President Biden's plan will forgive up to $20,000 in federal student loan debt. Right now, borrowers are allowed to skip payments, the interest rate has been set to zero, and collections are paused on defaulted loans. But that could soon change. Experts are saying that borrowers should prepare to start making payments again in early fall.
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The ninth and most recent payment pause extension, issued in November, says that the pause will continue until the Department of Education is either allowed to move forward with forgiveness, or the litigation is resolved.
If the Supreme Court rules on the program before June 30, those with remaining balances will have to start repaying loans 60 days later. If the court has not made their decision by June 30, the payment pause will end 60 days from June 30 - the end of August.
Borrowers are advised to start preparing now for payments to resume.
Leslie Tayne is a financial attorney with the Tayne Law Group. She recommends borrowers first get an understanding of their overall finances.
"If you don't know what comes in and goes out of your household on a regular basis, it's going to be very challenging to figure out what it is that you can afford," she says.
Borrowers can contact their student loan servicers to learn their repayment plan options. There are income-driven repayment plans, which sets your payment based on income and family size. There is also the Public Service Loan Forgiveness program for those working in public service fields.
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"Each one of these programs has different requirements. And you must be aware of what those requirements are. Because if you don't meet the requirements and follow the guidelines for those requirements, you could be pulled out of that program," Tayne says.
Even if borrowers have up to $20,000 forgiven, if they have a remaining balance, they will have to start payments again. For those borrowers, now's the time to reduce the amount they owe.
"So while there are programs in place right now, there's no requirement under this act for anybody to repay their federal student loan, you can repay your federal student loans and reduce the balances. Therefore, when the interest does kick back in, you'll have interest on a lower principal balance," Tayne says.
Borrowers should log into their loan accounts to make sure that all their contact information is correct, in order for their servicer to get in touch when payments begin again.
And a reminder - these forgiveness programs apply to federal student loans, not private loans.
Take a look at more stories and videos by Michael Finney and 7 On Your Side.
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