Since our last update on student loan forgiveness in late 2022, there have been several new developments that we will unpack in this article. As certain pieces of the forgiveness program made their way to the U.S. Supreme Court, an update on that ruling will also be provided along with key information on the status of the loan payment pause.
Our December 2022 article included news that applications for the federal student loan forgiveness program were suspended by the Biden administration after a federal judge in Texas struck down the program as unlawful. Since then, multiple lawsuits were filed, one of which was ultimately deemed valid by the U.S. Supreme Court with the Court voting 6-3 against President Biden’s broad student loan forgiveness program on June 30, 2023.
Borrowers are encouraged to review other student loan forgiveness programs to determine if they qualify. These include the Public Student Loan Forgiveness Program in which the loan balance can be forgiven, tax free, after making 120 qualifying loan payments to borrowers who are employees of certain government or nonprofit agencies. Under the Income-Driven Forgiveness Program monthly loan payments are capped as a percentage of income. Forgive-ness occurs after either 20 or 25 years, depending on the type of plan and individual situation. There are additional programs for teachers, nurses, state-specific programs, members of the military and various public service loan assistance programs.
The Department of Education’s COVID-19 student loan pause program ends on September 1, 2023. On this date interest resumes and payments will commence beginning in October 2023. A recent law passed by Congress prevents any further extensions of the payment pause. Borrowers can expect to be notified well before interest resumes. Borrowers are also encouraged to beware of anyone reaching out to you to pay a fee to suspend your federal student loan payments. Such attempt should be reported to the Federal Trade Commission.
With several legislative plans still in play by the current administration, borrowers are encouraged to prepare for the worst and hope for the best. Revisit your student loan accounts to understand where your loans are, what your payments will be when they resume and adjust your budget accordingly.
Contact Lisa A. Mrkall, CPA, Principal, at 716.633l1373 or lmrkall@tsacpa.com, or your Tronconi Segarra & Associates advisor for more information on this matter.
