The one-time relief provided by the U.S. Department of Education as part of the Biden-Harris Administration student debt relief plan is blocked. This ruling leaves over 26 million people in complete limbo with their federal student loan debt. They expected $10,000 to $20,000 to be canceled from their student loan balance, and this dramatic change adds more stress to borrowers. Student loan payments will resume in January for the first time in almost three years.
What now? Everyone’s situation is different. No blanket statement serves all borrowers on what they should do next. Borrowers require student loan financial planning designed to help each person and their family to determine the next step. “There are so many ways to address federal student loan debt if you know where to look and how to manage your loans. Some ways would grant you far more benefit than $10,000 or $20,000! They are hard to find and even harder to manage” said Will Tracy, Head of Operations at Fiducius.The idea of instant debt cancellation from 10,000 feet in the air looks appealing.
Still, for many, it casts a cloud over other options that are far more beneficial for them. For example, the Public Service Loan Forgiveness Program (PSLF) is available for select borrowers. It lowers monthly student loan payments to an affordable amount. It can result in their entire loan balance being forgiven tax-free. Yes, the entire federal student loan balance can be forgiven if program requirements are appropriately met.
$10,000 in debt cancellation certainly wouldn’t hurt. However, the debt cancellation was never meant to be a long-term plan to address a borrower’s debt or how to make affordable payments beginning in January 2023.
There are beneficial programs available today that do not depend on pending legal battles.