The Clock Is Ticking; Student Loan Repayment Is Set to Resume in May 2022

Are you confused by all the headlines promising student loan forgiveness? Honestly, most of the headlines are merely hopeful speculation.

Let’s review three recent headlines:

BANKRATE.com

Biden Could Cancel $10,000 Of Your Student Loan Debt: Here’s What We Know So Far

TIME.com

Why Growing Demands for Student Loan Debt Forgiveness Could Be Joe Biden’s First Presidential Test

NASDAQ.com

Biden’s Student Loan Forgiveness Could Wipe Out Debt for 15 Million Borrowers

Follow the links to read the full articles, but first, notice that the common element in each of those articles is the word “could.”

ALL of these news stories are not based on facts; the articles speculate about what could happen. These media outlets have missed the fact that it literally takes an act of Congress to implement a new forgiveness program, and that is NOT a simple process.

What it Takes to Pass a Forgiveness Act

  1. Both the House and Senate have to pass a bill; then, the President must approve the bill. Until all three sign, it is only an idea, a wish, or a goal.

  2. After the President signs the bill, the bill goes through the Congressional Budget Office (CBO), usually through an appropriations bill. The tricky part is that something can be authorized in a bill and not fully funded due to a lack of available funds and budget approval.

Other Complications

Truthfully, an executive order to pay off student loans is only an idea because there is no assurance that it will be funded. A process must be completed for the Executive Order to be complete. Anything promoted otherwise is simply politics, not reality.

Another point is that even a bill is passed and funded, the amount forgiven will not change your monthly payment unless part of the bill designates recalculating the monthly payment based on the new balance.  IF forgiveness occurs, it is likely only to reduce the length of time borrowers have to pay back their loans and the amount of interest paid over the life of the loan.

All of the proposed remedies to reduce the amount of debt owed student borrowers will usually take months, if not years, to go through the process of becoming law and being funded by the CBO.

So, What Should You Do?

Don’t bank on receiving relief before your payments are due. Practically speaking, you have three options:

Option One: Plan to resume payments in February 2022

Option Two:  Switch your payment plan to an Income-Driven Repayment Plan

Option Three:  File for a deferment

Choosing the Best Strategy

Feeling hopeful, some relief will eventually happen is comforting. Still, we recommend the best strategy is to file now for an Income-Driven Repayment Plan so that you can be ready to resume payments in February. Your monthly payment could be as low a zero dollars per month depending on your income and household size. Lastly, keep in mind that the Income-Driven Repayment Plans do have the benefit of potential student loan forgiveness.

Read More About The CARES Act and Student Loans

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