuing story and contact us at info@heag.us if you think our compliance experts can help you help your students and alumni.

Source: https://www.insidehighered.com/news/2022/12/02/supreme-court-takes-debt-relief-lawsuit?utm_source=Inside+Higher+Ed&utm_campaign=fee4a63cab-DNU_2021_COPY_02&utm_medium=email&utm_term=0_1fcbc04421-fee4a63cab-236158973&mc_cid=fee4a63cab&mc_eid=f93fac4f9b