Student loan relief is not happening - now what?
On Friday, the Supreme Court decided the cases regarding student loan forgiveness. The main issue before the Court was whether the current administration had authority to forgive student loan debt under the HEROES Act. Last year, President Biden announced that borrowers would be granted student loan relief – an amount between ten and twenty thousand dollars per person. Friday, the Supreme Court said no.
Borrowing student loans is a lot like using monopoly money. With a couple of quick clicks, the money is in your bank account and just as quickly, it’s applied to your tuition. You hardly see it until you finish school and then suddenly, there is a huge balance that you owe. I don’t think most people borrowed this money expecting that it would be forgiven, and my (anecdotal) guess is that most people didn’t feel any friction in borrowing the money. Borrowing student loans is streamlined and the process is somewhat mindless. Only upon seeing the balance at the end of schooling and realizing it is essentially a mortgage payment does the gravity set in.
Forgiving student loans has been a popular platform for politicians. It makes sense. Student loans are a huge burden for a lot of people, and many feel duped into having taken them. So, when the idea that student loan debt might get wiped away (or at least, partially) is on the table, it’s appealing.
Last August, when President Biden announced that up to $20,000 of student loans would be forgiven for Federal Student Loan Borrowers, it was very exciting. Whereas (my guess) most students never had an expectation of loan forgiveness, suddenly, upon this announcement last August, there became an expectation that it would happen. And, when it didn’t, it was deeply disappointing. This disappointment is true, even if someone is in the exact same (or an even better position) before the expectation was made. I imagine that a lot of people are feeling tremendous disappointment and disillusionment because of this unfulfilled promise. If you’re feeling this way, give yourself space to acknowledge your disappointment.
Let’s look to the bright side for a moment. For the past three years, there has been zero interest on loans. Those three years could calculate to be thousands, or tens of thousands, of dollars of grace. There have also been zero payments. If one has been fortunate enough to have been employed these last three years, there was perhaps the opportunity to use the savings from interest and payments – and maybe make huge progress on paying down student loans, saving up an emergency fund, or saving a down payment for a house. This was an unprecedented move in the history of student loans, which for a lot of people, gave them the opportunity to make some powerful financial moves, even in a climate of economic and social uncertainty.
Ultimately, here’s the takeaway: If you still have student loans, plan to pay them off as soon as possible. Get out of a situation where you are reliant on someone else’s (or nine other people’s) decisions. Paying off your student loans is in your control. The sooner your debt is gone, the sooner you are not subject to the whim of any of the emotional roller coasters created by people seeking your vote.
Interest will resume September 1 and payments on October 1. So, practically, what do you now?
Plan to resume payments by adjusting your budget to incorporate the resumed payment.
If you want an income-driven repayment plan (even if you had one pre-March 2020), contact your student loan servicer.
If you want your payment to automatically debit from your account, contact your servicer to arrange for it (even if it was automatic before).
Pay as much as you can between now and September 1 to minimize the amount of interest you will pay on the total balance.
Be nice to the people working for the student loan servicers. They are not responsible for any of the decisions that have been made, are working in unknown territory, and are receiving calls from the other 20 million borrowers affected.
If you want help coming up with a plan to pay back your student loans, please reach out to me. I’d love to help you find liberation from the drain that they are.