Is $20K Student loan Forgiveness Still Going to Happen?

The Biden administration has extended the forbearance until 2023 as repeal is tied up in court. You should plan to resume making payments on your federal student loan sometime in 2023, especially if you’re counting on debt forgiveness to wipe out your balance entirely.

No one knows for sure when — or if — student loan forgiveness is coming

Why? A federal judge in Texas has struck down the Biden administration’s plan to wipe out up to $20,000 per borrower. The plan remains under an injunction stemming from another lawsuit, and several other cases are winding their way through the courts. Any of them can derail debt relief, too. There is no guarantee that roadblocks will be cleared, ever.

Borrowers already approved for loan forgiveness received emails from the department on Nov. 19 — but were told no relief would come yet.

“We strongly believe that the cases are without merit, and the Department of Justice has appealed in our favor. Your application is complete and approved, and if we prevail in court, we will pay your approved debt,” wrote Education Secretary Miguel Cardona. “We will update you if there are new developments.”

Will student loan forgiveness be extended?

Yes. On November 22, the Biden administration extended tolerance to 2023, beyond the most recently scheduled restart in January 2023. It is the eighth extension.

Unless the President orders one more extension of forbearance, the clock starts over 60 days after the Department is allowed to implement the program or 60 days after the lawsuit is settled or June 30, 2023 — whichever comes first. Interest on the loan will resume, and missed payments will eventually leave a big hole in your credit history.

Is the case likely to succeed?

we don’t know It’s unclear whether any lawsuits to stop student loan forgiveness will ultimately succeed.

However, two of the most challenging cases led to a complete shutdown of the program. In one case, a judge ruled the plan illegal, and the case’s next stop is the Supreme Court in February. In another, an appeals court issued an injunction, preventing any debt relief while the case moves through the system.

Borrowers should plan based on current circumstances, said Scott Buchanan, executive director of the Student Loan Servicing Alliance, which represents organizations that service federal student loan accounts. Here it is: Student loan cancellation is blocked, and payments will resume sometime in 2023.

“You have these big programs and big decisions using the authority that’s not tested in court,” Buchanan said. “It could cause a lot of delays or it might mean it doesn’t happen.”

For those watching from the sidelines, it’s harrowing.

“It makes me incredibly frustrated,” said Dave Christensen, a borrower in Wisconsin who paid off his loan during the pandemic and is waiting for a refund he’s worried he might have to pay with interest. “We tend to drag things out to try to win for our agenda and our policies, we lose track of how it affects people.”

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Can I still apply for loan cancellation?

No, For now, the education department has stopped fresh applications for relief until the cases are over The White House says 26 million borrowers have applied, with 16 million already processed and ready to roll. It has started notifying approved applicants through email, though relief is still on hold.

As per current guidelines, you must apply by December 31, 2023.

Can I still apply for loan cancellation?

Was I wrongly authorized?

Not everyone who received the approval email from the Department of Education was actually cleared for a loan waiver.

9 million borrowers received emails in error, the department said on Dec. 7. Those affected will receive a correction email in the coming days. Accenture Federal Services, a government consultant, mistakenly sent additional emails on behalf of the Department of Education. These nine million people are not included in the pool of 16 million people who were duly approved.

“Communicating clearly and accurately with borrowers is a top priority for the [Education] Department,” a spokesperson said. “We are in close contact with Accenture Federal Services as they take corrective action to ensure all borrowers and victims have accurate information about their loans. relief.”

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Do I have to return my refund?

Yes, but not all at once. If you sought a refund for payments made during the pandemic, your new payment amount will reflect a larger balance when they resume, including the refund.

If you don’t want the money back, it may be better to wait until the debt cancellation cases are over. Cancellation still occurs and if you pay your loan balance below the amount you qualify for cancellation, your refund will be automatic.

If you still want to request a manual refund, you have until the end of 2023 to do so.

What if I can’t afford to pay?

Dwayne Quasi-Wright, professor of higher education administration at George Washington University, takes action now.

“It’s going to take a while,” Wright said. “Take a day off, take a lunch break, maybe an extra hour, call your lender right now and have a conversation about January 1st.” He says borrowers should be clear about their upcoming payment amount and ask servicers about options that could lower their bills.

An income-driven repayment plan limits your payments to a certain portion of your gross income, potentially lowering your monthly bill while extending the term of the loan. Payments can be as low as $0.

If you are already enrolled in an IDR plan, you do not need to re-certify your income before July 2023.

If you’ve lost your job, an unemployment deferment can let you skip payments entirely until you start earning again.

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What about other parts of debt relief?

“The administration is fighting on a whole bunch of other fronts,” said Mike Pierce, executive director of the Student Borrower Protection Center. “None of those policies are directly affected by any of these losses.” These principles include:

Changes to the loan forgiveness program greatly streamline the process for borrowers in public service, whose schools were closed, and whose schools defrauded or misled them.

An income-driven loan repayment waiver that spans past payments — including partial or delayed payments, or time spent in certain types of forbearance or deferment — counts toward the 240 to 300 required for forgiveness.

A “Fresh Start” program that allows borrowers with defaulted loans to refinance into good standing without penalties and catch-up payments.