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Student loan debt relief —- A student loan is a sort of financial aid given to students in the United States to assist them in covering the costs of higher education. It is often borrowed from the government or private lenders and must be returned over time with interest. As the expense of education has grown significantly in recent years, student loans serve an important role in enabling students to pursue college or university degrees.
Student loans, on the other hand, may have a significant influence on students’ life. Many graduates are saddled with significant debt after finishing their courses, which can take years, if not decades, to repay entirely. This financial stress might make it difficult for them to fulfill other life objectives, such as buying a home, establishing a family, or saving for retirement. Furthermore, the stress of debt repayment can have an impact on one’s mental health and overall well-being.
Furthermore, student loan debt may limit employment options since graduates may be forced to choose higher-paying positions above their genuine interests in order to satisfy loan commitments. It also contributes to economic inequality, since poor students who rely significantly on loans may face more financial difficulties after graduation than their more affluent peers.
Due to the financial weight of student loans, President Joe Biden proposed several student loan debt relief programs. They are designed to wipe the slate, giving students more financial freedom.
The issue
The student loan debt relief program has long been touted by several key figures, but the onset of the pandemic only gave the idea more traction due to the fact that millions were laid off work. As a result, the government suspended payments and interests for federally-held loans. President Joe Biden called for the forgiveness of at least $10,000 as a pandemic relief measure.
Student loan debt relief has been caught in a limbo as far back as the Trump administration’s reign. In 2022, Biden sought to settle the issue, but legal challenges have often proved to be a roadblock in his efforts. The student loan debt relief had even looked to get the green light in the past few months, but ultimately, the Supreme Court struck down the President’s efforts.
Many had been anticipating the rejection, but some were hopeful to see one of their financial problems alleviated. Now, borrowers are scrambling to plot out how they can continue their payments once the next one is due. Nonetheless, Biden has remained adamant that he would continue to work on an improved proposal for the student loan debt relief program. Additionally, US Education Secretary Miguel Cardona assured borrowers they would remain updated in the following months.
As of now, the Biden administration is working to provide borrowers some relief, offering them a more cost-efficient income-driven repayment plan.
The new plan
The updated student loan debt relief program will be dubbed the SAVE Plan (Saving on a Valuable Education), which would cut the amount borrowers have to pay monthly by half. For example, their payment would go from 10% to a mere 5% of their disposable income. According to the US Department of Education, the SAVE plan is set to replace the current REPAYE (Revised Pay As You Earn plan) and will go into effect in the summer.
The Department of Education also noted that it would give borrowers some relief if they are unable to make the loan payments in the first year, redirecting missed payments to credit reporting agencies for the 12 months.
Borrower measures
Without any certainty in the student loan debt relief program, federal student loan borrowers will have to find ways to ensure they make the payments in the fall. Payments will be due in October and interests are tipped to accrue on the 1st of September. Given how much time people still have now in the early weeks of July, borrowers should consider the following measures.
They have to make sure their contact information is updated. To do so, they would have to enter a section of the Education Department’s website (studentaid.gov) to update everything they need if they haven’t. However, it is also paramount that they keep track to ensure they don’t miss any due dates and billing statements.
Borrowers can also connect with their loan servicer, which typically has hold of their updated contact information. On the website, they can check the “My Loan Servicers” section to see if they remained in contact with their loan servicer or if they changed.
Due to the financial strains of the current economic landscape, borrowers are faced with the problem of producing the necessary cash. According to Consumer Financial Protection Bureau estimates, one out of five borrowers are at risk of being unable to resume payments. They, however, have the option to take out a loan based on their income with the income-driven repayment plan (IDR).
Borrowers can also use the IDR to review if they signed up to auto-debit enrollment to ensure the payments arrive on time. Double checking and confirming will also ease any potential problems. Finally, borrowers can open a high-yield savings account, earmarking the stored cash for student debt payments so once the bills are due in October, they would have less problems to deal with.
